Brands that Build Consumer Confidence

An NPR story earlier this year talked about small ways people could regain their feeling of being in control of their own destinies amidst the bumps and bruises of this recession. “Washing your car yourself…buying a small amount of stock” were some of the suggestions.

Fast forward to stories about the Obama's vegetable garden and thousands doing the same thing either coincidentally or because of their example. According to a survey by the National Garden Association, 43 million US households plan to grow their own fruits, vegetables, and herbs this year, up 19% from last spring. These are boom times for Burpee seeds, Ball canning jars, and Scotts Miracle-Gro. The Wall Street Journal ran a story recently about booming sales for devices to help rooftop and balcony gardeners produce plentiful fruits and vegetables in containers. Savings on food costs are an obvious benefit of growing and canning your own. But there’s something else at work here.

By learning how, and caring for the seeds and plants that put food on the table, home gardeners gain a feeling of control, and have colorful reminders of their own competence: the bigger the tomatoes or the more flavorful or more plentiful the crop, the greater the ability. And capability ladders up to feelings of confidence - something we need more of these days, as rolling layoffs and the ongoing recession continue to spook markets and individuals.

Gardening has played role in building feelings of competence on a massive scale before. According to Wikipedia,

“Victory Gardens were vegetable, fruit and herb gardens planted at private residences in United States, United Kingdom, Canada and Germany during World War I and World War II to reduce the pressure on the public food supply brought on by the war effort. In addition to indirectly aiding the war effort these gardens were also considered a civil "morale booster" — in that gardeners could feel empowered by their contribution of labor and rewarded by the produce grown. Making victory gardens became a part of daily life on the home front.”

Businesses that can help consumers feel a greater sense of control and competence stand to win big – in sales and by building their confidence. I wrote about the boom in sewing classes and home sewing earlier this year, before seeing the morale booster angle to the story.

New concepts like Tech Shop may also fit the bill. TechShop is a 15,000+ square foot

"membership based workshop that provides members with any skill level access to tools and equipment, instruction, and a creative and supportive community of like minded people so you can build the things you have always wanted to make. TechShop is perfect for inventors, 'makers', hackers, tinkerers, artists, roboteers, families, entrepreneurs, youth groups, FIRST robotic teams, crackpots, arts and crafts enthusiasts, and anyone else who wants to be able to make things that they dream up but don't have the tools, space or skills."

From a single location in Menlo Park, Tech Shops have been added in Portland, OR, Austin, TX, and Durham, NC, and more are reportedly in the works.

The recession is eliminating jobs, draining our savings accounts and eroding our confidence. Learning a new skill could turn out to do more for our collective confidence than any politician's speech or rise in the Dow. Welding classes, anyone?

Still Spending to Protect the Investment in our Homes

Last year, we talked with thousands of homeowners about a wide range of topics including food and eating at home vs. away from home, shoes and clothing, and home improvement and home maintenance. Our research through Q4 highlighted showed that: DIY is booming, pretense and conspicuous consumption are out, coupons are back, and at least in some categories, people believe they’re spending smarter, not spending less.

I thought it would be interesting, and possibly instructive, to share what we heard about these themes in each category, so I wrote a 3-part story. Part 1 was about food. Part 2 was about clothing. This last installment is on shelter.

In December, we talked to 50 homeowners in the Midwest about their home care habits and purchases in 2008. They told us they're still investing in their homes, and are focusing on expenses that add to their home's value. As a result, it was not surprising to us that home furnishings got slammed last year. Seems that people don't see furniture or decor as increasing the value of their homes. Stores like Pier 1, Restoration Hardware, and Pottery Barn, and others focused on the decor side of homes were all losers in 2008. Pier 1's Q4 comps were down 18%...and their quarter ended before December!

Although they weren't spending it on home furnishings, most homeowners felt their spending on home improvement and home maintenance since June had not changed. While they are definitely deferring some projects, they are also doing more themselves. That means more novice DIY’ers are doing projects around the house, which translates to greater demand for advice and reassurance. These are two things Home Depot is not known for.

This trend may explain the greater losses at Home Depot vs. Lowe’s. At Home Depot, 2008 profits dropped 38 percent compared to a 15 percent decline Lowe's through the first three quarters of 2008. It may also explain why independents and co-ops like Ace Hardware, where helpful advice is their point of difference, saw much smaller declines than the big box stores.

Homeowners also said they’re comparison shopping and relying on coupons more than ever. Home improvement and home maintenance stores that don’t do coupons or that neglect the web do so at their peril.

The skills and habits consumers develop during these hard times may last a lifetime. So, as this recession enters Year 2, it looks like retailers that get the DIY market in their category will make out better than the rest – while the recession is still with us, and after it has passed.

Four Themes That Cross Categories

Since last Fall, the economic news has been uniformly grim. People losing their homes, deferring maintenance, unable to afford heat. Food banks and soup kitchens overflowing with “customers.” Donors to thrift stores in years past now shopping at them. As a November story on mightbargainhunter.com points out so clearly, “we may think that we need a lot of things. The stuff we really need — after breathing — are food (and clean water) in our stomachs, clothes on our backs, and a roof over our heads.”

This past year, we’ve talked to hundreds of consumers on behalf of clients. We’ve talked about food and eating at home vs. away from home. We’ve talked about shoes and clothing. And we’ve talked about home improvement and home maintenance. In these conversations, we heard several common themes:

• DIY is booming
  
  
• Pretense and conspicuous consumption are out
  
  
• Coupons are back
  
  
• At least in some categories, people believe they’re spending smarter, not necessarily spending less

So, I thought it would be interesting, and possibly instructive, to share what we heard. In this 3-part series, I'll start with the Food category, then Shelter, and in last installment, will talk about Clothing. Compare notes with your own experience, and let us know where we got it wrong…or right!

The problems at Whole Foods and other upscale grocery retailers started long before Q4. Food prices surged in the first half, and organic produce took a hit. Consumers shifted to private label and shopping the club stores for food and groceries in a big way early in the year. Big winners in the category were ALDI whose no frills, private label offering fits the current environment well, and the various 99-cent and dollar stores, for their low prices.

Coupon use is also factoring into food purchases. As market researcher ICOM found, “Households of two adults and two children who use coupons wisely can save 25% on their grocery bill annually, without cutting purchases.” And online coupons were the runaway hit of the year. Consumers of all ages told us they used them, and said would be more inclined to use them if they were electronic. The availability of electronic coupons would most influence the shopping behavior of 18-34 year olds, 77% of whom said they are much more likely or somewhat more likely to use coupons if given access to this paperless technology.

The other thing about food is that more people are eating at home. According to a story on NPR’s Sunday Weekend Edition, cooking skills may have atrophied during the eat-out/take-out days, so we’re seeing increased interest in cooking classes. Cook book sales are also surging. Whether thanks to the Food Network, the recession, both or something else, cookbooks were a bright spot in publishers' lineup.

In this recession, all four themes are at work in the food category.

Next up: Shelter.

Tapping Into the DIY Zeitgeist

One way homeowners are saving money is by doing more themselves. Whether it’s making improvements inside and outside their homes or fixing the things that are broken or don’t work right, it looks like many people are (re)discovering their handiness.

That said, many of us don’t feel very handy – we didn’t learn when we were growing up, and many of us have convinced ourselves that we’re too busy to do it, even if we had the skills.

The SF Chronicle recently reported that “buying hardware doesn’t have to be hard.” Bay Area Consumers' Checkbook magazine and Checkbook.org asked thousands of local consumers to rate their hardware-store experience. Checkbook then did an exhaustive price survey of 170 area stores, both independents and chains.

Their results confirmed what we have seen in our own research with homeowners consistently all year, and as recently as last week:

• Independents are best for advice - for people like me who don’t know what we’re doing or what we need to in order to accomplish it.
• Big box stores are best for variety both within and across categories of merchandise
• Independents can be competitive on price, but you have to work harder to make it pencil out – either buying enough to qualify for a discount or use their card or be in their program

People like the idea of supporting their local stores and appreciate the fact that their local, independent hardware store has folks working there who can answer questions and who know their stuff. Now that cheap is chic, the independents are having a particularly tough time. Stores like Ace Hardware and True Value are seen as less competitive on variety and on price, and fall lower down on customer’s list of places to go to get what they need.

The advice and help they offer may not be enough to make the independent store the first stop for most home improvement or repair shopping trips, but they are the only real advantage these stores offer as the economy has cratered. The growing popularity of doing-it-yourself may provide a ray of hope for independents, as events like the Maker Faires and sites like Etsy.com gain traction.

Maker Faire (www.makerfaire.com) is a two-day, family-friendly event that celebrates the Do-It-Yourself (DIY) mindset that is put on by O’Reilly Publishing, owner of Make Magazine. Over 65,000 people attended the Bay Area Maker Faire this year and the magazine has fans around the world, with a paid circulation of 100,000; its Web site gets 2.5 million visitors each month. The publisher held a second Faire in Austin, Tex., in October this year. Here’s what the NY Times reported was one attendee's take on the event’s appeal: “Things like Maker Faire give people hope. Creativity is the best expression of humanity.”

Etsy.com (www.etsy.com) is an online marketplace for buying & selling all things handmade. According to Quantcast, traffic at Etsy was at an all-time high of almost 2.5 million unique visitors/month in November. Looks like giving homemade is “in” this holiday, even if it’s not made in our own homes!

Seems like the independents might be find a lifeline by connecting the dots here.