What does the future hold for companies in the business of manufacturing, marketing and selling discretionary products — those things that people desire but don't need? How can new insights about why people buy things they don't need help companies sell more of their products? How can companies divine the future for the sales of discretionary products and develop plans for action that will increase sales and build market share? Tracking trends is one method many businesses use to foresee the future. Here are the major trends on the horizon that will have the strongest impact on discretionary product manufacturers.
A 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, trading in his middle-aged wife for a new, younger model. A woman may get a face-lift, 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 on their grandchildren to make up for some of the inadequacies their children may have experienced because money was tighter when their kids were growing up. 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.
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?? in 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.
As Boomers pursue new experiential passions, they will need tools, equipment and accessories to support their new pursuits. Discretionary product providers can position themselves for success by offering 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 bed, kitchen and bath, and with a powerful engine and four-wheel drive.
Since the future focus in consumer behavior will be about buying the experience, 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 antimaterialism 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.
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, skydive 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.
CONSUMERS WILL CRAVE REALITY
Our society is undergoing a digital revolution. The Internet is playing a bigger role in our lives. Schoolchildren today learn about computers right along with their lessons in reading, writing and arithmetic. The Internet is also playing an increased role in the commercial side of consumers' lives. In 2000, roughly $27 billion in sales were conducted over the Internet. While this is just slightly less than 1 percent of total retail sales of $3.1 trillion, it is a significant contribution to the overall economy.
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, how we play and how we 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.
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 populate our gardens with birds, turtles, frogs, toads, peaceful snakes, squirrels, bats and even other furry mammals that will connect us better to the real world.
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 decor, consumers are broadening their focus to texture (i.e., touch), background music or sounds of running water in indoor fountains (i.e., hearing) 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 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.
Our taste in home furnishings, including the colors we use to decorate and the art we choose for our walls, will also become 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.
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 homes 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, 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; 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 man-made 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 having to dry-clean 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 be decidedly Jetsons 21st century. 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: cars. 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. The designs will look forward by looking back to the future vision of motor vehicle transportation, as conceived in the 1940s and 1950s.
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. 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 2 to 3 stores in 1990, to buy home furnishings, electronics and major appliances, had cut the number of visits back by 0.5 stores 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 trip, so they can get back home and to safety more quickly. More 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.
Party plans and other forms of direct selling will be the next guerrilla 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 safety 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 spokesperson 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. 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 medium in the future.
THE COMING RETAIL CRISIS
Office real estate is facing a crisis of excess inventory. After years of creating new office space, coupled with overly optimistic tenants who grabbed more office space than they needed, nearly 40 million square feet of office space will return 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.
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 64 percent from 1992 to 2000, 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 141 percent from 1992 to 2000, the other general retailers, composed of discounters and warehouse clubs, reached $170.9 billion in retail revenue. In the same eight-year period, traditional department stores, sales grew only 34 percent, not even matching growth of the retail industry as a whole. Non-store retailers also posted triple-digit growth from 1992 to 2000. Non-store retailers include catalogers and mail-order marketers, television shopping, direct sales, party-plan marketers and e-tailers. This segment rose 121 percent, from $73.4 billion in sales in 1992 to $162 billion in 2000. Growth of these two segments — other general merchandisers and non-store 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, Home Depot, Lowe's and so forth. These national specialty retailers are literally “eating the lunch?? of small independent specialty retailers that focus on 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 percent to 15 percent. However, that growth has come 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 ambience while showcasing national, upscale and specialty chain stores.
HOW TO SURVIVE THE RETAIL SHAKEOUT
Understanding why people buy applies equally to manufacturers and retail businesses in anticipating consumer behavior now and in the future. Retailers need to explore with their consumers why people shop in their stores. What features, products, attributes, benefits, needs and consumer desires does the store meet? In what areas does it fail to satisfy? Retailers need to dig deeper than simply “customer service?? and “quality.?? Too many retailers imagine their point of difference is “customer service?? or “quality?? products, but if you sit in a room for five minutes with consumers, you discover that these terms are meaningless. Retailers have to understand the heart, mind and emotions of their customers. They need to figure out what experiences consumers expect and desire to have while shopping in the store and then develop strategies to give them more of those experiences.
Customer service has to be more than answering a question, wrapping a package or escorting the customer to an aisle. Retail salespeople need to participate in the shopping experience with their customers. They have to be shopping partners, not salespeople or clerks. They have to have authentic enthusiasm. They need to be real and honest. They need to be likable. They need to like their customers.
Retailers can also enhance the shopping experience by providing information. Why should Home Depot have a monopoly on teaching people how to use their products? Any retailer selling home products can figure out hundreds of ways to provide information to its customers. Just watch HGTV, The Learning Channel or Discovery to figure out how. The same theory applies to retailers of electronics, books, pet supplies, cosmetics and personal care items, gourmet foods, housewares, sporting goods, hobby items and crafts supplies. Consumers are eager to learn about their passion and willing to participate with retailers in this process. The key to launching a successful experiential retailing program is to provide valuable information without substituting a sales presentation for a learning experience. Consumers are too savvy today. They will immediately see through the hoax.
Pamela N. Danziger ©2002. All rights reserved. Excerpted with permission from the book Why People Buy Things They Don't Need (Paramount Market Publishing, Inc.). To order call toll-free, (888) 787-8100 or go to www.paramountbooks.com or amazon.com.