Olympic-sized Update

I had a few folks comment that my last post was perhaps the most negative that they had seen on Making Cents (given my tendency to try to find the silver lining in most cloudy situations), but remember, I was quoting Bill Kirk who is the CEO of Weather Trends International. I did so because Bill and the folks at WTI have an amazingly accurate track record of forecasting retail sales based on their weather models.

So after the February retail report actually showed same-store retail sales actually INCREASED by 3.7%, I emailed Bill the following:

Bill:
After your persuasive post on the downward expectations on February SSS sales due to snowmageddon conditions, I’ve been checking the SSS reports released today (from ICSC and others) which seem to indicate a 4% increase for the month, which is actually higher than the 2-3% Wall Street expectations. Is this correct? If so, given your excellent track record, is this just one you missed this time?
Thanks for your input,
Charlie

As usual, Bill is always prompt in returning comments on WTI forecasts and he emailed back with the following reply:

Charlie,
Good morning. Retailers for the most part were all well above expectations but many did comment that the record snow cost them 1% to 2% in lost sales. Bottom line, they overcame the 9 major hurdles but they were up against the easiest February comp ever last year which was -4.3% so the +3.7% gain captured most but not all of last year’s huge losses. The expectations for March have been set very low at +2.5% by Wall Street but with the first major Spring surge of warm weather late month around Easter, retailers are poised for a blow out month with exceptional sales gains well above expectations. Why? Because they’ve had two back-to-back really bad March sales in 2008 = -2.3% and last year -5.1% due in large part to cold/snowy weather around Easter the past two years. Net-net we missed this one but Wall Street was surprised by the prior 2 strong months so we’re still up on the street!
Bill

I agree. I still hold a great deal of respect and will continue to follow the weather-based retail modeling by WTI (and others) because they represent one more layer of information to help us all in making more informed managerial decisions. Just goes to show that its hard for anyone who's brave enough to do some forecasting to get it right 100% of the time!

That being said, I do agree with Bill that expectations for March are OPTIMISTIC given the level of "pent-up demand" that is generally being touted in the marketplace. Again, last spring was pretty good given the circumstances and with the industry going into this spring with consumer confidence a lot higher than last year; the Conference Board's leading economic indicator index having increased for the 10th straight month; and the latest job market report mostly positive, I feel we are positioned about as well as we could be going into the spring season.

All that is left to do now is to put our best differentiated foot forward and make sure that we not only exceed consumer expectations, but delight them in the process!

Nine Olympic-sized Hurdles For February Retail SSS

From Bill Kirk of Weather Trends International:

There is a growing avalanche of bad news for overall February 2010 retail industry same-store-sales. Results are announced March 4th – here are 10 reasons why they will likely come in much lower than the +2% to +3% expectations on Wall Street:

1. Snowmageddon! February national snowfall will be off the chart and likely to crush all records for the snowiest February in 115 years. It’s tough to convince consumers to make Spring purchases when snow is all we see. THIS IS A BIG NEGATIVE!

2. The most highly correlated external factor to overall retail industry same-store-sales (SSS) is SNOW with an 84% correlation toward LESS being more favorable for higher SSS. Over the past 30 years, a snowier February results in lower than expected SSS for 82% of cases. THIS IS A BIG NEGATIVE!

3. A cold/wet/snowy February average SSS are +1.3% over the past 30 year’s vs a warm/dry/little snow February which brings much higher SSS of +6.7%. THIS IS A BIG NEGATIVE!

4. There were 21 days this February with significantly more snow than last year and the most snow before Valentine’s and President’s Day in decades. Nearly 70% of the country was covered in snow (49 of 50 states) prior to Valentine’s Day – the most on record. THIS IS A BIG NEGATIVE!

5. The Consumer Confidence Index is the 2nd most correlated external factor to retail industry SSS at 73%. While February consumer confidence came in at 46, much lower than the 55 predicted, it is down from the 56 in January. 90 is considered a good economy. THIS IS A BIG NEGATIVE!

6. The next most correlated factor is temperature (46%) with warmer being better. February 2010 is on pace to be the coldest since the 1970s (30+ years) with a 5.2F drop from last year. Every 1F colder can cost retailers up to 0.7% in lost sales. THIS IS A BIG NEGATIVE!

7. A stronger than expected January (we had that in 2010 with the +3% gain) is followed by a weaker than expected February in 63% of cases over the past 30 years. THIS IS A NEGATIVE!

8. Unemployment is at +9.7% this February vs +8.1% a year ago. THIS IS A NEGATIVE!

9. Gasoline prices are up +39% vs a year ago at $2.66 a gallon vs $1.91 gallon. THIS IS A NEGATIVE.

10. THE ONE BIG POSITIVE? Very easy comparisons to last year February SSS results which were the worst in 30 years at -4.3% according to data from ICSC. If it wasn’t for this easy comp, February 2010 would be a complete disaster; even with the easy comp results are likely to be much lower than expected!

Stay tuned for the March 4 report to see how WTI's forecast comes out.

American Consumption and the New Normal

American consumer attitudes about how we think about and spend our hard-earned dollars are undergoing the biggest change since the end of the Great Depression and World War II. As in the 1940s, we now find ourselves in a moment of turbulence, confusion, and new beginnings. Heading into a new year and a new decade, we're starting to get an idea of what our "new normal" may look like for consumers. At the end of... more, click here

Do price increases reflect value?

An interesting article appeared in Advertising Age this week regarding Restoration Hardware's latest pricing strategy. Hint: It's all in the marketing! Click here.

Home centers down but optimistic

Home improvement retailer The Home Depot, Atlanta, GA, reported sales for the second quarter ended August 3, 2009, were $19.1 billion, down 9.1% from the prior year period. Profit declined 7% to $1.12 billion. "Concerns about the housing market, rising unemployment and softness in the overall economy continue to pressure consumers," CEO Frank Blake said. "Our business performed well in a down market, we captured market share and drove operating productivity. The combination made for a solid quarter relative to our plan."

Lowe's reported net income of $759 million for the quarter ending July 31, a 19.1 percent drop from the same time a year ago; this translated into an earnings per share of 51 cents. Sales dropped 4.6 percent to $13.8 billion, and fell by an average of 9.5 percent in stores open at least a year. Lowe's management blamed the bad quarter on shaky consumer confidence, bad weather, and a harsh comparison to last year's quarter, when consumers were prodded into the store by a fresh influx of federal tax rebate checks. But CEO Robert A. Niblock said in a statement that there are signs of a bottoming out in housing and the larger economy, so the company expects D.I.Y.ers to begin trickling back into stores.

Retail sales up slightly

Today's report indicates that advance monthly retail sales in June 2009 increased 0.6% from May but declined 9.0% from June 2008, to $342.1 billion. Excluding autos, June retail sales rose 0.3% from the prior month but declined 7.9% from the prior year.

Some might consider this a dead cat bounce given that the increase was almost entirely due to the combination of a 2.3% rebound in motor vehicle sales and a 5.0% price-related surge in sales at gasoline stations.

"On the whole, this was a decidedly mixed report as the better than expected print on the headline number masks the weak underbelly of core consumer spending, which continues to decline" as one commentator puts it.

Looking at the quarterly retail sales trend shows that retail sales have risen 3.5% over the last three months versus a 9.0% decline over the last year.

In like a lion, out like a lamb

My friend, Dean Chaloupka, offers the following commentary on the spring season:

Talking with growers around the country, most did very well through the peak of the Spring 2009 season and have seen sales drop off during June. Depending on what part of the country you are in, this could be viewed as significant (North) or not (South).

I won't go into the economic factors which contibuted to the industry fairing well through most of the Spring but will touch on a couple which growers and retailers should think about as softer June sales have reminded us.

1. While consumers stayed home in Spring and focused on decorating their homes and yards, the economy is still on peoples minds and many consumers are on budgets. Consumers will not spend as freely as in better economic times.

2. People will make their purchases last longer. Plants will be maintained and not pulled out and replanted as often.

3. Disposable income still plays a role in how much people will purchase for plant material. Gasoline has started to move upward again and can impact sales going forward if the trend continues.

4. Consumers need a reason continue to purchase plant material. Later in the season, new and fresh planters, baskets, etc will generate new sales but it should not be expected that left over flats, 4", 6" pots and items which are the same thing consumers saw earlier will meet a need. At this time, consumers will no longer "grow" the plant.

It is my expectation that consumers will view plants and horticultural products for the rest of 2009 just as they have done in June. They will need to be enticed to decorate and the same old products, plants, packaging, and messages will not do it.

Retailers cutting back variety

Stan Pohmer (Pohmer Consulting Group) sent me a link this morning to a WSJ article discussing retailer moves to cut back on the number of SKU's. Here is an excerpt (for the full article, click here):

For years, supermarkets, drugstores and discount retailers packed their shelves with an ever-expanding array of products in different brands, sizes, colors, flavors, fragrances and prices. Now, though, they believe less is more.

Pharmacy chain Walgreen Co. is cutting the types of superglues it carries to 11 from 25. Wal-Mart Stores Inc. has decided that 24 different tape measures is 20 too many. Kroger Co. has tested stripping out about 30% of its cereal varieties.

In the next year or so, these and a few of the other largest retailers are expected to slice the assortment of products in their stores ...

Stan made a few elaborative comments in his email saying:

Line simplification, making it easier for the consumer, reducing SKU's for better inventory control, back to basics, reduction of confusion...

As explained in the book The Paradox of Choice: Why More Is Less by Barry Schwartz, and explained in the article, having the retailer be the gatekeeper of the assortment, reducing the SKU count to reduce customer confusion and only stocking the best of the best, could increase sales, rather than hinder them (which goes against the logic of most producers).

This could have major implications for the L&G industry...do we really need another red petunia? If the Boxes embrace this philosophy of short and deep, is this an opportunity for the IGC's, to fill the gap and gain differentiation? Or is this a fundamental shift for all retailers?

To which I replied with my own comments:

In our industry, we have already seen brand blurring erode brand equity; product proliferation whittle away at the length of the product life cycle; and analysis paralysis on the part of our consumers (as you stated). I contend that retailers should put each product category and each product within the category to the value proposition test. We [as an industry] need to remember that we are in the solutions business. Even in our research regarding the value of landscapes to perceived home value, the sophistication of the design was the number one contributing factor, followed by size of the plant material. The diversity of the plant material was still a contributing factor, but well behind the other two.

To which Stan replied with the following:

As far back as the early 1990's, the Big Boxes (specifically TGT and WMT) went through an exercise they called 'space wars' where every department, every planogram and every item on that planogram was evaluated through multiple metrics (i..e unit and $ sales and net contribution (GM less markdowns of all types, adv costs, internal/external distribution costs, plus any internal charges...down to the item level!). Looking at the numbers at the macro level, management determined division and dept space re-allocations, and then the individual departments did their micro level critiques. Using this information in building the assts for the next season, category, asst and unit decisions were made, down to the # of facings and shelf inventory.

Overall this system worked (one had to make judgment decisions and couldn't let the numbers force stupid decisions). Every item had to justify it's existence every year...there were no sacred cows. Even if the buyer wasn't a product expert, the numbers forced him to, at least at the top level, make more intelligent decisions based on sales (consumer demand) and profit. It makes me wonder, however, how the SKU proliferation that's taken place over the past few years survived the space wars analysis process (unless one incorrectly equated breadth of asst with differentiation)

Want to join in the discussion???

Cut costs, not customer experience

Here's a quote from a recent blog entry by Jeffrey Pfeffer, a professor of organizational behavior at Stanford’s Graduate School of Business and is the author or co-author of 12 books including “What Were They Thinking? Unconventional Wisdom About Management.”

Not all cuts are the same. Management, which is invisible to the customer, seldom cuts itself, because no one thinks they’re redundant. ... The companies that will do the best are those that recognize their own particular “moments of truth” — the small but crucial experiences that matter most to their clientele — and figure out ways to reduce costs that don’t adversely affect these small but psychologically important customer interactions.

From the BNET Report...click here for full post!

Retail Rebound?

May 7 (Bloomberg) -- Wal-Mart Stores, the world’s largest retailer, reported comparable-store sales for April that rose more than analysts expected. Revenue from U.S. stores open at least a year increased 5%, excluding gasoline sales, in the four weeks through May 1, the Bentonville, Arkansas-based company said today in a statement. That exceeded the 3% average estimate compiled by Retail Metrics Inc.

U.S. store visits rose the most in seven months, spurred by demand in the grocery, health, home and entertainment categories, Wal-Mart said. Some consumers spent more freely on sporting goods and other discretionary merchandise after gasoline prices and payroll taxes dropped. The shift of Easter to April 12 from March 28 in 2008 also lifted sales.

Target Corp. announced Thursday that net retail sales for the four weeks ended May 2 were $4.45 billion, up 4.5% from the comparable period last year.Minneapolis-based Target (NYSE: TGT) said first-quarter highlights included better-than-expected same-store sales and gross margins, favorable retail expense performance and credit card results that were in line with prior guidance. Target’s April results far exceeded those for the first two month’s of the company’s fiscal first quarter. Same-store sales were down 6.3% in March and 4.1% in February.

Weather and retail sales report

Despite the economy going into a tail spin, retail industry same-store sales were on the high side of expectations (-0.1% vs expectations of -1% to -2%) and in many cases exceeded expectations, especially Wal-Mart which blew away it's own expectations with a +5.1% gain.

There was some discussion that lower gasoline prices helped the industry but an analysis reveals that's most likely not the reason for the stronger gains. As the chart below shows, gasoline prices have steadily risen by $0.27 gallon from December to February so that certainly didn't help boost disposable income. Unemployment went from 7.2% to 8.1% so that didn't help retailers any. So what was difference from the earlier Winter months when retail sales were the worst in decades to the better February? MUCH BETTER WEATHER!

In December we had a slew of negatives for retailers with the coldest conditions in 8 years, 2nd wettest in 16+ years and snowiest in 20+ years with the snowiest week prior to Christmas in over 100 years resulting in the worst retail sales ever despite easy comparisons to a year ago. Yet unemployment was lower than February and gas prices much lower than February so it was all about the weather creating the PERFECT STORM for the abysmal industry results.

Then came January which had a few more positives but cold and snow was still extreme and despite worse unemployment, higher gas prices retail sales were not as bad December and higher than expected.

Then there's February - much worse unemployment, worst stock market plunge since the Depression, $0.27 gallon higher gas prices than December and very tough comparisons to a year ago retail sales, yet the industry comes in much higher than expected? Why? Maybe consumers felt a bit of Spring in the air with 1,581 new record high temperatures, warmest February in 4 years, least snow in 7 years and driest in 13 years? All very favorable trends for higher store traffic and higher retail sales. Click on chart below to enlarge.

January retail sales up 1%

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for January, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $344.6 billion, an increase of 1.0 percent (±0.5%) from the previous month, but 9.7 percent (±0.7%) below January 2008. Total sales for the November 2008 through January 2009 period were down 9.5 percent (±0.5%) from the same period a year ago. The November to December 2008 percent change was revised from –2.7 percent (±0.5%) to –3.0 percent (±0.2%). Retail trade sales were up 1.1 percent (±0.7%) from December 2008, but were 11.0 percent (±0.7%) below last year.

A statistical mirage? Many pundits think so -- click here.

2008 retail sales down 0.1%

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for December, adjusted for seasonal variation and holiday and trading-day differences (but not for price changes) were $343.2 billion, a decrease of 2.7 percent (±0.5%) from the previous month and 9.8 percent (±0.7%) below December 2007. Total sales for the October through December 2008 period were down 7.7 percent (±0.5%) from the same period a year ago. However, total sales for the 12 months of 2008 were down 0.1 percent (±0.4%) from 2007.

ANLA Management Clinic Blog

In order to stimulate interest in the 2009 ANLA Management Clinic, ANLA developed a one-day blog entitled Managing Through Tough Times. For one jam-packed day, industry leaders, including business owners, consultants, and editors, provided ideas for managing costs, driving sales, targeting new customers and motivating staff in the midst of strong economic concerns. Check out these thought-provoking (and action inducing) blog entries by clicking here.

How will the current retail environment affect green industry sales in the spring?

Quick overview of some of yesterday's December retail data (no real surprises):

Wal-Mart cut fiscal Q4 earnings target about 10%.
Costco posted a 4% drop in December same-store sales.
Family Dollar gained 8%; Same store sales gained 6%.
BJ’s Wholesale had 1.6% sales growth; the lowest in a year.
Sears (the largest U.S. department-store) sales fell 7.3%.
Target same-store sales fell 4.1%.
Macy’s December sales fell 4%.
Gap stores sales fell 14%.
Abercrombie & Fitch fell -24%.
Neiman Marcus reported a 28% drop off.
Limited Brands reported a 10% drop.

Also, a recent DJN press release states:

Food retailers are girding for a "battle" with vendors in the first half of the year as grocers push for lower prices to help shoppers through the recession and food manufacturers resist, Supervalu Inc. (SVU) Chief Executive Jeff Noddle said Wednesday.

With commodity and ingredient costs falling sharply in recent months, supermarket chains have been pushing for lower prices on everything from coffee to soups to help increase sputtering sales. In recent months, both Supervalu and competitor Safeway Inc. (SWY) have switched to a pricing strategy that sells more products at "everyday low prices" rather than relying on coupons or other promotions.

But food manufacturers have been reluctant to roll back their price increases, taken to offset higher input costs, despite some consumer product categories experiencing declines in sales volume of between 3% to 5%, Moody's Investors Service said in a recent report on the sector.

Lastly, from Wednesday's Business Week:

Shoppers are getting used to those 75 percent off sale signs, and that's bad news for merchants who worry they will also have to quickly slash prices on spring goods to attract customers.

Anxieties about how rampant discounts have affected shoppers' psyches and stores' profits are running high...The deep price cuts are making shoppers question the true value of items.

My Commentary:

Obviously, all of the trends above begs the question of whether or not we are "training" consumers to be more price (discount) oriented that they have been in the past. Or, as a friend of mine put it...what is the longer-term psychological impact of the drastic price reductions of the holiday and post-holiday sales periods going to be on the going-forward consumer expectations and purchase behaviors?

Obviously, people are currently spending less than normal; certainly less than justified according to their actual incomes (they are saving more which is good in the long run but bad for the economy in the short run). They are also shopping smarter, focusing on the "value" they derive from each precious dollar spent. So as we have discussed before on this blog, those retailers that have their value proposition clearly delineated will be in a much better competitive position than those who don't.

Without a doubt, several leading lawn & garden retailers are already positioning themselves for price-oriented competition this spring. We have always had a segment of consumers that are price-conscious shoppers and this will obviously bode well for them. Today's economic environment may increase the number of these price-oriented consumers and the real question is by how much.

But the majority of our core lawn & garden consumer base have other things besides price in their value equation. The question is whether or not retail firms have successfully identified what THEIR key customer base truly values and are differentiating themselves accordingly.

Another key point to remember is that even though unemployment is at 7.2% (from today's labor report), we'll still have 93% of the workforce earning a wage. The monies not being spent now will eventually burn a hole in people's pockets (if historical behavior holds true). It will probably take a few more months of spending declines for this hole-burning to take effect, so the economy will likely hit its low point this spring.

The key question then is whether "spring fever" will induce our core customer base to let go of those discretionary dollars burning a hole in their pockets. And, if so, will they be willing to pay the prices we must charge to cover the cost increases we've incurred in the last 2 years? Again, they are much more likely to do so if we appeal to their value equation.

It will also be very interesting to see how President-elect Obama's yet-released-but-being-revamped stimulus plan is eventually structured and even more interesting to see how much of it is actually spent (historically only 20-40% of a stimulus is spent -- the rest is saved or used to pay down debt). But fortunately, many folks will be receiving their tax returns about the time spring season kicks off, which means another influx of funds to burn a hole in their pockets!

Ok, now that we've discussed the retail environment, what does all of this mean for green industry growers? The tougher selling environment at the retail level this spring translates into a need to develop more intensive and collaborative relationships with your customers in meeting the needs of the end consumer – particularly in terms of their value proposition. During the downturn in 2008, those growers that proactively worked with their retailers (and usually these were pay by scan sales) to more closely provide landscape solutions for consumers were the ones who were most successful.

If any of you attended the recent industry webinar entitled, “It’s a Great Time to be in Business” you probably heard lots of great ideas. One of the best quotes that I wrote down during the webinar was “These are the times during which great companies are made.” Bearing that in mind, recall also that there are plenty of companies that have survived the last 50 years, which means they have gone through 11 such recessionary periods. How did they do it? By relentlessly focusing on and emphasizing their value proposition to their key customer base. There's a great lesson there. What is yours?

Roundup on Retail

As projected, the media is focusing on the depressed holiday sales this year (see links below). I have talked with a couple of garden centers who indicated their holiday sales were strong. However, they happened to be located in areas where the downturn has been buffered somewhat (see previous post here).

• Retailers Brace for Major Change
WSJ, DECEMBER 27, 2008

• Bargain-Hunting Shoppers Turn Up Noses at Post-Christmas Sales
Bloomberg, Dec. 27 2008

• Amazon Claims ‘Best Ever’ Christmas (Whatever That Means)
NYT Bits, December 26, 2008

• For stores, a very un-merry holiday
CNN/Money.com, December 26, 2008

• Retail stocks suffer, some defy dismal sales data
Reuters, Dec 26, 2008

• Christmas Aftermath: Navigating the Gift Return
WSJ, Holiday Sales Blog

• Holiday Sales Tumble as U.S. Consumers Cut Spending
Bloomberg, Dec. 26 2008

• US-Holiday sales may be down 4 pct -SpendingPulse
UK Reuters, Dec 26, 2008 2:12pm GMT

• Amazon says 2008 holiday season was ‘best ever’
AP, Dec 26, 2008

• Fresh survey shows gloomy U.S. retail sales: report
MarketWatch, Dec. 26, 2008

• Amazon Lauds Its Holiday Sales
WSJ, DECEMBER 26, 2008, 9:41 A.M. ET

• Retail sales dismal in United States and Britain
International Herald Tribune, December 25, 2008

• Retailers slash prices to entice holiday shoppers
AP, Dec 26, 2008

• After-holiday prices reach ‘rock bottom’
THE TENNESSEAN, DECEMBER 26, 2008

• Visits to U.S. Retailers Fell 24% on Weekend Before Christmas
Bloomberg, Dec. 25 2008

• Retail Sales Plummet
WSJ, DECEMBER 25, 2008

• Early Reports Confirm Weak Holiday Shopping
NYT, December 24, 2008

Put Your Best Foot Forward

Here is my latest column in the December issue of Today's Garden Center regarding the holiday retail outlook and strategies. Click here.

Black Friday and Cyber Monday sales strong

Though the holiday season is far from over, retailers across the country are breathing a collective sigh of relief after shoppers headed to stores and websites in droves over the weekend. According to the National Retail Federation's 2008 Black Friday Weekend survey, conducted by BIGresearch, more than 172 million shoppers visited stores and websites over Black Friday weekend, up from 147 million shoppers last year. Shoppers spent an average of $372.57 this weekend*, up 7.2 percent over last year’s $347.55. Total spending reached an estimated $41.0 billion. "Holiday sales are not expected to continue at this brisk pace, but it is encouraging that Americans seem excited to go shopping again." said NRF President and CEO Tracy Mullin.

It also looks like more people than ever spent the first workday of the holiday season doing something other than work on their computers. Online shoppers spent $846 million in the U.S. on 'Cyber Monday,' according to new comScore Networks data. That was a 15% increase over the same day last year (see chart above).

From Conspicuous to Conscious Consumption

An interview with Dan Stanek, Executive Vice President, TNS Retail Forward

It wouldn’t surprise you if I said that this holiday shopping season is expected to be weak. But would you be taken aback if I said that there is a fundamental shift in consumer values underway that may have a lasting impact on retailers? If your eyebrows are raised, listen up.

What changes are you observing in consumer values?

What I am seeing is the pendulum swinging away from the conspicuous consumption of the 1980’s and 1990’s and toward conscious consumption. And this is having a profound impact on the retail industry. Overall, the current economic situation is accelerating trends toward frugality and placing importance on relationships and people instead of things. The importance on things to make someone happy is being questioned. I am seeing almost an anti-consumerism sentiment.

The immediate change for retailers is that people are shifting from premium brands to down-market channels. Wal-mart (WMT) is a big beneficiary of this trend with its lower prices and higher value. There is also a move into dollar stores and thrift shops as well as Freecycle or Craigslist and other places where people can barter and exchange goods versus just throwing away unwanted items.

In the long run, some of these new spending patterns will stick with consumers who may not return to spending more when the economy rebounds or who will stay with lower-end brands in some categories.

Is there another time in history where there has been a big shift in consumer values? How did it impact retailers then?

During the Great Depression there was a profound amount of frugality. People made the best use of what they had. This value system stuck with that generation for their lifetime. They purchased high-quality goods that would last a long time. They didn’t want to be wasteful.

There were also profound shifts in the opposite direction, during the 1980’s and 1990’s. During the tech bubble when people started to feel rich they wanted to display that affluence with a Rolex or perhaps a BMW or large home. During this period of high consumption the retail industry experienced tremendous growth and also consolidation as the rise of behemoths like Wal-Mart occurred.

Is there a brand or campaign that you think is getting in right in addressing the current shift in values?

Dentyne is taking a very basic product, a discretionary product, and instead of positioning it around taste or fun they are relating it to specific relationships and social issues. Their campaign (supported by TV spots, billboards and the internet) is all about people and your relationships with them – “Make face time.” Obviously the connection they want consumers to make is that if you are going to be with people you need fresh breath. So, Dentyne encourages people to get off the internet and re-connect with friends by providing visitors with 3 minutes to explore dentyne.com. It’s an original concept.

What advice do you have for retailers who are (re)developing their marketing strategies?

The most important thing for retailers is to tie value and values together. When you can make a statement to offer lower price or great value and also that you are doing things “right” (such as making a donation with each purchase or using environmentally friendly materials), it will help justify the purchase for shoppers. You need to provide a reason for consumers to prioritize your purchase in their life above other things they need to spend money on.

Retail Holiday Outlook

Two independent surveys project the troublesome holiday outlook for retailers:

1. According to the National Retail Federation's (NRF) 2008 Holiday Consumer Intentions and Actions Survey, conducted by BIGresearch, U.S. consumers plan to spend an average of $832.36 on holiday-related shopping, up a paltry 1.9 percent over last year’s $816.69. This represents the lowest increase in planned consumer spending since the survey began in 2002.
   
   
2. A Deloitte survey released Wednesday was a bit more bleak in its findings. Almost six in 10 consumers said they would reduce spending this holiday season. Shoppers plan to spend about $532 on gifts, down 6.5 percent from last year, and buy fewer items. Nearly seven in 10 consumers said they would wait for store sales, cut back on shopping trips to save gasoline and use more store coupons.

From an earlier post, I quoted BusinessWeek.com saying:

"Call it a customer service Christmas. Consumers are expected to rein in spending this year, and the retail climate favors big-box stores that can offer bargains. But because small retailers can't win price wars, experts say independents need to leverage their biggest advantage over the chains: personal relationships with customers and the ability to deliver superior service. With some economists predicting one of the weakest Decembers since 1991, retailers that falter could face a cold winter." For the entire story, click here.

Another good quote I came across today:

“In the current economic environment, consumers are looking for value,” said Stacy Janiak, Deloitte’s U.S. Retail leader. “Heading into the holiday season, retailers will be well-positioned by emphasizing their unique value propositions, whether that means price, customer service, loyalty programs, or some other metric important to their customer base. In addition, given the current credit situation, retailers should take a close look at their financing options and conduct scenario planning, particularly with respect to liquidity issues.”

Since retail firms in the Green Industry should NEVER compete solely on price, they MUST differentiate their product and service offerings. Refer back to previous posts on differentiation strategies (click on the differentiation link on the right-hand side of this page) as a reminder of why this is so important!