Thursday, November 15, 2012 | Edited by Daniel Moores
||On the New Shopping List: Milk, Bread, Eggs and a Mortgage
Retailers Step Up to Sell Financial Products
On a recent shopping trip to Costco, Lilly Neubauer picked up paper towels, lentils, carrots -- and a home mortgage.
While Ms. Neubauer, 27, said she was surprised to find the warehouse club selling financial products, she and her husband saved about $200 a month by refinancing there this year. She also bought home insurance from Costco, she said, again because it was cheaper there.
"It opened us up to the fact that Costco is more than toilet paper," said Ms. Neubauer, who lives in Dallas.
As the nation's largest banks stay stingy with credit and a growing portion of the population has no bank at all, major retailers are stepping into the void. Customers can now withdraw cash at an A.T.M. with a prepaid card from Walmart, take out a loan at Home Depot for a kitchen renovation, or kick-start a new venture with a small-business loan from Sam's Club. This year, Walmart even started to test selling a life insurance policy.
Consumer advocates are torn about the growth of this shadow banking industry. Financial products are making it into the hands of people who otherwise might not qualify for them, but these products are not always subject to the same regulations as bank products are. And to turn a profit, retailers generally have to charge more to people with poor credit or none at all.
"These products can come with high fees and few real protections," said Norma P. Garcia, a senior lawyer with Consumers Union.
For the retailers, banking products are not huge profit centers but a business strategy, meant to put money into customers' hands and get them buying more.
"You've got to remember, Walmart is intended to be a one-stop shop," said Charles M. Holley Jr., the company's chief financial officer.
Retailers were once interested in actually becoming banks. Sears, in the 1980s, tried a "socks and stocks" strategy that included acquiring the Dean Witter brokerage firm. And Wal-Mart Stores sought a banking charter for almost a decade before finally abandoning the quest in 2007.
While supermarket chains have leased space to bank branches for years, they are now offering their own products or teaming with small financial firms to do an end run around big banks. While the banks are likely to bristle at such competition, supporters of the retailers say the stores are stepping into areas that banks have abandoned.
"The banks kind of dropped the ball, and in my mind, and in the consumers' mind, they left it open for different approaches," said Robert L. Phillips, a professor at Columbia Business School.
Part of the lure is the so-called underbanked population -- people who use few, if any, bank services. The Federal Deposit Insurance Corporation estimates that roughly 10 million households in the United States do not use a bank, up from nine million three years ago. And the agency says 24 million more households have a bank account but still use nonbank financial services, like prepaid cards.
Mr. Holley said that 20 to 25 percent of Walmart customers were unbanked.
"The more kinds of services we can offer our core customer like that, the better for them," he said.
Last month, Walmart unveiled a prepaid card with American Express. The card operates much like a debit card except that it is not attached to a bank account. It comes with free customer-service telephone support, and fees are relatively low, but the account is not backed by the F.D.I.C.
Frustrated with the fees charged by her bank, Nancy Fry, a real estate broker in Logan, Utah, bought a prepaid card from Walmart this year. But this was even worse, she said -- she was charged $3 every time she loaded money onto the card. "I really don't have very much money and can't afford these fees," she said.
Consumer advocates complain that prepaid cards are loosely regulated and can cannibalize the money put on them. Consumer lawyers have pushed for greater disclosure of fees and more stringent regulation of the card providers. The government is expected to issue new rules this year.
Walmart began to test selling a one-year MetLife life insurance policy this year, and customers can wire money or pay bills at any Walmart store.
Costco is also courting customers who are fed up with their banks. "A lot of members think their bank fees are too high, or the trust level has gone down over the years, or they're having issues with debit and credit cards," said Jay Smith, Costco's director of business and financial services.
Costco sells auto and homeowners' insurance, offers credit card processing for small businesses and began making mortgages in late 2010. It does not make money on the mortgages, which are offered by small lenders, Mr. Smith said. The idea is to get people to renew their store memberships, where Costco makes a large chunk of its profit.
Home Depot, whose customers are mainly homeowners, is trying to increase sales by extending credit to people who would otherwise have trouble getting it. Last year, the company began offering loans of up to $40,000, and this year it extended its no-interest credit card payment terms.
"We have the ability to get credit to consumers in this tight credit market, and we wanted people to take advantage of that in a market where people don't have access to home-equity lines of credit like they used to," said Dwaine Kimmet, Home Depot's treasurer and vice president for financial services.
Mr. Kimmet said the loans were especially useful for people who needed emergency items, like a water heater, though shoppers use them for other home décor projects as well.
They are also helpful for Home Depot, whose sales growth has been squeezed by the housing crisis.
Mr. Kimmet said the store loans, unlike home-equity lines of credit, did not require collateral, meaning Home Depot could not seize someone's house for a failure to pay.
The interest rate on Home Depot's credit card is higher than that on a typical credit card -- 18 percent to 27 percent, depending on credit score, compared with an average of 14.59 percent, according to Bankrate. But Mr. Kimmet said the retailer offered cards to people with credit scores as low as 600, below what many lenders accept.
Other retailers are also trying to make it easier for people to qualify for financial products. Office Depot and Sam's Club offer loans backed by the government's Small Business Administration, and both involve quick, one-page initial applications. More than 1,000 Sam's Club members have used the program since its introduction two years ago, the company said.
When Kent Prater was about to open a restaurant in Lumberton, N.C., he searched online for loans backed by the Small Business Administration and found that Sam's Club sold them. He applied online for a $25,000 loan and was approved for a $10,000 loan, with an interest rate of about 10 percent. With a bank, "I think it would probably be a little bit more difficult, because of the environment -- the economy and the regulatory environment," said Mr. Prater, who opened Thai Chili last month.
Paco Underhill, who researches shopper behavior as founder and chief executive of Envirosell, said retailers offering financial products is only the beginning.
"The banks are going to scream bloody murder when retailers try to obtain banking charters," he said. "But it's not hard for a retail organization to look across the landscape and say, 'Who are my customers, and what else could I be selling them?'"
(Source: The New York Times, 11/14/12)
||Survey: Most Consumers Think Best Bargains Offered on Thanksgiving Weekend
Survey results released Tuesday by PriceGrabber found that 71% of consumers believe that retailers offer better deals during Thanksgiving weekend than they do during the rest of the winter holiday shopping season, up from 58% in 2011.
When consumers who indicated that the best deals can be found over the Thanksgiving weekend were asked which days retailers offer the best prices, 71% said Black Friday (Nov. 23), down from 80% in 2011 and 86% in 2010, and 41% said Cyber Monday (Nov. 26), up from 37% last year and 33% in 2010.
When asked which days they plan to shop over the Thanksgiving weekend, 42% said Black Friday (Nov. 23), followed by 38% who said Cyber Monday (Nov. 26); 21% indicated Saturday (Nov. 24), 13% selected Sunday (Nov. 25), and 10% said Thanksgiving Day (Nov. 22).
When consumers planning to shop on Black Friday were asked to select all of the reasons why they planned to do so, 70% said that they can find the best prices on that day. Thirty-three percent noted that they plan to shop on Black Friday because it is a tradition with family and friends; 22% indicated they have the day off from work and enjoy shopping; and 7% said they like the thrill of fighting the crowds.
"Shoppers are eager to find deals this holiday season as they continue to keep a tight grip on their purse strings. Our survey data reveals that consumers believe some of the best prices will be offered over the Thanksgiving weekend, especially on Black Friday and Cyber Monday," said Rojeh Avanesian, VP marketing and analytics of PriceGrabber.com. "While Black Friday remains a popular day for in-store shopping, we have seen a steady growth in online shopping on Cyber Monday. We expect this trend to continue as shoppers harness the power of the Internet to find the best pricing and take advantage of free shipping and other retailer incentives."
According to the PriceGrabber's survey, 64% of Black Friday shoppers plan to take advantage of extended store hours to start shopping even earlier this year. Twenty-four percent plan to start shopping in stores on Black Friday between midnight and 4 a.m.; 27% indicated they will start shopping between 4 a.m. and 8 a.m.; and 26% plan to shop between the hours of 8 a.m. and noon.
Fourteen percent indicated they plan to shop between noon and 10 p.m. and 9% of consumers indicated that they will start shopping at 10 p.m. on Thanksgiving evening to prepare for Black Friday sales if stores are open.
According to PriceGrabber's survey, consumers cite clothing, consumer electronics and computers as the top gift purchases on Black Friday. Of the consumers who indicated that they will shop on Black Friday, 56% said they will purchase clothing as gifts. This was followed by 48% who said they will purchase consumer electronics; another 48% who said they will buy computers, laptops, tablets or related equipment; 37% who said they will purchase books, CDs, DVDs or video games; 32% who said they will purchase toys; and another 32% who said they will purchase shoes.
Other items shoppers will purchase this holiday season include jewelry and watches, gift cards, sporting goods, appliances, beauty, cosmetics and spa packages, and food or candy.
(Source: Retailing Today, 11/13/12)
||Deal-Driven Restaurant Traffic Declined in 2012
Restaurant consumers have altered their expectations for brands’ value proposition and have become a little less deal-driven, according to new research from The NPD Group.
The Port Washington, N.Y.-based research firm has found that, for the 12 months ended in August 2012, non-deal restaurant traffic increased 1 percent in the United States while restaurant visits tied to a deal decreased 1 percent. It was the second consecutive 12-month period in which non-deal traffic grew 1 percent, after remaining flat in the period ending August 2008 and declining by 3 percent in both 2009 and 2010.
Deal-related visits had declined in the 12 months ended in August 2011 as well, by 2 percent, though that kind of frugality-motivated traffic had increased by 3 percent in 2008, 2009 and 2010, as the Great Recession and its hangover sent consumers running toward daily deals, value and dollar menus, and combo meals.
The NPD Group noted, however, that while overall deal-related traffic is down, much of that decline has to do with consumers perceiving some of the same ordering habits, especially getting combo meals, as part of a restaurant's regular price-value equation and not as a special promotion.
"In 2008, when economic concerns caused many consumers to stop some of their discretionary restaurant visits, many restaurant operators turned to offering consumers more deals to drive traffic," Bonnie Riggs, The NPD Group's restaurant analyst, said in a statement. "As has been historically the case, when deals are in the marketplace for an extended period of time, consumers tend to expect them or see them as the everyday price and not as a deal."
In fact, orders of combo meals are increasing, but consumers are increasingly identifying the visit on which they ordered the combo to be unrelated to any deal. Orders from dollar or 99-cent value menus have fallen in the 12-month period, The NPD Group found. Yet other kinds of deal-oriented offers, such as coupons, single-item discounts and senior citizen discounts, increased slightly.
Striking the right balance
As a result of changed customer expectations and perceptions, restaurant brands are finding that they must strike a better balance between value-driven traffic and the rest of the customer experience. McDonald's Corp. exemplified a need for that balance during its third-quarter earnings call, when officials said that the company's response to disappointing sales and net income would be to drive traffic and market share through better promotion of its value platform.
Chief executive Don Thompson said McDonald's would not only put more advertising dollars behind its main value platforms, but also would shift the focus of that advertising from the Extra Value Menu back to the Dollar Menu and Breakfast Dollar Menu. The former strategy was meant to highlight some higher-margin items priced between the Dollar Menu and Extra Value Meals, but Thompson said "that didn't resonate as strongly with consumers as we thought."
The entire value platform represents about 10 percent to 15 percent of McDonald's sales mix in the United States, Thompson said, so the brand would need to apply an all-of-the-above approach to turn earnings around. That means continuously balancing value items with premium limited-time offerings like the Cheddar Bacon Onion sandwich and operations initiatives like double drive-thrus and extended hours of service.
Riggs advocated a similar approach, in which restaurants try to drive traffic not just through price-point promotions, but also through every facet of the customer experience.
"What should operators do?" Riggs asked. "Examine their value proposition, not just in terms of prices but also in quality and service; leverage the convenience factor of restaurants; and offer variety, all three of which consumers have consistently told us are important to them."
Another publicly traded restaurant brand, Red Robin Gourmet Burgers, reported recent success by combining that everyday-value approach with menu variety. In its third-quarter earnings call, chief executive Steve Carley credited Red Robin's Tavern Double cheeseburger platform with driving increased traffic and a same-store sales gain of 1.1 percent.
The platform begins with a plain double cheeseburger for $6.99, a value-conscious price point for casual dining, and allows customers to upgrade for $1 to several different flavor profiles.
The NPD Group based its report off the findings of the firm's CREST service, which tracks consumption patterns from more than 400,000 restaurant visits per year.
(Source: Nation's Restaurant News, 11/06/12)
Daily Sales Tip: Try Not to Let It Bother You
There's no such thing as rejection. Somebody saying "no" is just like somebody saying "yes." "No" is just a word, like "yes" is a word, except we put all these connotations on certain words: "No" is bad and "yes" is wonderful. Here's the key –- if I don't give "no" any power, then it doesn't stick to me. I can keep getting "no'd" and it doesn't matter. Eventually, the more I keep going the more "yeses" I will get.
Sometimes I get asked by salespeople if sales is something you're born with or something you can learn. That's a hard one to answer. I think it's unquestionable that some people are born with the skill to communicate more effectively than others –- it's in their DNA. Can you teach someone how to sell? Yes, you can give them all the skills sets, but eventually they still have to do it.
In all these years that I've been selling, nothing has changed. I'm constantly looking at how I am doing it. What should I say? What should I not say? I can come out of a sale knowing I did all the right things and still not get an order, and still, I will feel great because they weren't ready to buy at that time.
There's no point in beating myself up, if I take it personally, or feel rejected, everything stops: I'll never get out of bed. That's why "no's" don't matter. Being told "drop dead and go away" doesn't mean anything; it's just their opinion, and has nothing to do with me or with you.
So if I do get fed up, I just make a choice: How long do I want to be fed up for? Answer: I only want to do it for seconds. I have got my life ahead of me and if I take it personally and get upset nothing is going to happen except I'm going to blame someone else, and then it's a spiral into the abyss –- the downward elevator to despair doesn't make for sales.
So keep your chin up and spirits high -- set your sights on winning the sale and you will always succeed.
Source: Motivational speaker Jeff Gee