Do you think tough times drive the entrepreneurial or creative spirit? Why or why not?
Posted on May 2, 2008
Confirming what we have been forecasting in our CDI reports throughout 2007, the US economy has not been in recession. It is weak–economic growth in 1Q2008 was 0.6%–but not collapsing. Same is true of workers’ compensation and consumer spending: up only slightly, but at least not down. In my view the worst is over; the economy and consumer spending will turn around, perhaps dramatically, by the third and fourth quarters.Of course there is uncertainty among consumers, and that is reflected in our survey of household buying intentions. Again, most telling is the large percentage of households (54%) sitting on the fence, not committing to any major purchases in the next three months, a real wait-and-see posture. (This is actually down slightly from last month, and we will allow ourselves to take that as a positive sign.)
In our view consumers are waiting for any positive sign to start greater spending again, such as a stronger stock market, or a stronger housing market. Both are indeed in the cards: there is currently $3.5 trillion sitting in money market funds and with a lot of businesses showing profits, that money will not stay on the sidelines. As for how much further housing prices can fall, consider that the US population of over 300 million will surpass 400 million within 35 years, and it becomes clear that the real question is when the next housing boom starts.
[The Consumer Demand Index (CDI) is a nationally representative monthly survey of 1,000 or more US private households that measures consumer purchasing intentions across the range of durable and non-durable goods. I’ll send a free sample issue upon request.]
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12932
Filed Under Consumer Behavior
What concepts being tested by Blockbuster do you think are most promising? What do you think of Jim Keyes’ approach to keeping Blockbuster relevant? Are there other concepts that you think the chain should be pursuing?
Posted on April 25, 2008
You have to admire the efforts. Here’s the important quote:”I’m a big believer of the physical relevance of a store. People like to shop, whether it’s in a Neiman Marcus or a Blockbuster,” Mr. Keyes said. “But we need to change our stores to become a destination for entertainment.”
It’s true everything is moving online, but a combination of online and in-store is necessary to optimize opportunities. However, here’s the other important quote:
Arvind Bhatia, an analyst at Sterne Agee & Leach in Dallas, has been through the test stores. Although he found them promising, he said it’s too early to tell whether the investments will generate a return.
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12917
Filed Under Entertainment Retailing
Assuming it were to happen, what would a Dell acquisition of RadioShack mean for the two companies? What is your assessment of the challenges and opportunities faced by each of the companies without a deal taking place?
Posted on April 24, 2008
I like the idea; looks like a win/win to me. I am convinced the future of retail is multi-channel integration, giving consumers maximum choice and convenience. And the technology/computer/innovation market is still set for decades of growth, as more and more areas of life (and consumption) move among and between channels or platforms (I’m thinking entertainment, education, information, financial, health, etc.). What a great market position to be in. (Further analysis later.) http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12915
Filed Under Business Strategies
Is now a good time for retailers to be looking to build new stores? Do economic slumps, particularly those that have hit the real estate market, represent an opportunity for retailers? Does the process for site selection change during economic slumps?
Posted on April 17, 2008
The US population recently surpassed 300 million. It will grow to 376 million by 2030, on its way to 400 million soon afterward. This will fuel a huge demand for residential, office, industrial and commercial properties. Nearly half the buildings Americans will live, work and shop in by 2030 haven’t been built yet.Yes, I would say it’s a good time to invest in real estate.
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12899
Filed Under Business Strategies
Are marketers and retailers taking advantage of parents’ tendency to over-buy? Do you expect a backlash from frivolous baby products and services? How can retailers capitalize on this opportunity responsibly?
Posted on April 15, 2008
Are marketers and retailers taking advantage of parents’ tendency to over-buy? Of course; that’s their job.Do I expect a backlash? No, this has been going on for decades. I remember writing about the phenomena over 20 years ago in FutureScan (now Growth Strategies), except the unfathomable figure for raising a child then was $100,000 (as opposed to today’s $1 million).
Frivolous baby products and services? What you buy is frivolous; what I and my spouse buy are small indulgences.
How can retailers capitalize on this opportunity responsibly? The way they always have: give people what they want at a profitable price point. This is a retailing industry web site, right? And oh, by the way, integrate your sales channels.
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12892
Filed Under Consumer Behavior
Is the American public, marketers included, naïve and gullible when it comes to understanding the Latino consumer? If so, why? If not, why do there seem to be so many mistakes?
Posted on February 1, 2008
Gregory Rodriguez just published a book that goes even further. Its title is “Mongrels, Bastards, Orphans and Vagabonds,” a history of Mexican-American immigration. The main thesis is one of assimilation and acculturation (to a changed mainstream, to be sure), and that America itself is becoming so “mongrel” that eventually all racial, ethnic and cultural distinctions will be rendered meaningless. (I have reviewed the book for www.hispanictrending.net and for the February issue of Growth Strategies.) Rodriguez reinforces a point I have made many times over the years: English language adoption among Mexican-Americans is far more extensive than is commonly believed. Just because there are vast swaths of America where only Spanish is required to function does not mean that only Spanish is spoken among Spanish-speaking populations. How else, asks Rodriguez, could upwards of 75% of Mexican-Americans be employed in white-collar or skilled occupations?Rodriguez goes so far as to label the entire “Hispanic market” a contrivance, an “invention” of Spanish-language marketers such as Univision, who sought to convince mainstream corporations that Latinos would continue to speak Spanish no matter how many generations their families live in the United States. But that is not the case. True, Spanish is certainly not going to fade away in the regions of the country that serve as gateways to new immigrants. The sheer size and continuous nature of Hispanic immigration, the proximity of Latin America to the US, and the availability of Spanish options in media, business and government services guarantee the continued proliferation of Spanish usage in the US. But it’s not what the kids are doing: young Hispanics may be very proud of their heritage, but English is the language of that powerful assimilation machine known as American culture. Hence, the language of the future is English.According to a study conducted by researchers at the State University of New York (SUNY), English remains the language of choice among the children and grandchildren of Hispanic immigrants, despite continuing waves of migration from Latin America. In contrast to concerns from some analysts that English may be losing ground to Spanish in some parts of the United States, the study finds the majority of Hispanic Americans moving steadily toward English monolingualism. Among third-generation Hispanics, the fastest-growing segment of the US Latino population, 72% speak English exclusively.Further, the study finds that this trend has generally continued among Mexican-Americans, the country’s largest immigrant group, even during the immigration boom of the 1990s. Even for Hispanics in Los Angeles, a magnet for immigration from Latin America, the pattern of language shifts across generations remains similar to those among Hispanics nationally. The report suggests that many other researchers and analysts have underestimated the pressures of assimilation, and are missing its contemporary signs. (Hello, Samuel Huntington?)What’s behind this English preference trend? Although not generally understood or appreciated, Hispanic immigration to the US, as well as the share of the US Hispanic population that is foreign-born, both peaked years ago. Migration to the US will decrease even further after 2010, according to University of California professor Philip Martin, due to a drop in Mexico’s birthrate. Hence, the explosive growth of the US Hispanic population in the coming decades will be fueled more by natural increase (native births) than by immigration. This will speed the processes of assimilation, acculturation and English-proficiency.
Filed Under Consumer Behavior
Do you agree with the premise that the media have contributed to the economy’s downturn by “terrorizing” consumers? If so, what do you think it will take to get beyond the negativity? How can marketers and retailers help turn the tide?
Posted on January 27, 2008
There is a mismatch between Americans’ assessment of their own economic, financial and social situations (good, with good prospects), and that of the country or economy in general (bad, and likely to get worse). And as we have been pointing out during all of this time, both cannot be true for a majority of people. But has the mismatch between perception and reality ever been greater than today?[According to the latest Harris Poll, 94% of Americans are satisfied with their lives (56% very satisfied), and 62% expect their personal situation to improve in the next 5 years. Yet 68% believe the nation is “on the wrong track.”]One wonders about the accuracy of polls that show some significant percentage of Americans believing that the economy is in recession: economic growth in the third quarter was 4.9% (combined second and third quarters were up 8.7% on an annualized basis); or that the next generation will experience a declining standard of living (two-thirds of Americans have incomes higher than their own parents, according to the Economic Mobility Project). How do such misperceptions persist in the face of evidence to the contrary? Our long-time readers know at least three explanations:
The good news is that the bad news is wrong; the bad news is that the good news often gets overlooked.The case for no recession in 2008:
- We are certainly not in recession now; as stated above, the increase in real GDP in the third quarter was revised upward to 4.9% by the government’s Bureau of Economic Analysis, which cited exports, personal consumption expenditures, private inventory investment, equipment and software, federal government spending, nonresidential structures and state and local government spending as positive contributing factors. At nearly 5%, third quarter growth was the best in 4 years and second highest in 7 years.
- Consumers are not “tapped out.” Employment (and employment opportunities) and household income are still at high levels. Chain-store sales are up 2.5% from a year ago; “Black Friday” and “Cyber Monday” sales were both up substantially from a year ago, setting new records. Housing values have declined marginally, but the “negative wealth effect” on consumer spending is just not that pronounced, if it exists at all.
- Sub-prime debt is not a widespread or systemic problem; it comprises only about 1.4% of global equity markets and affects only a small percentage of domestic borrowers. Furthermore, the Fed has committed to “act as needed” to shore up the economy; to stay “flexible and pragmatic” in dealing with the housing situation and credit crunch; and to not let fear of “moral hazard” deter policymakers from doing what is necessary.
- The price of oil was unsustainable at $100; it is now dropping and will continue to do so through 2008, bottoming out as low as $50 or $60. According to Fadel Gheit of Oppenheimer & Co., there is no oil shortage. Global inventories are over 4 billion barrels, the equivalent of all the oil produced in the Middle East for six months. Buyers are having no trouble finding sellers. The fear premium is totally exaggerated, not justified by logic or market fundamentals.
- The Federal Reserve predicts low inflation and continued economic growth in 2008; it will not raise, and might lower, interest rates.
- Taxes will not be raised, and may be cut (it’s an election year!).
Of course recessions have not been outlawed; we seem to get a short, shallow one every ten years to correct the unavoidable misallocations of economic and financial resources. But due to the amazing resiliency and productivity of the modern American economy; its abundance of entrepreneurs, innovators, inventors, risk-takers and creators; its public and private equity markets; its rule of law–in other words, capitalism–we will always return to the path of growth. The threats of disruption to this process of “creative destruction” are high taxes, overregulation, instability and protectionism.
Filed Under Ask Dr. Roger
How are the mass affluent different from mainstream consumers? What marketing and merchandising do consumers with above average spending habits respond to best?
Posted on January 27, 2008
When you include the affluent market with the “near-affluent” and then add in the “affluent-minded,” you’re talking about nearly half the population! (well, at least 40% anyway). The point is that the expectation of quality and luxury has now become a mass phenomenon.How to reach and sell and establish loyalty among the new affluent market? I would say most of all, individualization, or in other words, mass customization. The processes and technologies that make this possible are more available and affordable than ever. It is up to retailers and providers of goods and services to equip themselves to treat every one of their customers as an individual. This will increase number and size of sales, visits, loyalty, referrals, income and profits. It is the way of the future.
Filed Under Consumer Behavior, Uncategorized
Dr. Roger in the news
Posted on January 21, 2008
Children’s line to start online
By Kim Leonard
TRIBUNE-REVIEW
Friday, January 18, 2008
American Eagle Outfitters Inc. is starting a children’s clothing line to be called “77kids by american eagle” — and it will be the South Side-based company’s first brand to debut solely online.
The online marketplace allows the retailer to communicate with consumers about the merchandise long before the first stores open, Strand said, and response to the brand will help to shape what goes into the stores.
“Smart,” retail expert and business futurist Roger Selbert said yesterday when told of the online-only concept. “That’s where people go first to shop these days, before they go to stores.”
The move should work especially well with parents of youngsters who will wear 77kids, said Selbert, of Santa Monica, Calif. Many people now are adept at searching and comparison shopping online, he said, and “Moms with young kids who don’t have much time still find time to go online, probably every day. And they still will buy in a store, too.”
American Eagle executives who presented at a Cowan and Co. conference this week in New York City noted that AEO Direct, the company’s online business,has passed $200 million in annual sales and could reach $500 million in two years.
Sales margins are above those at stores, they said, and the “multi-channel” customer who shops on the Web and at AE stores in retail centers spends three times more than single-channel consumers.
American Eagle often references its 1977 founding date in its clothing styles. Its “AE” clothing and “aerie” intimates and fitness wear brands are geared for 15- to 25-year-olds, while the company’s Martin + Osa line is designed for older consumers.
If anyone can succeed here, it probably is American Eagle,” said LouAnn DiCosmo, retail specialist at The Motley Fool, though she questioned the timing of the launch given the retailing climate of late.
With consumer spending slowing across the board, it is tough for any retailer to branch out,” she said, and the company “is doing well with aerie, not so great with Martin + Osa.” The online debut will avoid a big, initial capital outlay, but potential investors may “want to watch and see how this plays out.”
American Eagle’s stock closed yesterday at $19.10, up 33 cents.
Kim Leonard can be reached at kleonard@tribweb.com or 412-380-5606.
Filed Under Upcoming Appearances
Do you believe there is a direct correlation between employee satisfaction and company performance? Have retailers learned to value intangibles such as employee satisfaction in achieving company performance goals or does the emphasis remain solely on traditional accounting measures?
Posted on January 21, 2008
The focus of retail industry employment is migrating from quantity to quality. Total retail employment is shrinking because of cost-cutting, consolidation and technology advances, but industry employment is growing in higher-skilled occupations, especially those involving technical, logistical and managerial skills.
Stores still have to scramble to find qualified employees who meet their needs, and still need to make competitive offers to get the people they want. The unemployment rate for people 25 years of age and older with at least a bachelor’s degree is just l.9%; that spells trouble for retailers.
As for employee satisfaction, consider Best Buy’s Results-Only Work Environment (ROWE): employees are allowed to decide how, when and where they get their jobs done. The only yardstick for evaluating employees is whether they meet goals for productivity. ROWE has had a significant impact: productivity jumped by 35%. Are profitability and stock price tied directly to intangibles? Of course they are.
Filed Under Trends in Employment