Do you see evidence that consumers are getting tired of cutting back and are looking, in varying degrees, to open up the purse strings a little bit? Where do you see opportunities for retailers at this time?

Posted on June 2, 2009

If there is one iron-clad rule when it comes to the life cycle of recessions, it is that when things get cheap enough, buyers appear.

In other words, there is a bottom somewhere, if for no other reason than even after the worst disaster, survivors must move ahead with their lives. And we all have to buy the basic staples (even the bare necessities add up to billions of dollars in expenditures).

Will we completely change our lifestyles, living in smaller places, driving smaller cars, consuming less, become more frugal, less ostentatious, opting for voluntary simplicity, etc.? Fugetaboutit. I get asked about this during every downturn and I always say the same: only those who already have everything seem to buy into the notion of doing with less. And, as it turns out, they have to spend freely in order to impress themselves that they are living frugally.

What about consumers and consumer spending, such an important component of economic activity? Optimists point out that most people (upwards of 90%) are still working, earning, making their mortgage and credit card payments–and spending, if at a less frenetic pace. Pessimists see the credit contagion as spreading. They point to devastated domestic balance sheets, due to collapsing home values, declining net worth and reduced financial spending power.

I can here offer some personal and professional insight, from my long association with the Institute for Business Cycle Analysis: our own US Consumer Demand Index, the only monthly survey of American consumers which measures actual buying intentions (as opposed to sentiment, confidence or opinion, all of which are of course subjective). We query over 1,000 households a month on their specific spending plans across a broad range of durable and non-durable goods. We don’t ask their opinion of which direction the country is going, or on how good a job they think the President is doing. We ask them, are you, or are you not, in the next three months, going to be buying a car, PC or TV, white goods, home furnishings, kitchenware, toys, etc. In the case of food/groceries and clothing/shoes, we ask whether they are going to be purchasing more, less or the same amount as in the corresponding period of last year. Regarding those durable goods, we also ask, uniquely, if their household has no plans to be buying anything in those categories during the next three months. This gives us some unique insight into real consumer behavior.

Our March data show a fairly strong upturn (from a very depressed level of -37 to a less depressed level of -11). This is a significant improvement, but we will refrain from calling a bottom or turnaround until we see our three-month moving average in positive territory for three consecutive months. (On the basis of this March report, the three-month moving average improved only one point, from -26 to -25, so there is still a long way to go, but the positive direction and momentum is encouraging.)

[Feel free to contact me for a copy of the US CDI and subscription information (or feel free to visitwww.consumerdemand.com). Our monthly surveys, which have been conducted since February 2001, give a fairly accurate forecast of the strength and direction of the PCE (Personal Consumer Expenditures) and ISM (Institute for Supply Management) indexes 4 to 6 months ahead of official data.]

So where do I stand? I believe the tide is starting to turn–the rate of decline in most major economic indicators is clearly slowing. The forward looking stock market is well off its lows. In our latest CDI survey, the percentage of consumers declaring themselves on the sidelines decreased from the record high level of 68.4 in February to the still awful 62.2 in March (at least we’re moving in the right direction!).So is that flickering light we see the end of the tunnel or an oncoming train? Ask me in two months. I would offer a stronger opinion, but everyone in the “foreseeing” business ought to be properly humble from now on. Roger Selbert, Editor & Publisher, IntegratedRetailing.com

http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13778

Filed Under Consumer Behavior

What do you see as the biggest potential benefit to be gained from the use of handheld scanners in retail stores? How can these devices and supporting programs best be used to provide an improved customer experience?

Posted on May 7, 2009

I shop at Ralph’s here in LA, using a loyalty card, and they are obviously keeping track of all purchases. I just got a bunch of coupons in the mail for a list of items I purchase regularly. Recently, to promote a particular (remodeled) store, they sent three or four coupons (with specific use dates) for $10 off on a minimum $25 spent shopping (in that store only). You can bet I am a loyal customer.

The idea of having a hand-held scanner and getting coupons right in the store as I am buying sounds even more appealing. And as a retail analyst and consultant, of course I approve of the customization aspect. If loyalty and repeat (and increased) business is the goal (and it should be), then this seems a promising path.

http://retailwire.com/Discussions/Sngl_Discussion.cfm/13729

Filed Under Connecting Technology

What do you think of CompUSA’s new retail 2.0 concept, especially its move to allow unrestricted internet access throughout the store? Even with its TigerDirect connection, do you think CompUSA will be able to compete on price against online competition?

Posted on April 15, 2009

Here’s the money quote: “Consumers are looking for alternative places to go and the thrill of walking into a store and looking at products is not easily replaceable for shoppers.”As I have been saying for 8 years, multi-channel, then merged-channel is how the best, most successful retailers operate today and will in the future.

Shopping from home before buying is now the rule, but consumers will gladly visit physical stores for the total experience. They will be able to access in-store Internet terminals for comparison shopping, but this is an advantage to the store in which they are standing. I see this as expanding visits, sales, profits, and growth (and raising the stock price).

http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13673

Filed Under Business Strategies

Will the type of targeting that will apparently be offered by Cablevision result in significantly more advertising dollars flowing back to television? What will the potential of this type of targeting capability mean for consumer brand marketers and retailers?

Posted on March 5, 2009

I’m sure this will lead to positive results, but the real “holy grail” will be when consumers can seek out information on the products and services for which they are in the market at the present moment. Hey, I think we already have that: it’s called the internet! Just another argument for the integrated retailing imperative. http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13593 

The Sky Has Fallen: Now What?

Posted on January 14, 2009

Superstrategist Ed Yardeni is quoted by James Pethokoukis in US News & World Report on what could go right in 2009: (1) Lower mortgage rates fuel a refinancing boom which lifts consumer spending. (2) Home sales increase and home prices stabilize. (3) Easier credit conditions increase auto sales. (4) The drop in fuel prices also boosts consumer spending; the unemployment rate peaks below 8%. (5) Massive spending on infrastructure by the US government offsets weakness in such spending by state and local governments. (6) The money supply grows rapidly. (7) Stimulative monetary and fiscal policies overseas revive global economic activity and US exports. (8) Depleted inventories and improving sales trigger a big jump in industrial production. (9) Credit quality spreads narrow significantly and rapidly as investors seek better returns than available in Treasury securities. (10) Stock prices rise 30%-40% in anticipation of better earnings during the second half of 2009 and in 2010. (11) Inflation remains subdued, and productivity pops.My approach is “might as well be optimistic.” For more reasons the economic news (including consumer spending) is not all bleak, see the current issue of Growth Strategies (ask me to send it by email), or see my soon-to-be-posted piece onwww.newgeography.com. 

Filed Under Ask Dr. Roger

What has the disparity of incomes in the U.S. meant for the business of retailing? Is there room for middle of the road merchants in a country where the economic middle appears to be shrinking?

Posted on October 22, 2008

What has the disparity of incomes in the U.S. meant for the business of retailing?  Well, of course, it has meant a proliferation of high-end retailers on one end, and a proliferation of discount retailers on the other.  But is there room for middle of the road merchants in a country where the economic middle appears to be shrinking?  Of course there is.  Most consumers still consider themselves to be middle class, and still shop, buy and otherwise behave as middle-class.  But growing income inequality is real and likely to grow, driven by several unstoppable trends: the education premium, the technological skills premium, winner-take-all labor markets, assortive marital patterns, and immigration.  How can retailers respond:

http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13318

Filed Under Consumer Behavior

What do you think of the potential for getting consumers involved in product development via the internet? Is this only an option for certain categories? Do you think that such efforts will be more about public relations than actual product development?

Posted on July 31, 2008

I recommend an article in the current issue of McKinsey Quarterly, “The Next Step In Open Innovation.” I provide a synopsis in the July issue of my newsletter Growth Strategies (contact me for a copy).       The authors write that increasing numbers of organizations are now approaching innovation as a convergence of like-minded parties, or distributed co-creation, to use its technical name. LEGO, for instance, famously invited customers to suggest new models interactively and then financially rewarded the people whose ideas proved marketable. Threadless is also cited as selling merchandise online and in-store (hey, an integrated retailer!) that is designed interactively with the company’s customer base. Of course what facilitates this new approach to innovation is the rise of the Web as a participatory platform.       Other examples of co-creation are cited. One of them is participatory marketing, which encourages customers to help create marketing campaigns. Approached in the right way, this is also an opportunity to start co-creating products with them. Last year, for instance, Peugeot invited people to submit car designs online and attracted four million page views on its site. The company built a demonstration model of the winning design to exhibit at automotive marketing events and partnered with software developers to get it included in a video game.       Even business-to-business companies are starting to co-create with customers.       http://retailwire.com/Discussions/Sngl_Discussion.cfm/13132 

Filed Under Ask Dr. Roger

What’s the key to creating a culture that drives innovation? Which approaches should companies use more?

Posted on July 18, 2008

For most companies, innovation is a proprietary activity conducted largely inside the organization in a series of closely managed steps. Over the last decade, however, a few consumer product, fashion, and technology businesses have been opening up the product-development process to new ideas hatched outside their walls–from suppliers, independent inventors, and university labs. Executives in a number of companies are now considering the next step in this trend toward more open innovation. So write authors Bughin, Chui and Johnson in The McKinsey Quarterly (June 2008), which I cite and quote at length in the current issue of Growth Strategies:          Increasing numbers of organizations are now approaching innovation as a convergence of like-minded parties, or distributed co-creation, to use its technical name. LEGO, for instance, famously invited customers to suggest new models interactively and then financially rewarded the people whose ideas proved marketable. The shirt retailer Threadless sells merchandise online–and now in a physical store, in Chicago–that is designed interactively with the company’s customer base. In the software sector, open-source platforms developed through distributed co-creation have become standard components of the IT infrastructure at many corporations. What facilitates this new approach to innovation is the rise of the Web as a participatory platform….          Even the most advanced businesses are just taking the first few steps on a long path toward distributed co-creation, conclude the authors. Companies should experiment with this new approach to learn both how to use it successfully and more about its long-term significance.           http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13102 

Filed Under Business Strategies

How critical is the psychological component to consumer spending? Is a strong retailing environment a by-product of consumer optimism and, conversely, are periods of weak sales created by shopper pessimism?

Posted on June 27, 2008

The psychological component to consumer spending is huge, of course. The problem is that there is often a mismatch between consumers’ perceptions of their own situations and prospects (usually good, and improving), and those of the economy as a whole (often bad, and worsening). As a marketer or retailer it thus becomes your job to appeal to consumers on the basis of value, whatever the (perception) of the overall economy. There are different ways of doing this with different consumers.  http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13058 

Filed Under Consumer Behavior

Which offline direct marketing media will become more valuable for retail and consumer brands in the future? Which will lose value?

Posted on June 23, 2008

According to PQ Media, spending on alternative media hit $73.43 billion in 2007, a 22% increase over the previous year, and will continue to surge. As reported on AdAge.com, the research firm forecasts a 20.2% increase over the next year, to a total of $88.24 billion, and a compounded annual growth rate of 17% for 2007-2012, reaching $160.82 billion. By then, alternative media will represent 26.6% of all advertising and marketing dollars.  According to The Future Exploration Network, the fastest-growing and largest segments of digital advertising over the next few years are forecast to be paid search, mobile, and video. However the pace of growth is expected to be solid across the board. They expect new segments of digital advertising to emerge, including personalized outdoor and in-building advertising, and advertising in virtual worlds. The domain of digital advertising will continue to expand. For example, newspapers delivered on e-paper will be a new forum for digital, personalized advertisements.   http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13047