CONSUMER TRENDS
Having explored the cultural shifts that are giving rise to the trends, here are the major trends on the horizon that will have the strongest im-pact on discretionary product manufacturers.
Shift From Buying Things to Buying Experiences
Part of our popular cultural mythology says that when people reach middle age they undergo a personal identity crisis, the "midlife crisis," that often is played out in the consumer marketplace. Stereotypically, a man may address his midlife crisis by buying a little red sports car or, more sinisterly, by trading in his middle-aged wife for a new, younger model. A woman may get a facelift, dye her hair, find a younger man, or, empowered by "menopausal zest," find new energy to pursue a career or hobby. When grandchildren come along, the new grandparents may shower presents and gifts on their grand-children to make up for some of the inadequacies that their children may have faced when they were growing up because money was tighter. This is the life stage that the boomer generation is now approaching en masse, and it will change the fortunes of many companies that sell and market to people who buy things they don't need.
With the attitude of "been there, done that" about buying more things, boomers will turn away from a consuming focus on things to a hunger for experiences and personal development.
In their middle years, the members of the baby boom generation will face the inevitability of their mortality. In doing so, they will try to make up for lost time and the things they may have missed by directing their energy and money toward experiences and away from the continued acquisition of material things. With the attitude of "been there, done that" about buying more things, boomers will turn away from a consuming focus on things to a hunger for experiences and personal development. Service industries that satisfy the mature boomer's craving for personal enhancement will fare well after 2010. These include travel providers, especially adventure travel modified for aging boomers' health and fitness levels; health and beauty spas; and colleges and adult-education experiences, including training, such as cooking or language schools. Consumers will turn away from a focus on the thing consumed (i.e., the noun) to the experience (i.e., the verb).
 |
VIKING RANGE CORPORATION
Viking's new take on experiential retailing.
With the luxury end of the major appliances industry accounting for an estimated $5 billion of the total industry's $31.6 billion in 2001 sales, Viking Range Corporation claimed to be the first to offer "professional" ranges to the homeowner in 1987. Since that first commercial-type range, the company now offers a complete line of home appliances for the kitchen, as well as outdoor products for the pool and patio.
Recognizing that selling luxury extends far beyond the thing (i.e., the appliance) to selling the whole experience (i.e., a professional-quality dining experience in the home), Viking launched its first Viking Culinary Arts Center in Memphis, Tennesee, in 1999 as a center for training home cooks. It then acquired HomeChef, a 27-year-old San Francisco-based cooking school, in November 2000, and so aggressively launched itself into experience marketing. Today, the company operates eight Viking Culinary Arts Centers in Georgia, Missouri, New York, Ohio, Pennsylvania, Tennessee, and Texas and four Viking HomeChef locations in California.
The Viking Culinary Arts Center concept is a simple and an organic extension of its flagship appliance brand. "Viking products have always been designed for the true epicurean enthusiast, and the Viking Culinary Arts Center is a way for Viking to really connect with our consumers," explains Joe Sherman, president and CEO of Viking Culinary Arts Center. "It is a natural extension of the Viking brand because now consumers can come in to test drive Viking products before choosing which to buy."
But the center is far more than a place to "test drive" your new stove. It's part gourmet theater-in-the-round where world-class chefs prepare their signature dishes in state-of-the-art demonstration kitchens. All decked out with overhead video monitors, each participant has a clear overhead view of the cooking surfaces.
Another aspect of the Viking Culinary Arts Center concept is a handson cooking school. Students can choose between one-, three-, or five-day classes and work on cooking stations outfitted with Viking professional appliances. The curriculum covers everything from basic baking techniques to preparing a restaurant-quality gourmet meal.
And no Viking Culinary Arts Center would be complete without the retail store, where consumers can purchase the tools they need to create their new recipes. The stores sell only professional-type, high-caliber equipment, from spoons and spatulas to complete cookware sets, along with gourmet food ingredients from sea salt to Belgian chocolate and pasta sauce. While Viking major appliances are not available in the store, consumers are referred to their local dealer.
The three aspects of the center—cooking theater, cooking school, and store—provide, as the company's Web site describes, "a unique venue where Viking consumers can fuel their passion for cooking and experience the full Viking product line in action." There is also an "evangelical" aspect to this program. In effect, it helps create the ideal target market for Viking in the future. The thinking goes that a better-educated, more-sophisticated home cook will be better able to discern the ultimate benefits of a Viking appliance over other brands.
From things to experience, that is the motto for the future for marketers and retailers that sell things people don't need.
From things to experience, that is the motto for the future for marketers and retailers that sell things people don't need. Ultimately, all emotionally driven purchasing is about buying a thing to achieve a feeling, enhance an experience, or get an emotional lift. The Viking Culinary Arts Center is an example of a product-based marketer fully embracing the challenges of experiential retailing. As Fred Carl, the president of Viking says: "The Culinary Arts Center was developed around the concept that Viking wants to provide our consumers with the best cooking experience possible. That includes not only the appliances they cook on, but the techniques and cooking tools they use."
|
As boomers pursue new experiential passions, they will need tools, equipment, and accessories to support them in their new pursuits. Discretionary product providers can position themselves for success by providing new products to enhance boomers' experiences and adventures. Durable-goods providers, such as automobile manufacturers, will fill such a need as will those who manufacture and market sporting goods, personal-care items, books, housewares, and entertainment. For example, boomers will need new recreational vehicles to take them on their new adventures. I predict they will eschew the big, bulky, luxurious RV models so admired by today's mature generation. Instead, they will favor more simplified, environmentally friendly models that can take them off the highway. Think modified VW bus concept crossed with an SUV, equipped with a bed, kitchen, and bath, with a powerful engine and four-wheel drive.
The future focus in consumer behavior will be about buying the experience, so manufacturers and marketers must think beyond the features and benefits of the product they are selling, to how that product supports or enhances an experience.
The future focus in consumer behavior will be about buying the experience, so manufacturers and marketers must think beyond the features and benefits of the product they are selling, to how that product supports or enhances an experience. If you came of age in the 1960s as I did, you will remember the strong anti-materialism ethic running through the youth culture. At the same time, 1960s youth hungered after new, mind-opening experiences. Some members of the boomer generation self-destructively turned to sex, drugs, and rock 'n' roll to fulfill much of this craving for experience. I sincerely hope that boomers learned from their youthful excesses, as I foresee that they will participate in a second adolescence in their senior years.
With a "been there, done that" attitude, some boomers will turn away from the pursuit of materialism and excessive consumption and save their money for adventures. New and exciting experiences in their second adolescence could include climbing Mount Everest or at least trekking to base camp. They might decide to travel to China, hike the Appalachian Trail, learn to cook in Paris, or get an advanced degree in English literature. Some may take up painting or photography; set off cross country on a Harley; or learn to fly, sky dive, or balloon. Closer to home, others may take up a second language, join a theater group, form a "garage" band, or, like me, take piano lessons after 30-odd years without touching a keyboard.
| E-COMMERCE % SALES IN MILLIONS | CHANGE E-COMMERCE SALES PREVIOUS PERIOD | |
|---|---|---|
| 1999 4th Quarter | $ 5,393 | (NA)% |
| 2000 1st Quarter | 5,772 | 6.1 |
| 6,250 | 9.2 |
| 7,079 | 13.3 |
| 9,248 | 30.6 |
| Total 2000 | 28,349 | (NA) |
| 2001 1st Quarter | 8,009 | -13.4 |
| 7,904 | -1.3 |
| 7,894 | -0.1 |
| 10,788 | 36.7 |
| Total 2002 | 34,595 | 22.0 |
| 2002 1st Quarter | 9,470 | -12.2 |
| 9,761 | 3.1 |
| 10,465 | 7.2 |
| 13,770 | 31.6 |
| Total 2002 | 43,466 | 25.6 |
| 2003 1st Quarter | 11,928 | -13.4 |
| 12,464 | 4.5 |
| 13,284 | 6.6 |
| 17,226 | 29.7 |
| Total 2003 | 54,902 | 26.3 |
| Source: Department of Commerce, U.S. Census Bureau | ||
Figure 9.6: Quarterly Retail and E-commerce Sales, 1999 to 2003
With a "been there, done that" attitude, some boomers will turn away from the pursuit of materialism and excessive consumption and save their money for adventures.
Oh, did I mention that I had to buy a piano to play so I could take those piano lessons? Pretty soon, I will be ready to buy the baby grand I really wanted but felt was a little too extravagant before I knew whether I could recover my piano-playing skills. The Steinway Company and my music store will be thrilled.
Consumer Trend: Consumers Will Crave Reality
Our society is undergoing a digital revolution. More of the equipment we interact with daily—our office computers, cellular phones, microwave ovens, digital televisions, entertainment systems, radios, and even our cars—are digitized and virtually unknowable to ordinary human beings. Where one might have conceptually understood how an analog telephone, television set, or precomputerized car operated, today you need a degree in computer science or electrical engineering to even begin to comprehend how digital models work. Operating many of these machines presents a challenge to the techno-illiterates. I cannot set the timer on my microwave oven or program the VCR to tape a show without getting out the manuals, but luckily, I have two sons who can do those things for me.
The Internet is playing a bigger role in our lives. School children today learn about computers right along with their lessons in reading, writing, and arithmetic. They are exposed to the Internet, too, with 95 percent of U.S. schools having Internet access in 1999, according to the U.S. Center for Education Statistics. Internet use is rising dramatically across the entire population, with the average number of hours spent per person per year on the Internet rising from 74 hours in 1998 to 122 hours in 2000, a 65 percent increase. In 2000, roughly 43 percent of the adult population used the Internet in the past 30 days, according to a survey reported by Mediamark Research. The Internet is also playing an increased role in the commercial side of consumers' lives.
The Internet's rapid growth as a commercial powerhouse will have profound influences on the way people shop in the years to come.
Today, close to two-thirds of adult Americans access the Internet, as compared to 47 percent back in 2000, according to research from the Pew Research Center. Today, the Internet is becoming a central hub for communications (e-mail is the most widely used Internet application, while instant messaging, or IM, brings an entirely new way to communicate among youthful Internet users who are its main users today), information and research (searching the Internet for news, health, or cultural information has grown by 50 percent since 2000), and commerce (the number of people who have made purchases online grew by 63 percent since 2000, with online travel services posting some of the greatest gains in e-commerce activity).
As the Internet assumes a growing role in the commercial side of consumers' lives, they spent $54.9 billion over the Internet in 2003, a 26.3 percent increase from 2002. While this is only 1.6 percent of total retail sales, the Internet's rapid growth as a commercial powerhouse will have profound influences on the way people shop in the years to come.
As our contemporary American society becomes more "virtual," with consumers turning to computers and the Internet for their work, social interaction, entertainment, and shopping, there will be a swing back to the "real" world. Consumers will crave reality. We live and will always live in a real world bounded by time and space and governed by the physical laws of the universe. As our world goes more cyber, consumers will feel the need to surround themselves with things that will bring them back to reality. This will manifest itself in many different areas of our lives, from how we dress, to how we decorate our homes, play, and entertain ourselves.
As we turn away from buying things and focus more of our spending on experiences, nature travel and history travel will grow. What connects us with the real world more than nature? What grounds us in our cultural reality better than history? History travel, especially travel focused on Civil War sites, is already a booming business and destined to grow. History travel will encompass colonial America, Revolutionary War sites, western expansion, and native cultural attractions as well. Foreign travel will take consumers overseas to the homelands where their ancestors originated.
As our world goes more cyber, consumers will feel the need to surround themselves with things that will bring them back to reality.
Grounding through nature will express itself in the garden. Outdoor living space will grow, with consumers building elaborate garden getaways where they can shut out the modern world and enjoy the sounds, smells, and sights of nature. We will invite wildlife into our garden worlds, including birds, but hardly limited to them. We will populate our gardens with turtles, frogs, toads, peaceful snakes, squirrels, bats, even other furry mammals that will connect us better to the real world. A flock of wild turkeys roams our neighborhood. Cars stop on the road just to watch them. They are ugly creatures, looking like miniature Jurassic Park raptors with feathers, but fascinating nonetheless when they come to forage in our yard. I keep food on hand to throw out to them because they seem so special in a first Thanksgiving, Plymouth colony sort of way.
With an emphasis on reality, our home decorating focus will expand to include all five senses. While color and style (i.e., sight) may always dominate our home décor, consumers are broadening their focus to texture (i.e., touch), background music or sounds of running water in indoor fountains (i.e., sound), and home fragrances (i.e., smell). The sense of taste is indulged in our kitchens, now the center and focus of the home.
As we arouse and stimulate our senses through the things with which we surround ourselves, we will pay particular attention to the feel of fabrics in our upholstered furniture, rugs, pillows, throws, bed linens, curtains, towels, and kitchen and dining linens. Shoppers have always been "touchy-feely" when buying these products, but in the future they will become even more so. Consumers will demand that the fabrics they touch, sit on, and cover up with, engage them and stimulate them texturally, as well as be a pleasing color and design.
Our taste in home furnishings, including the colors we use to decorate and the art we choose for our walls, will also become more harmonious with nature, more soothing, more natural, and more beautiful. Our taste in color will not fade into pastel nothingness. Rather, we will look for stronger, bolder colors that appear in nature. Think of the bright, bold colors found in a spring garden filled with tulips, daffodils and other flowers. Moreover, we will combine colors not to contrast, but to complement. Art will turn from modern influences with its stress on shapes and colors back to more beautiful, naturalistic images. The continued popularity of the Impressionist painters foreshadows the new direction for art in the third millennium.
Silence itself may become a new luxury and status symbol, with architects incorporating more sound-blocking features in new homes.
In the home of the future, sound will play a more central role. Music that is created to stimulate a mood or a feeling will grow in demand, as consumers enhance their home with new entertainment systems that give the effect of surround sound. Designers will figure out ways to bring the sounds of nature into our homes from simple tabletop fountains that recycle tap water to other more complex fountain designs. Expect architectural design to incorporate a Spanish influence by introducing inner courtyards with natural fountains. Silence itself may become a new luxury and status symbol, with architects incorporating more sound-blocking features in new homes.
Home fragrance will become an essential element of the home. While candles are the preferred means for home-fragrance delivery today, new more flexible mechanisms, such as heated waxes, potpourri boilers, and misters will give consumers more control of the fragrance and the mood the fragrances are intended to set. Aromatherapy technology will be applied to home fragrances and recipes for combining different scents to achieve desired emotional effects will become popular.
The trend toward realism and naturalism will also play out in fashion. We will strive to achieve multisensory looks that combine color and style with texture and scent. Cosmetics and personal-care products will satisfy our sensual cravings for indulgences. Fashion designers will experiment with new fiber technologies, even combining new manmade fibers with natural ones that achieve ultra-comfort in our clothes while enhancing feminine curves with fabric that floats and swings, rather than clings. We will look for more washable fabrics, rather than dry cleaning with all those dangerous chemicals. Consumers will have signature fragrances that are individually hand blended to capture the essence of the personality. Personal fragrances will be developed for different moods, allowing the individual to coordinate his or her signature scent with activities for the day or their feelings.
As we ground ourselves more and more in reality, we will want our "techno-toys" to have a decidedly Jetsons, twenty-first-century appeal. For TVs, home entertainment systems, major appliances, and computers, we will favor an ultra-high-tech look, lots of chrome and steel, lights and buttons, and sleek curves. Our desire for the ultra-high-tech look for technology products will play out in our favorite toy: the car. Today's consumers are enamored of the retro-looking Chrysler PT Cruiser, Ford Thunderbird, and the new GM Chevy Bel Air Concept Vehicle, but car design will take a decidedly high-tech turn soon. It will offer designs that look forward by looking back to the future vision of motor-vehicle transportation, as conceived in the 1940s and 1950s.
Consumer Trend: Time is the New Shopping Currency
If the rising economy of the 1990s taught us anything, it was that anyone who is willing to get the right education and work hard at the right job can make more money. However, we also discovered that no matter how rich or poor we were, no one could add one second more to one's life. Time is the great social equalizer. We all have only 24 hours a day, 7 days a week, 365 days per year. With this discovery comes the awareness that our time is a precious and limited resource. A new priority of making the most of the limited time we have is taking over. Consumers are looking at all the ways they spend their time, including shopping, and demanding a more time-efficient, time-conscious way to shop.
The amount of time consumers are willing to shop has declined steadily over the past decade, and it can be expected to collapse even more as consumers are confronted with new concerns about safety in public places. America's Research Group found that consumers who visited two to three stores in 1990 to buy home furnishings, electronics, and major appliances, had cut the number of visits back by half a store by the end of the decade. Today, shoppers are going to only 1.8 stores to make the same purchases.
Further, as consumers retreat into the safety and comfort of their homes, they want to spend less time at the store, especially a store that is not satisfying their craving for a unique and emotionally satisfying experience. They will do more of their weekly shopping in a single shopping trip. More consumer shopping will also be done from the home, with consumers turning to the Internet, mail-order catalogs, and even party-based and other direct-selling businesses for their shopping needs.
Time is the great social equalizer.
Party plans and other forms of direct selling will be the next guerilla marketing method to grab share, while giving fits to traditional retailers in the years to come. This retailing methodology has everything going for it in today's emotional climate. You get a chance to meet and greet your friends in the comfort of a friend's home, thus providing social experiences that people desire. Over appetizers and a glass of wine, you get to look at new, interesting products presented by your friend, a spokes-person you can really trust. While seeing the new products, you can learn how to use them or display them in innovative ways, thus providing the enhancement of education and information. You gain access to special sales offers, and you can pay for the products later when they are delivered to your home. It is the perfect retailing method for the new millennium. Longaberger Baskets, Blyth's PartyLite candles, Pampered Chef, Discovery Toys, Avon, Mary Kay, and many others have known it for years, and soon many other smart marketers will be exploring opportunities to sell in this way. Word of warning: It only works with women, at least so far.
Television shopping mimics the intimacy of party plans.
Television shopping mimics the intimacy of party plans. We are already conditioned to think of the television celebrities we invite into our homes every day as our "friends." As a result, the television shopping channels with their personally engaging show hosts will become a more powerful retailing media in the future.
Consumer Trend: The Coming Retail Crisis—Excess Retail Space
It is happening in office space today. Office real estate is facing a crisis of excess inventory. After years of building new office space coupled with overly optimistic tenants who grabbed more office space than they needed, nearly 40 million square feet of office space returned to the market in 2002, according to Torto Wheaton Research. As new office buildings remain vacant and existing tenants fail to renew their leases, rents will fall and overall office vacancy rates will rise. Even boom towns, such as Atlanta, Dallas, and Houston, faced office vacancy rates in the double digits at the start of 2002.
As the crisis grows in office real estate, another one will develop in commercial retail space. The results of overbuilding retail space in the 1990s will come home to roost soon. Today every man, woman, and child "owns" between 40 and 50 square feet of dedicated retail space. In the 1990s, about 3 square feet per person was added to total retail space inventory. With 44,500 shopping centers nationwide, 300 million square feet of new store space was added in 2000. During the 1990s, space devoted to retail grew 20 percent, twice as fast as the population. Consequently, operating profits for retailers have dropped, and the retail business has become far more competitive.
Contributing to the coming retail crisis is the shifting pattern of consumer shopping.
Contributing to the coming retail crisis is the shifting pattern of consumer shopping. Consumers are turning away from traditional department stores and shopping more at mass merchants, discounters, and warehouse marts. While the sales from general merchandisers in total rose 92 percent from 1992 to 2002, the key driver of growth in this segment was the category of other general retailers, including Wal-Mart, Kmart, Target, Costco, and Sam's Club. Posting growth of 264.3 percent from 1992 to 2002, the other general retailers comprised of discounters and warehouse clubs reached $258.3 billion in retail revenue. In the same ten-year period, traditional department stores sales grew only 23 percent, not even matching growth of the retail industry as a whole. Nonstore retailers also posted triple-digit growth from 1992 to 2002. Non-store retailers include catalogers and mail-order marketers, television shopping, direct sales, party-plan marketers, and e-tailers. This segment rose 138.6 percent from $81.3 billion in sales in 1992 to $194 billion in 2002. Growth of these two segments—other general merchandisers and nonstore retailers—is expected to outpace that of the retail industry as a whole. These two segments will continue to grab market share by siphoning sales away from competing classes of retailers.
A bright spot in the retail marketplace has been the explosive growth of large, national specialty chains, including Bed Bath & Beyond, Linens 'n Things, Pier 1, Pottery Barn, Williams-Sonoma, Restoration Hardware, The Home Depot, Lowe's, and so forth. These national, specialty retailers are literally "eating the lunch" of small independent specialty retailers that specialize in gift and home products. Yet, the national specialty chains have an Achilles' heel that may soon start to trip them up. Many of these companies have become retail "darlings" by posting consistent annual growth rates in the range of 7 to 15 percent. However, that growth has come largely from opening new stores rather than increases in existing-store sales. The trouble is that with only about 225 U.S. cities boasting a total population of 100,000 or more, the new markets where the national specialty retailers can open is shrinking. Many of the chains have between 200 and 300 individual stores, and behemoth Pier 1 has just topped 900 outlets. Inevitably, revenue growth for these chains will return to earth as their "frontier" markets evaporate. Their new store openings will be slated for existing markets where they will start to cannibalize their own stores' sales.
The coming retail shakeout will have an impact on all retailers, large and small. Clearly, some big-name department stores will be unable to stay the course as the department store sector continues to distance itself from the shopping needs of consumers. More small independent retailers—those shops that line small-town-America's main streets—will fold as Wal-Mart, Kmart, or Target open up on the town's bypass. The national specialty chains will have to work harder for every percentage point of revenue growth, as their building expansion programs slow. They may well start to close some of the unproductive stores in favor of larger stores in growing urban or suburban centers. Many older malls will fold as consumers start to patronize the new, unenclosed, lifestyle malls that are sprouting up throughout the country. They are designed to mimic small-town ambiance, while showcasing national, upscale, and specialty chain stores.
| 1992 | 2002 | % CHG '92-'02 | |
|---|---|---|---|
| Furnishings and electronics | $ 97.8 | $ 198.6 | 103.1 |
| Building and garden | 160.2 | 323.1 | 101.7 |
| Food and beverage | 371.5 | 508.5 | 36.9 |
| Health and personal care | 90.8 | 191.6 | 111.0 |
| Clothing and accessories | 120.3 | 178.6 | 48.5 |
| Sporting goods and hobby/books | 49.3 | 81.5 | 65.3 |
| General merchandise total | 248.0 | 476.1 | 92.0 |
| 177.1 | 217.9 | 23.0 |
| 70.9 | 258.3 | 264.3 |
| Miscellaneous stores | 55.8 | 105 | 88.2 |
| Nonstore | 81.3 | 194 | 138.6 |
| Total retail trade in billions | 1,275.0 | 2,257.1 | 77.0 |
| Source: Census Bureau | |||
Figure 9.7: Retail Sales by Type of Store, 1992 and 2000, Excludes Motor Vehicles, Gasoline, and Food Service
EAN: 2147483647
Pages: 137