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From Conspicuous to Conscious Consumption

November 24, 2008 by Charlie

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.

Filed Under: News Tagged With: retail, retail sector, trends

2009 Outlook for Landscape Services

November 24, 2008 by Charlie

Lawn and Landscape just released their 2009 State of the Industry report with sections on the:

  • Housing Market Outlook
  • Commercial Market Outlook
  • The Cash Flow Crunch
  • Swelling Service Fees
  • Who Bails Out Small Business?
  • Today’s Customer
  • Small Business Ballot
  • Economy Broadens Labor Pool

A must read!

Filed Under: News Tagged With: landscape firms, value of landscaping

Who do you believe?

November 23, 2008 by Charlie

From the WSJ: The good news is your home may be worth more than the rock-bottom price that your neighbors’ houses fetched. The bad news: No one but you might think so.

The one point of widespread agreement in the real-estate industry is that there is no single accurate index of home prices. They are all over the map, cover different sets of homes and may exclude parts of the country or be unduly influenced by the mix of homes sold in a given month.

No matter which index is correct, until a large inventory reduction takes place, housing prices will not stabilize. Click here for the Money Morning housing forecast for 2009.

Filed Under: News Tagged With: housing industry

Unemployment rates vary by state

November 23, 2008 by Charlie

Facts from the October BLS report on state unemployment rates, ranked from lowest to highest:

1. Five states have unemployment rates at 3.6% or less (SD, WY, ND, UT, and NE).

2. 33 states have unemployment rates below the national average of 6.5%, 15 states are above 6.5%, and two states are at 6.5%.

3. The median unemployment rate by state is 5.7%, with 25 states at or below 5.7% and 25 states at or above 5.7%, and mean by state is 5.86%.

Based on #2 and #3 above, Mark Perry suggests that the reason the national average of 6.5% is above the median of 5.7% is either because: a) the states with higher-than-average unemployment rates are also states with higher-than-average population, and/or b) there are more extreme “outliers” above the median than extreme outliers below the mean, bringing the mean of 6.5% above the median of 5.7%.

Both of these are probably correct. Some of the states with the highest jobless rates are also states that have large populations (MI at 9.3%, CA at 8.2%, OH at 7.3% and, IL at 7.3%). Moreover, the two states with the highest rates are Michigan and R.I. with 9.3% rates, 3.6% above the median, while the two states with the lowest rates are SD and WY with 3.3%, or only 2.4% below the median.

The bottom line is that economic problems and labor market weakness are not necessarily distributed equally around the country, but the biggest problems are perhaps somewhat concentrated in some of the states with the largest populations. Fourteen states have unemployment rates below 5% for example, which would normally considered to be pretty far from recessionary levels.

Filed Under: News Tagged With: labor

Why the auto industry is in trouble

November 16, 2008 by Charlie

If you want to figure out why the U.S. auto industry is in deep trouble, while Japanese car companies operating in the United States are doing a bit better, this picture from Mark Perry, an econ prof of University of Michigan, Flint, may be a good place to start.

Filed Under: News Tagged With: costs, trends

Valuation of the stock market

November 15, 2008 by Charlie

This chart, courtesy of Jim Hamilton, shows the stock market relative to the average of the past ten years of earnings. The red line is the historical average. (Click on the graph to enlarge.) According to this metric, stocks are now cheap, but not exceptionally so.

Filed Under: News Tagged With: financial markets

10 Market Rules to Remember

November 13, 2008 by Charlie

Bob Farrell’s (Merrill Lynch chief market strategist from 1967-1992) 10 Market Rules to Remember (link):

1) Markets tend to return to the mean over time.

2) Excesses in one direction will lead to an opposite excess in the other direction.

3) There are no new eras — excesses are never permanent.

4) Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.

5) The public buys the most at the top and the least at the bottom.

6) Fear and greed are stronger than long-term resolve.

7) Markets are strongest when they are broad and weakest when they narrow to a handful of blue chip names.

8) Bear markets have three stages — sharp down — reflexive rebound —a drawn-out fundamental downtrend.

9) When all the experts and forecasts agree – something else is going to happen.

10) Bull markets are more fun than bear markets

Source: Dennis Gartman of “The Gartman Letter”

Filed Under: News Tagged With: financial markets

Green Industry Risk Management Guide

November 13, 2008 by Charlie

As I mentioned in an earlier post, three colleagues and I recently conducted a series of risk management workshops that were held across the nation for nursery and greenhouse growers. A concluding part of these workshops was the development of a hands-on publication that folks in the Green Industry could use in analyzing and addressing the various risks they face, including production, marketing, financial, legal, environmental, and human resource risks. Click here to view a PDF version of this timely Green Industry Risk Management Guide (large file size = 20MB).

Filed Under: News Tagged With: risk

Top 10 most irritating phrases

November 11, 2008 by Charlie

According to Oxford University researchers, here are the top 10 most irritating phrases:

1 – At the end of the day

2 – Fairly unique

3 – I personally

4 – At this moment in time

5 – With all due respect

6 – Absolutely

7 – It’s a nightmare

8 – Shouldn’t of

9 – 24/7

10 – It’s not rocket science

At the end of the day, what would you add to this fairly unique list? With all due respect, I personally, at this moment in time, absolutely shouldn’t of suggested that it’s not rocket science because people are saying this 24/7 and it is literally a nightmare!

Filed Under: News Tagged With: trends

Frankel on the recession

November 11, 2008 by Charlie

Professor Jeffrey Frankel of Harvard University’s Kennedy School of Government is also on the Recession Dating Committee at the National Bureau of Economic Research.

Last night, he was on Bloomberg discussing the recession. He has a terrific piece in the cafe on the same subject, titled, NOW Are We In Recession?

Go check em out.

Filed Under: News Tagged With: economic forecasts

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