Thursday, June 28, 2012 | Edited by Daniel Moores
||New-Home Sales Rise at Fastest Pace in Two Years
Americans bought new homes in May at the fastest pace in more than two years. The increase suggests a modest recovery is continuing in the U.S. housing market, despite weaker job growth.
The Commerce Department said Monday that sales of new homes increased 7.6% in May from April to a seasonally adjusted annual rate of 369,000 homes. That's the best pace since April 2010, the last month that buyers could qualify for a federal home-buying tax credit.
Even with the gains, the annual sales pace is less than half the 700,000 that economists consider to be healthy.
Yet the increase follows other signs that show the housing market is slowly improving nearly five years after the bubble burst.
Builders are gaining confidence in the market and starting to build more homes. Mortgage rates have plunged to the lowest levels on record, making home-buying more affordable. Prices remain low and have started to stabilize. And sales of previously occupied homes are much higher than the same time last year.
Though new homes represent less than 20% of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the National Association of Home Builders.
One reason prices could rise is the supply of new homes for sale remains extremely low. Just 145,000 new homes were for sale in May. That's not much higher than the 144,000 available in April, which was the lowest supply on records dating back to 1963.
At the current sales pace, it would take 4.7 months to exhaust the May supply. A six-month supply is generally considered healthy by economists.
"With no excess inventory of unsold new homes, any sustained rebound in new home sales should quickly translate into firmer prices," said Steven Wood, chief economist at Insight Economics.
The median price of a new home sold in May edged down 0.6% from April to $234,500. But the median price was 5.6% higher than the same month one year ago.
Builders are responding to the low supply. In May, they requested the most permits to start construction on homes and apartments in three-and-a-half years.
The gains in new homes sold were concentrated in two regions of the country last month. Sales surged 36.7% in the Northeast and 12.7% in the South. Sales fell 10.6% in the Midwest and were down 3.5% in the West.
Sales of new homes are increasing despite a sluggish job market, which has slowed retail spending and business investment in computers and machinery. Some economists warned that the weaker job market has also started to affect some home sales.
Sales of previously occupied homes fell in May to a seasonally adjusted sales rate of 4.55 million after nearly touching a two-year high in April.
Still, re-sales have risen 9.6% from the same month last year.
Hiring slowed sharply in April and May, raising concerns about the strength of the recovery. Employers have added an average of only 73,000 jobs a month in April and May. That's much lower than the average of 226,000 added in the first three months of this year.
(Source: USA Today, 06/26/12)
||Jewelers Report Warm Summer Business
Typically, summer brings a slowdown in sales for retailers, with no large jewelry-gifting holidays on the horizon and many consumers retreating to vacation spots for a break.
This year, though, a number of jewelers report that sales have remained strong even as the mercury has begun to climb, with bridal as well as sales of fashion pieces buoyant.
Retailers also agree that while sales patterns used to be easy to forecast -- increasing the last two months of the year while staying fairly steady the other 10 -- it's difficult to predict when sales will rise, or fall, anymore.
National Jeweler interviewed independent retailers from five regions of the country: Northeast, Southeast, Midwest, South Central and West.
Numbers are up for the first six months of the year at David Craig Jewelers in Langhorne, Pa., according to President David Rotenberg, although business in the summer slows down considerably at the store.
"We're doing better than usual," the jeweler said. "Our biggest down year was between 2007 and 2008, and every year since then we've been up."
Rotenberg said he's seen more bridal sales this summer.
"We're always busy preparing for what will be coming, so summer will be active with putting together plans and inventory," he said. "Sales-wise, I expect summer to be ahead of last year."
Business also has been good so far this summer at Evan James, Ltd. in Brattleboro, Vt., owner Evan James Deutsch said, although the season doesn't typically bring crowds.
"We're not really in a tourist area, and if it's 100 degrees like it was last week, who wants to come out and shop in that?" he said. "But I would say so far we're at or above expectations."
Deutsch said he expects business to slow down in July and August as more people take vacations. "But it's hard to gauge retail. We'll have to wait and see how it all shakes out."
This has been the busiest summer in the past three years at Allen's Jewelers in Albany, Ga., said owner Steve Allen.
"Things are pretty good. We're doing OK," he said. "It's been better than usual."
Allen said he's seen more engagement rings sold this summer than in previous years, with many customers continuing to request halo designs. He said he hopes business continues to be steady, although the community surrounding his store has been hit hard by the recession.
"Before three years ago, we were busy year-round. But when the economy tanked, everything did," Allen said. "There's been speculation it could get better because it's an election year. But it depends on who gets elected."
Gause & Son Jewelers in Ocala, Fla., is closing its second location and has been holding a sale for about two months. "The store that is closing has had good business," Manager Cammie McCloud said. "Our main location is also doing well, and the stores are only five miles apart. So considering one is closing, it's been steady."
McCloud said she anticipates a slower summer with consumers on vacation.
"I don't anticipate a huge July or August, but hopefully the fall will be good," she said. "With the election, there's a lot going on right now."
"So far this summer, we're doing surprisingly well," Gene Gragg, owner of Metal Works Fine Jewelry, Inc. in Yorktown, Ind., said. "I'm actually shocked at how well we’re doing."
The jeweler said business feels better than last year and is better for his custom work, which includes mostly gold pieces with colored stones and diamonds.
"Business will continue to be good if gas prices continue to go down," Gragg said. "It's psychological. If people save on gas, they have more money for other things. I think people are loosening their purse strings a bit."
Although summer is generally slower at Garfinkles Fine Jewelry in Highland Park, Ill., owner Jill Garfinkle said more people in the area want to buy now.
"To tell you the truth, I think people here were reluctant to spend money before, and after a while that reluctance kind of ebbed, and they're willing to spend now," she said.
A suburb of Chicago, Highland Park is not a touristy area but one of wealth, Garfinkle said.
"May and June were better for gift purchases, but customers are coming in, and they've been interested in everything," she said. "There's not one particular thing."
Still, the jeweler said of the coming months, "I don't know what to expect."
After a slow first quarter, business has picked up for Valerie Naifeh of Naifeh Fine Jewelry in Oklahoma City.
"I am thinking the summer is going to be good. I am thinking we are going to at least match our great numbers from last year," she said, noting that record-breaking heat then limited outdoor activity and might have pushed more people into shopping.
She said sales of bridal jewelry have been steady, as has self-purchasing by female customers and the sale of "push presents," gifts given to moms-to-be while they are expecting or shortly after their new baby arrives. Popular push presents include personalized pieces from Cordova, Temple St. Clair and Monica Rich Kosan.
"That's become a very big category for us," Naifeh said.
Mike Butterfield of Butterfield Jewelers reports that business at his New Mexico stores has been fair (Butterfield Jewelers opened a second store, also in Albuquerque, in March). He expects a slight increase in sales as compared to last year through the presidential election in November.
In bridal, he said customers are trading down in the quality of diamonds in order to obtain the same size -- generally 1 carat -- at their desired price point while sales of platinum have increased as the price gap between it and gold has narrowed.
When it comes to fashion jewelry, sales of bold silver pieces with gold accents are strong while Pandora has "cooled off" as a category, Butterfield said.
"I think Pandora's peaked," he said. "We're dropping a bit. We're just not seeing that mad rush we were before."
Retailers in the western United States also were optimistic about the coming months.
However, like other jewelers, Tom Hart, of Hart Jewelers in Grants Pass, Ore., said it is difficult to know what to expect anymore.
He said this is a trend that has persisted since the recession ended. Before the economic meltdown, sales figures at his store varied very little from month to month, except for the historically busy months of November and December. Now, sales rise and fall drastically throughout the year.
"I cannot forecast each month coming up. There's just no rhyme or reason on what month's going to be busy and what month isn't," he said.
He said after a slow April and May, business picked up in June. "Hopefully that continues," Hart said.
At Alvin Goldfarb Jeweler in Bellevue, Wash., Steve Goldfarb predicts it will be a good, though not great, summer. He said an improved economy likely will lead to sales of trendier jewelry, just as it has in clothing, where women have gravitated away from the classics to indulge in trendy lime green and bright pink jeans.
"I think it might be a little bit more fun, (with) shoulder-length earrings and colorful necklaces," Goldfarb said, noting these are trends he saw at recent trade shows.
"I am a big believer that if you see things (at trade shows) you know they'll be advertising them and putting them in magazines," he said. "That will help to drive people's awareness."
Hart said trendier pieces always do well at his store in the summer because of the tourists that gravitate to Grants Pass and want a unique piece with which to return home. "We do (sell) more of that type of thing during the summer, because we are a popular area for tourism," he said.
(Source: National Jeweler, 06/26/12)
||Study Highlights the Effectiveness of Humor in Ads
JC Penney has had a hard time executing a new marketing strategy that plays up laughs with Ellen DeGeneres while trimming annual promotions to 12 from nearly 600. But maybe the retailer was on to something.
Humorous commercials consistently resonated best with viewers before, during and after the recent recession, a new study from Nielsen suggests. Advertising relying on prices and promotions, on the other hand, didn't perform as well -- even when the economy suggested many consumers would be scaling back and spending less.
The study looked at 4,000 packaged-goods commercials from 2006 through 20011, evaluating the effectiveness of various creative approaches while the economy was still strong, during its plunge and after the recession officially ended. "Effectiveness" reflects measures such as appeal and likeability, ad recall and purchase intent.
"While a humorous storyline was the top driver for each period, suggesting in good times and bad consumers like to laugh, the real surprise was the low scores ads focused on price and promotion received, even during the height of the recession," said James Russo, VP for global consumer insights at Nielsen, in a statement provided by the company. "Contrary to what many leading companies might have thought."
Mr. Russo recently presented the findings at the Cannes ad festival.
In 2008 and 2009, when the recession was at its worst, humorous ads scored 133 on Nielsen's effectiveness scale, where 100 is the average. Price-driven ads received a score of 73 during the same period. Humorous ads' effectiveness dipped somewhat in the recession while price ads improved marginally, but price ads still underperformed other creative approaches, according to the study.
While price- and promotion-centered ads did not particularly resonate with recession shoppers, however, value propositions did. Instead of focusing primarily on a sale or specific price, Nielsen said, value-centric ads go beyond price to communicate other benefits such as convenience and affordability.
Ads pitching value saw a significant lift in effectiveness during the recession, when their scores jumped to 107 from 88, according to Nielsen.
"Another example of how savvy consumers were -- and are, for that matter -- redefining value," Mr. Russo said.
(Source: Advertising Age, 06/21/12)
Daily Sales Tip: Cold Calls Pay
Even though many salespeople dread it, the simple truth is that cold calling is an absolutely necessary part of the sales process, and it pays.
Done right, it keeps a steady flow of prospects in the pipeline, which is important since 10%-15% of customers (yours and your competitors') are always actively looking for new suppliers.
Another 20%-30% are willing to listen to promises of a better product, improved service or lower prices.
Source: Adapted from Cold Calling Techniques That Really Work, by Stephan Schiffman