Tuesday, October 11, 2011 | Edited by Daniel Moores
||Frontier of Frugality
Retailers Face Reality That Many People Can't Trade Back Up
Retailers are coming to terms with a new reality: the consumer who traded down during the recession and never came back.
Buffeted by high unemployment, heavy debt loads, falling home values and high food and gas prices, these shoppers have been whipped into a permanent state of consumer caution. They buy only what they need, avoid premium labels, clip coupons and scour sales.
Wal-Mart Stores Inc. Chief Executive Mike Duke told analysts in a recent conference call that paycheck-cycle shopping is more pronounced than ever, with shoppers stocking up shortly after getting paid, then moving to smaller product sizes toward the end of the month when they run short of money.
"Consumers are fragile, fatigued and fed up," said Chris Christopher, senior economist at IHS Global Insight, citing wage stagnation, food inflation and high gas prices.
Retailers and manufacturers are figuring out how to appeal to these new "forever frugal" consumers -- rather than pin too much hope on economic rebound. Some are waiting longer to pass on higher costs, whether for food or cotton. Coca-Cola Co. and other companies have added new packages at small sizes and lower price tags. Some retailers are holding the line on hiring, even as they head into their busiest season of the year. Many stores are expanding their selection of cheaper private-label products and some are offering credit cards with across-the-board discounts. Layaway has made a comeback.
Heading into the holidays, retailers are in a bind. Many of them placed their orders back in early spring when the stock market was rising and the economy appeared to still be rebounding. But lackluster back-to-school sales signal that the holidays aren't likely to be free-spending for many shoppers. Now retailers are worried they will have too much merchandise.
Eight of the 16 large retail chains that retail analyst Ed Yruma covers for KeyBanc Capital Markets said their inventories had risen faster than sales when they reported second-quarter profit results in August.
It is an ominous sign indicating that chain stores' profit margins will be squeezed if they have to resort to bigger than planned discounts to move merchandise.
Echoing the sentiments of many other retailers, Jonathan Ramsden, chief financial officer of teen retailer Abercrombie & Fitch Co., told Wall Street analysts in a conference call in August that his company is increasingly concerned about "the potential double-dip recession...that has increased in terms of the likelihood over the last few months."
Apparel stores face a double whammy. Many had hoped to raise prices this fall to recoup the cost of cotton, which soared last year and hit historic highs in March before a recent pullback.
Now they worry that strapped consumers will resist price increases. If purchases stall, retailers will have to resort to cutting prices instead.
"The only lever the retailers have is discounting," said Mr. Yruma. "Clothing isn't like fine wine; it doesn't get better with age."
Mr. Yruma expects retailers to offer the sort of promotions that will preserve as much profit margin as possible. For example, instead of slashing prices, he says, stores will try more "buy one, get half-off a second item" promotions.
Wal-Mart is courting shoppers with a return to a Depression-era strategy: layaway.
Increasingly strapped Wal-Mart customers, 20% of whom don't even have bank accounts, demanded that Wal-Mart bring back layaway, which it canceled in 2005. The world's biggest retailer -- which has seen two years' worth of declines in comparable-store sales -- finally acquiesced in time for this Christmas.
Other stores such as Sears Holdings Corp. and Toys "R" Us Inc. brought back the layaway plans during the recession and reported a sales boost.
Target has a different weapon to snare a bigger share of pocketbooks. About a year ago, Target began rolling out a credit and debit card that offers a 5% discount on all purchases. The card effectively makes Target's prices equivalent or less than its competitors, Target Chief Executive Greg Steinhafel said in a recent interview with The Wall Street Journal. Shoppers who use the card increase their spending about 50% each visit, he added. In the spring, Lowe's Corp. began offering a similar 5%-off branded credit card.
Target attracts a more affluent customer than Wal-Mart. Households with income of $75,000 or more have largely resumed their pre-recession shopping patterns at Target. But the families making $50,000 to $75,000 are stressed, Mr. Steinhafel says, as they try to keep up with food and gas prices, health insurance premiums and stagnant wages.
"They are trading down, consolidating shopping trips to save on gas and generally not spending a lot on discretionary purchases," Mr. Steinhafel said.
Target is in a better position to cater to that stressed consumer than it was during the recession. About two years ago, it began adding fresh grocery and expanded dairy and frozen food in its discount stores, making its stores more of a one-stop destination. By the end of the year 1,500 of the chain's 1,800 stores will house the new format.
Dollar stores sales boomed during the recession and moderated only somewhat as the economy appeared to improve. Now, renewed pressure on consumers are lifting their sales again. Dollar General Corp. raised its full-year sales guidance to between 4% and 6% from 3% to 5% when it reported second quarter earnings in late August.
Rick Dreiling, chief executive officer of Dollar General, says the economic climate has bred two new types of dollar-store customers. One group, squeezed by high gas and food prices, is trading down to Dollar General, finding its prices on brand-name goods cheaper than rivals.
With these customers in mind, Dollar General sells smaller package sizes, so the outlay is smaller, a big selling point especially for shoppers who run out of money at the end of the month.
The second group of customers is what Mr. Dreiling calls "the trade-ins," people who can afford to shop elsewhere, but choose to go to the dollar stores. "They are the new consumer, who exercises frugality and smart shopping," Mr. Dreiling said in a conference call with analysts.
Dollar General has slowly passed along higher foods prices to customers and has backed off of some price increases if sales suffered. The company has seen strong response to a new category of private-label health and beauty products it introduced early this year under the brand name Rexall, which was once a pharmacy chain.
Looking forward, Mr. Dreiling said, "We see more of the same -- customers who are continuing to struggle."
(Source: The Wall Street Journal, 10/04/11)
||Casinos Focus on Upping Amenities, Not Gambling
Casino executives say they're spending less time thinking about new card tables, slot machines and hotel rooms, and instead are chasing new entertainment that's cheaper to offer and will distinguish their resorts.
Executives at an industry conference in Las Vegas last week said they are using retail, enhanced restaurants and other attractions to compete for consumers' leisure spending.
With casino gambling now available in 38 states, resorts need more than fresh tables and machines to compete.
CEO Virginia McDowell of Isle of Capri Casinos, for example, said she'd rather spend $200,000 on renovating a restaurant than on buying 10 new slot machines because more people will go to the restaurant.
"The key word right now is 'uncertainty,'" said McDowell. She said she doesn't expect more stability for at least a few years.
"When you have 250-point swings in the stock market on a given day, it really makes it hard for people to feel good about spending their leisure dollars," she said.
McDowell said consumers are no longer debating which casino they'll visit, they're thinking about whether they'll gamble at all.
One analyst said slot machine makers are starting to cut their prices in response -- offering more discounts, longer trial periods or free machines if a casino purchases a certain amount.
"Manufacturers noted that operators were more focused on price and game performance rather than primary focus just being game performance," said Robin Farley, a gambling analyst for UBS Investment Research.
Patti Hart, chief executive of slot machine maker International Game Technology, said its new machines have to be so creative and technologically advanced that they help casinos compete to keep gamblers playing.
The conference, which many casino officials attend to buy slot machines and table games for the coming year, was six weeks earlier this year than last. Farley said that move could hurt year-over-year sales comparisons for September.
Orrin Edidin, president of Illinois-based slot maker WMS Gaming Inc., told The Associated Press in an interview that operators usually come to the show having already allocated what they plan to spend and are looking to get the most from their dollars. Edidin said WMS is pushing the way its machines handle player money to give gamblers the best experience while still being profitable to the casino.
"Everything else regarding a slot machine, the stuff you see and hear, all the bells and whistles, may seem important to a player, but what really keeps him there --what retains the player -- is good math," Edidin said.
But Jan Jones, spokeswoman for Caesars Entertainment Corp., said casino operators have to consider the overall picture when deciding whether to buy.
"You're playing a game of trying to determine when is not reinvesting going to really impact your customer experience," she said.
(Source: The Associated Press, 10/05/11)
||Second Love at First Click
Natalie Friend, a marketing contractor at NASA Langley Research Center in Hampton, Va., was 65 and twice divorced when she decided to try online dating. "My daughter met her husband," she explained, "my friend's son met his wife, my cousin met her husband -- all online."
She said she was looking for a "playmate" when she joined SeniorPeopleMeet.com, not husband No. 3. But a couple of months and $14.95 later, she met Mr. Right.
Make that Mr. Wright. Frederick Wright, 74, was twice widowed and living in Virginia Beach. He joined SeniorPeopleMeet.com to find a companion who, like him, enjoyed travel and the arts. In October 2009, Ms. Friend met him for dinner. He was a bit older than she desired. But he loved opera. He seemed honest. And he had just sailed his boat around the world. The date lasted six hours.
Ten months later, Ms. Friend and Mr. Wright married at the Boxwood Inn in Newport News, Va.
"At our age," she said, "you don't have much time to waste."
If you think online dating is the domain of the young, maybe it's time to check in with your mother. Now, people 55 and older are visiting American dating sites more than any other age group -- up 39 percent in the last three years, according to the Internet tracking firm Experian Hitwise. The No. 2 group? Singles 45 to 54. According to IBISWorld, a market research firm, and the United States Census Bureau, about 37 percent of people 50 and older are unmarried. And the divorce rate among the 50-plus demographic is high. With so many older Americans unattached, living independently into their later years, and increasingly comfortable using the Internet, they, too, are logging on for love.
And they may be better at finding it than their younger cohorts. Dating industry professionals say that singles in their 20s and 30s are typically focused on marriage and starting a family, while older singles (many of whom have been married before) have a more relaxed approach and are careful to pick companions who share their interests.
"Baby boomers have been one of the fastest-growing demographics for a lot of online dating companies," said Caitlin Moldvay, an analyst for IBISWorld. The growth comes at the same time that some younger singles (18 to 34) are moving away from dating sites to social networking sites like Facebook as "a proxy for online dating," said Bill Tancer, the general manager of global research for Experian Marketing Services.
Greg Liberman, the president and chief executive of Spark Networks -- which owns specialty dating sites including JDate, ChristianMingle, BlackSingles, SilverSingles -- said that for the first eight months of this year, Spark had a 93 percent increase in new members 50 and older across all of its dating sites, compared with the same span of time last year. "We're seeing significant growth," Mr. Liberman said.
He's also observed that, while it's been common for parents to buy dating site memberships for their adult children, now adult children have begun buying memberships for their widowed and divorced parents. Gone is the heyday of personal ads in The New York Review of Books.
Niche sites like SilverSingles and OurTime (which also includes dating profiles from SeniorPeopleMeet.com and SeniorsMeet.com) are capitalizing on the demand. In addition to pooling people who want to date within their age group, the sites provide extra hand-holding for people who have been out of the dating game the last decade. For instance, SilverSingles encourages members to call its customer-care representatives for help with setting up a profile. The site also emphasizes safe online dating practices given that security is one of the biggest barriers to entry.
For a generation that found love without the aid of computers, this is a brave new world.
Janet Conner, 52, divorced in 2009, lives in Richmond Hill, Ga., which she described as a small, family-oriented town. To widen the dating pool, she joined eHarmony in July. And while she hasn't gone on any dates yet, she's hopeful.
"I last dated in the early '80s, and I see this as a tremendous vehicle," she said of online dating, "an opportunity to meet people that I would not have otherwise had the opportunity to meet. It makes the world a little smaller."
And it holds the promise of second chances. "If you get married at 50," said Gian Gonzaga, the senior director of research and development at eHarmony labs, "you can look forward to 20, 25 years of marriage." Having spoken with a number of baby boomers for his book, "Dating the Second Time Around," he thinks many of them are better equipped than younger singles to finding a perfect match. "They have this deep comprehension about what's important in a relationship," he said.
On a recent afternoon, the Wrights, from Virginia, were in a hospital room explaining over the phone that sharing interests bonds couples. "The more things you can do and enjoy together, the better you're going to be able to hang out for the tough times," Mr. Wright said. "My left foot is up on a bed with an infection," he continued, "we're not in the best of conditions right now. But we're having fun. We're still laughing."
Mrs. Wright interrupted him. "This time I was smart," she said. "I married my best friend."
It is this kind of happily-ever-after that has children encouraging their widowed and divorced parents to try online dating.
Bruce Garelick, 58, was married to his college sweetheart for 32 years until she died of cancer in 2008. Cydra was his 4-foot-11 "spitfire," the mother of his son, Jason, 26, and daughter, Kimberly, 28. Mr. Garelick said that, when Cydra was sick, she told him, "If I ever go, you have to move on with your life." Yet when she died, moving on felt impossible. Mr. Garelick said he gained 100 pounds, didn't shave, didn't want to see anyone.
Then, in June 2009, his daughter suggested that he try online dating. In short order, she was beside him as he logged onto JDate. "I never thought I'd find somebody again," said Mr. Garelick of Roslyn, N.Y. "I was just going through the motions."
But within five minutes of joining JDate, he received a message from Ilana David-Klein, 54, whose 10-year marriage had ended in divorce. Like Mr. Garelick, she had a daughter, Keren, 26, and a son, Yoni, 24. Mr. Garelick and Ms. David-Klein decided to get to know each other through marathon phone conversations (one lasted eight hours) about politics, music, sports, recipes and life as empty nesters. Weeks later, they met for lunch at his house where they said it was love at first sight. Ms. David-Klein was about to go on vacation, and Mr. Garelick had made her a goodie bag that included Pepperidge Farm cookies, a pillow for the flight and a mezuzah that had been given to him for his bar mitzvah. "I never thought I'd find my other half after my first marriage," Mr. Garelick said. "I thought that was it."
On Dec. 18, 2010, they married at the Garden City Hotel in New York. Their daughters walked them down the aisle, and their sons helped hold the wedding canopy.
Getting to that aisle had not been easy for either of them. Ms. David-Klein (now Mrs. Garelick) had been online dating for years. "I met guys who shaved 10 years off their life," she said, explaining that many suitors had lied.
Turns out, it was worth the wait. "I was a single mother for 17 years and, yes, you can still find your soulmate and your love," she said from the home she and Mr. Garelick now share. "Don't give up."
(Source: The New York Times 10/06/11)
Daily Sales Tip: Find Your 'Bell Cow'
On the ranch, the herd will follow along behind the one cow with a bell around its neck.
Many salespeople, especially those with less experience, emulate the example of the team's "bell cow." So, it's
important for you, as a sales manager, to study your team and identify who is the bell cow (informal leader)?
Next, what example is your bell cow setting? Does he/she display excellent work habits? Or, does he/she simply sit
back and "milk" the best territory? The example of work ethic and attitude that your bell cow displays
for the team is, perhaps, even more important than the example you set for the team.
Hopefully, you already have a few players capable of stepping up. If so, talk to them. Help them see the
importance of their success example, and ask them to share more of their talents, skills and energy with less experienced salespeople.
Source: Sales trainer/consultant Kevin Davis, president of TopLine Leadership Inc.