May 2, 2008
RSR Research: The Economy – How Can You Be Sad Sitting on an Orange Couch?
By Brian Kilcourse, Managing Partner
Through a special arrangement, what follows is an excerpt of a current article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.
Conventional wisdom has it that, in uncertain times, consumers hold off on discretionary purchases until the better times (hopefully) ahead. One would be hard pressed to find something more easily put off than a new couch or a dining room set, and yet at least to one industry insider, consumers (and the retailers that service them) aren’t going to let tight money prevent them from cheering up the home.
According to Karen Olsen, Vice President of Marketing for Merchandise Mart Properties, floor traffic was up 30 percent this year at their recent High Point Furniture Market event. Such a jump in attendance might seem counterintuitive, given what’s happening in the U.S. economy. In fact, it’s not getting tough – it’s been tough for home furnishings – for the last 1.5 years.
But things may be changing, according to Ms. Olsen. “It could very well be that people were coming to our buildings because we had a lot of new manufacturers launching new products, and there were new and exciting things going on that buyers were very interested in.” Like what? According to the executive, “we could see that a lot of manufacturers were cutting back, laying people off, and so now some very talented people are out in the marketplace starting their own companies and launching innovative new products – and buyers are excited!” The company also featured a Trend Center at the tradeshow, which according to Ms. Olsen, “was designed to inspire people to think differently about what was going to inspire consumers to buy home furnishings, and take those ideas back and implement them into their plans going forward.”
From a dour market, the entrepreneurial spirit flourishes. Says the marketer, “color is really big – and that shows that people are really trying to put some excitement back into the industry. They’re trying to bring the depressed attitudes from the economy up a level, and get people excited about the home furnishings industry again. For the last year and a half, it’s been neutral, muted colors – now we’re seeing bright colors everywhere.”
According to Ms. Olsen, with money being tight consumers aren’t going out as often as they used to, and therefore if they have something in their house that helps make them happy, they feel better. “There was one designer that was talking about a bright orange couch that she had just launched, and she said, ‘how can you be sad sitting on an orange couch?’ People were just very upbeat, realistic of course in terms of what’s going on in the economy, but for the first time in a year and a half, very enthusiastic – it was a positive experience for everybody,” she said.
Discussion Question: Do you think tough times drive the entrepreneurial or creative spirit? Why or why not?
BrainTrust
Recent Discussions
Discussion Questions
Poll
American business has had it easy for the past several years, from mom & pops to the big boys. Now that times are tougher, I am seeing the best innovate and differentiate like never before. The also-rans are cutting costs, firing both CMOs and staff in a poor effort to “duck and cover.”
My accounts are flat or up 10%–even up 20% this year. This flies in the face of conventional wisdom everyone is down and that no one is buying.
Yes, this economic downturn is different than the past–it has been foisted on us and try though they might, it just isn’t sticking. GDP was UP last quarter no matter how much they want to say it doesn’t matter. Job losses for April were only 25% of what the talking heads “feared” they would be. At some point you have to ignore this “sky is falling” mentality and get on with doing business.
The best understand this and it shows–why NOT sell an orange couch, indeed!
Tough times do drive the entrepreneurial spirit, through innovative solutions and creative problem solving. When the economy slows, there is pressure to think differently; it’s harder to motivate consumers to spend. Will new designs and colors help the slump in the furniture industry?
The report indicated that traffic was up 30% at Merchandise Mart Properties, but were people buying or just looking? I wonder how many orange couches were sold.
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.]
Evolution comes into play when economic times are rough. How can we sell stuff to customers that don’t want to buy? This question spurs creative and entrepreneurial drive. It can be as simple as remerchandising a 4 foot bunker to creating the next pet rock.
The best retailing ideas are born out of tough economic times. I myself have created an employee customer service orientation package that gets employees on the floor and selling in 3 hours or less. It saves training hours and gets associates producing on their very first day.
Marketing gets creative (and aggressive) during a rough patch. The whole ‘spend your stimulus check here’ campaign is showing clever ways at getting people in the door.
I don’t know if I would want to be in the business of selling cars or sofas today, but finding innovative ways to sell just about anything has got to be at a fever pitch today. While one side of organizations has got to be thinking ‘cut costs’, to be around when the economy picks up again–which it will–companies need to innovate, innovate, innovate.
As others have said in tough times retailers need to get smart about their business.
While there is less business out there to be had, I predict that the retailers that continually freshen up their selection with a broad and shallow assortment of inexpensive pick-me-ups will weather the storm well.
I doubt the weary customer will purchase a big ticket orange couch…but an orange throw pillow? That’s an entirely different story.
A national non-food non-energy retail client of mine with hundreds of locations and an excellent traffic counter system has shown several months of strong traffic and poor conversion, combined with a declining average transaction value. Shoppers show up, but fewer make purchases, and the purchases are smaller. I doubt that this non-food non-energy retailer’s experience is unusual.
More Discussions
Has Same-Day Delivery Become an Expectation Across Retail?
Are expectations around retail delivery speed in flux?OpenAI Names the Infrastructure Standard for Agentic Commerce
Will OpenAI or Google (or another entity) set the gold standard for agentic commerce?Is Five Below Poised For Even Greater Growth?
Five Below is hitting serious growth numbers. Can this trend continue?
American business has had it easy for the past several years, from mom & pops to the big boys. Now that times are tougher, I am seeing the best innovate and differentiate like never before. The also-rans are cutting costs, firing both CMOs and staff in a poor effort to “duck and cover.”
My accounts are flat or up 10%–even up 20% this year. This flies in the face of conventional wisdom everyone is down and that no one is buying.
Yes, this economic downturn is different than the past–it has been foisted on us and try though they might, it just isn’t sticking. GDP was UP last quarter no matter how much they want to say it doesn’t matter. Job losses for April were only 25% of what the talking heads “feared” they would be. At some point you have to ignore this “sky is falling” mentality and get on with doing business.
The best understand this and it shows–why NOT sell an orange couch, indeed!
Tough times do drive the entrepreneurial spirit, through innovative solutions and creative problem solving. When the economy slows, there is pressure to think differently; it’s harder to motivate consumers to spend. Will new designs and colors help the slump in the furniture industry?
The report indicated that traffic was up 30% at Merchandise Mart Properties, but were people buying or just looking? I wonder how many orange couches were sold.
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.]
Evolution comes into play when economic times are rough. How can we sell stuff to customers that don’t want to buy? This question spurs creative and entrepreneurial drive. It can be as simple as remerchandising a 4 foot bunker to creating the next pet rock.
The best retailing ideas are born out of tough economic times. I myself have created an employee customer service orientation package that gets employees on the floor and selling in 3 hours or less. It saves training hours and gets associates producing on their very first day.
Marketing gets creative (and aggressive) during a rough patch. The whole ‘spend your stimulus check here’ campaign is showing clever ways at getting people in the door.
I don’t know if I would want to be in the business of selling cars or sofas today, but finding innovative ways to sell just about anything has got to be at a fever pitch today. While one side of organizations has got to be thinking ‘cut costs’, to be around when the economy picks up again–which it will–companies need to innovate, innovate, innovate.
As others have said in tough times retailers need to get smart about their business.
While there is less business out there to be had, I predict that the retailers that continually freshen up their selection with a broad and shallow assortment of inexpensive pick-me-ups will weather the storm well.
I doubt the weary customer will purchase a big ticket orange couch…but an orange throw pillow? That’s an entirely different story.
A national non-food non-energy retail client of mine with hundreds of locations and an excellent traffic counter system has shown several months of strong traffic and poor conversion, combined with a declining average transaction value. Shoppers show up, but fewer make purchases, and the purchases are smaller. I doubt that this non-food non-energy retailer’s experience is unusual.