Tuesday, June 12, 2012 | Edited by Daniel Moores
||Big Homes Are Back in Business
Jamie and Ashley Mengle spent the past four years in a 1,920-square-foot, three-bedroom town house. In July, they will upgrade to a 3,200-square-foot single-family home with four bedrooms in Mechanicsburg, Pa., a suburb of Harrisburg.
The Mengles are at the forefront of a surprising trend in a number of new subdivisions across the nation: Bigger homes are making a comeback.
"There's no doubt we're a lot larger than we were a few years ago," said Steve Ruffner, president of the Southern California division of KB Home, one of the nation's largest builders.
KB Home says the average square footage of houses currently under contract is 2,079, an increase of 13% from last year. And more KB buyers are picking models that exceed 3,500 square feet.
That is a change from the past few years, when builders were downsizing houses to accommodate an era of frugality and austerity. As the economy slowly improves and some consumers' anxieties ease, buyers are upsizing again -- though there is far less demand than before for huge houses loaded with upgrades.
According to data from the Census Bureau, the average size of a newly built home was 2,480 square feet in 2011. That was up 3.7% from 2010 and represented the first annual increase since 2007.
Charter Homes & Neighborhoods, the company that is building the Mengles' new house, said the single-family homes it is delivering this year are 200 square feet larger than the ones they delivered last year, which works out to an increase of 5% to 10%. "The big sellers last year were town homes," said a company representative. This year, she said, the hot sellers are large colonials clustered in parklike settings.
The trend is helping some builders see increased sales prices. In April, the average home price was $282,600, up from $268,900 a year earlier, according to census data, though that is down from $329,400 in early 2007.
In its first quarter, KB Home saw its average selling price rise 6% from a year earlier to $219,000.
The return to bigger houses -- which has taken industry watchers by surprise -- indicates that the housing downturn paused, but didn't kill, America's love affair with supersize abodes. The trend is an encouraging sign for builders, which last year sold just 306,000 newly built homes, the lowest number since record-keeping began in 1963.
A major driver behind the bigger-home trend is record-low interest rates, under 4% for a 30-year fixed-rate mortgage, which allow some buyers to move up without necessarily making larger mortgage payments.
Some buyers say they reason that in the long run it is cheaper to buy a big house now, even though they don't yet necessarily need the space, and spread the cost over the life of the loan, instead of spending money down the road for expansion projects.
And because many builders slashed prices in recent years, especially on big houses that once were slow sellers, the cost difference between midsize and large homes in some communities is nominal.
In Orlando, Fla., at KB Home's Sawgrass Plantation development, a 2,792-square-foot house currently is priced at $212,000, while a 3,512-square-foot home is priced at an additional $6,000, or about $40 a month with a 30-year fixed loan.
In one West Coast KB Home development, buyers can get 1,050 additional square feet for $166 a month over 30 years. Mr. Ruffner said that adding another room is inexpensive during construction, particularly because the company gets a discount on large orders of materials.
Demand for bigger houses also is coming from families that were stuck in homes that were too small but were afraid to trade up during a weak economy. Now, some say they are feeling more confident and are ready to make a change.
"We just don't have enough space," explained Michael Tidwell, a father of three who lives in a 1,400-square-foot town house and is in contract to buy a 2,800-square-foot home in Mechanicsburg, for $340,000. In the new house, which should be finished this fall, there will be enough bedrooms for the children, and the kitchen will be twice as big.
"The kitchen is going to be humongous compared to what we have now. We actually feel like we can live and not be bottled up," he said.
Even companies known for building large houses say their buyers are scaling up. Toll Brothers, the Horsham, Pa., builder associated with sprawling suburban spreads, said buyers are bypassing its "smaller" models in Randolph, N.J., that start at 3,700 square feet and are priced starting in the mid-$700,000 range. Instead, more are gravitating toward a 4,800-square-foot house that, including upgrades, often sells for $1 million or more.
While buyers are upsizing, they are still being practical by adding living space, not "bling options," said Mr. Ruffner. Out of favor are expensive upgrades such as oversize sunrooms, vaulted ceilings and soaring entry halls.
"Structural options," such as adding a bedroom, "are much more popular" among buyers, Mr. Ruffner said.
"They seem to be going for those types of product that are maybe a better value all around," he said.
(Source: The Wall Street Journal, 06/08/12)
||Competition for No-Contract Market Gains Steam
Verizon Wireless, AT&T and other major wireless carriers are focusing on a class of customers they once largely ignored: bargain hunters with a fear of commitment.
With the market for two-year-contract phones saturated, large carriers are marketing aggressively to those who seek to prepay for minutes and data without a contract.
Smaller carriers that specialize in no-contract plans are stepping up to the competitive pressures with better devices and faster networks. Cricket and Virgin Mobile USA both announced recently that they will start selling no-contract iPhone 4 smartphones later this month.
Major carriers "are focusing on prepaid as a growth engine," says analyst John Weber of IDC. The research firm estimates the prepaid market will grow 7.4% a year on average until 2016.
The marketing shift comes as growth plateaus among customers who lock in long-term contracts in return for phone subsidies. The number of those customers fell in the first three months of this year vs. the fourth quarter, the first quarter-over-quarter decline in industry history, says research firm Recon Analytics.
Recent moves in the prepaid market:
Such moves "will further tip the scales in the (large) carriers' favor," says Deepa Karthikeyan, an analyst at Current Analysis.
- Verizon Wireless launched a prepaid plan in April with unlimited voice and text and 1 gigabyte of data for $80 on its 3G network.
- AT&T started selling in April a new plan that offers 1 GB of data for $25 a month, doubling the data amount offered in previous prepaid plans.
- T-Mobile added a no-contract plan last year that lets customers use any phone in its lineup.
- Sprint said in April that its two prepaid service subsidiaries, Virgin Mobile USA and Boost Mobile, will deliver voice and data on WiMax, its fastest network.
But smaller prepaid-plan providers aren't standing pat. Cricket, a prepaid brand owned by Leap Wireless, launched Muve Music service last year, giving customers unlimited song downloads for a monthly fee. Its iPhone 4 goes on sale June 22 and will cost $399.99 with a $55-a-month plan.
Virgin Mobile USA's iPhone 4 goes on sale June 29 and will cost $549 with a $30-a-month plan.
MetroPCS launched its 4G LTE network in 2010 and in August begins selling its first LTE-capable smartphones. They are priced below $150.
"Prepaid carriers are more nimble and can experiment with newer pricing and service models," Karthikeyan says.
(Source: USA Today, 06/08/12)
||Study of Sporting Goods Sales Shows a 4.2 Percent Increase in 2011
According to the Sporting Goods Manufacturers Association's Sales by Category Report (2012 edition), manufacturers' (wholesale) sales of sporting goods equipment, fitness equipment, sports apparel, athletic footwear, and sports licensed merchandise in the U.S. totaled $77.31 billion in 2011 -- a 4.2 percent increase over 2010 when wholesale sales were $74.19 billion.
"For the most part, sales in the sports and fitness industry continue to be a mirror image of the U.S. economy," said SGMA President Tom Cove. "As the economy begins to improve, Americans are more likely to spend more money on fitness equipment, sports gear, athletic clothing, and footwear. Overall, sports participation remains strong and solid in the U.S., though there is room for growth.
"We remain optimistic that 2012 will be a significant year of change for the sports industry as people are poised to be more active, play more and, hopefully, increase their spending on sports and fitness items," he stated.
The Manufacturers Sales By Category Report is an industry overview which gives topline wholesale market size data by category, which is derived from industry submissions and survey data.
Sporting goods equipment sales rose slightly -- up 2.5 percent -- from $20.37 billion in 2010 to $20.87 billion in 2011. The five largest categories of sporting goods equipment are:
The categories that registered sales gains in excess of 5 percent in 2011 included the following:
- Firearms/hunting ($2.9 billion)
- Golf ($2.5 billion)
- Fishing ($2.0 billion)
- Camping ($1.80 billion)
- Optical goods ($1.3 billion)
A few team sports categories actually had a solid year as sales showed a low single-digit increase. Those sports are lacrosse (up 5.4 percent), volleyball (balls & sets) (up 4.1 percent), soccer (up 2.9 percent), ice hockey (up 1.8 percent), basketball (up 1.4 percent), baseball/softball (up 0.3 percent), and football (up 0.1 percent).
- Bowling (up 10.0 percent to $217 million)
- Water ski (up 8.6 percent to $531 million)
- Martial arts (up 5.8 percent to $417 million)
- Golf (up 5.7 percent to $2.5 billion)
- Lacrosse (up 5.4 percent to $66 million)
- Firearms (up 5.0 percent to $2.9 billion)
The five leading team sports categories, based on overall sales, are:
Exercise equipment is a $4.49 billion business and treadmill sales account for 25.5 percent of that entire category. After treadmills, the next two largest fitness categories are elliptical machines ($1.06 billion) and exercise cycles ($484 million). Consumer/retail spending for exercise equipment accounts for just more than 75% of the entire exercise equipment category. At the consumer level, the top three categories for sales gains were elliptical machines (up 7.1 percent), exercise cycles (up 5.3 percent), and treadmills (up 3.6 percent).
- Football ($521 million)
- Baseball/softball ($489 million)
- Basketball ($352 million)
- Soccer ($340 million)
- Ice hockey ($243 million)
Wholesale sales of sports apparel were $31.4 billion in 2011, which is a 6.1 percent increase from $29.6 billion in 2010. The largest segment of the sports apparel industry -- at $4.8 billion -- is shirts/tops. Swimwear is the second largest segment of the sports apparel business at $2.5 billion. All five divisions of the sports apparel category had an "uptick" in sales in 2011. They were branded activewear (up 9.6 percent to $14.4 billion), performance apparel (up 4.7 percent to $1.3 billion), branded athletic apparel (up 3.3 percent to $14.2 billion), fitness apparel (up 1.7% to $320 million), and team uniforms (up 1.3 percent to $1.1 billion).
"In recent years, tightening athletic budgets prohibited many schools from ordering new uniforms, but 2011 saw an increase in sales which bodes well for the future," observed Cove.
Sales of sports licensed merchandise, which are largely fueled by emotion, an allegiance to an alma mater, and strong team loyalty, were steady in 2011 -- $7.385 billion, which was a 1.3 percent increase over 2010.
"The sports calendar is filled with big-time events throughout the year which range from college football bowl games to the Super Bowl to March Madness to major golf events to the World Series to college conference championship games," said Cove. "There is always another 'big game' coming up, which is a spending opportunity for fans to show their allegiance to a particular sport, team, or event."
The athletic footwear category was solid in 2011 as sales actually increased by 4.5 percent -- from $12.61 billion in 2010 to $13.18 billion in 2011. Running remains the rising star of the athletic footwear category as running shoe sales rose 7.6 percent to $3.89 billion. That was the largest percentage increase of any athletic footwear category. Outdoor/adventure is another strong category as sales increased by 6.1 percent -- from $603 million in 2010 to $640 million in 2011. Classics/originals also had a significant 5.6 percent jump in sales -- from $1.787 billion in 2010 to $1.887 billion in 2011.
The five leading athletic footwear categories are the following:
The SGMA's Sales by Category report is derived from a combination of aggregated quantitative data that is collected from a sample of manufacturers in a variety of product categories. These raw numbers are then combined with a series of interviews along with other industry data. The end product gives yearly projections on the health of the sporting goods and fitness industry. It should be noted that all figures are based on manufacturers' shipments in the U.S. market and expressed in wholesale, not retail, dollar values.
- Running/jogging ($3.89 billion)
- Classics/originals ($1.88 billion)
- Kids ($1.87 billion)
- Basketball ($875 million)
- Skate/surf ($831 million)
(Source: SportsOneSource Media, 05/24/12)
Daily Sales Tip: Handling Questions
If you don't know the answer to a question, do not guess. People will ask you tough questions, and you may not always know the answer. The person asking you may be testing you, knowing the answer full well. And if you fumble, it's very hard to rebuild credibility. Do not guess.
Answer questions directly and clearly. If you are asked a question and you give a "politician's answer" -- in other words, if you don't answer the question -- your credibility will decline, and you will hurt your chances of making the sale.
Source: Tom Szaky, chief executive of TerraCycle