Comment on anticipated 2009 holiday sales increase from Tom Shay

October 17, 2008

Speaking this weekend for the Southwest College Bookstore Association in Fort Worth, here is an article appearing in today’s Dallas newspaper talking about the amount of INCREASE of anticipated sales for the holiday 2009 season.

Anticipated sales increase of only 1.9%
One after another, consumer sentiment surveys and spending forecasts are piling on to predict an unhappy holiday season for U.S. retailers.

The National Retail Federation’s annual shopper survey to be released this morning said that Americans plan to increase spending by a “paltry 1.9 percent” over last year. It also indicated that price will be the biggest force behind purchasing decisions.

The survey follows the Commerce Department’s report Wednesday that September U.S. retail sales fell 1.2 percent, confirming the weak September sales that individual chains reported last week. The decline was almost double the 0.7 percent drop analysts expected from consumers, whose spending represents two-thirds of U.S. economic activity.

According to the trade association’s 2008 Holiday Consumer Intentions and Actions Survey, conducted by BIGresearch, Americans plan to spend an average of $832.36 on holiday-related shopping vs. $816.69 last year. That’s the smallest increase in planned consumer spending since the survey began in 2002.

The industry’s largest trade group may change its forecast to a 2.2 percent rise in the November-December period.

“It’s a possibility. We want to see if the volatility in the stock market dies down, and we want to get past the election to see if consumer confidence changes,” said Ellen Davis, federation vice president.

According to the survey, 40 percent of shoppers said sales and promotions are the biggest factor for where they shop, and 12.6 percent said everyday low prices are most important.

Young adults, ages 18-24, are pulling back their spending the most. Members of the highly sought-after demographic plan to spend 12.2 percent less than last year, according to the survey. “That will be disconcerting for so many retailers going after that group,” Ms. Davis said.

Still, retailers are going into this holiday season “with their eyes wide open, knowing that savings and promotions will be the main incentive for shoppers,” said federation president and chief executive Tracy Mullin. “No one is canceling Christmas because money is tight, but consumers will be sticking to their budgets and looking for good deals.”

As to where consumers will shop, 69.7 percent said discount stores, and more than half of adults, 58 percent, said they plan to shop at department stores.

One-third of gift buying, or 33.6 percent, will be influenced by the Internet, shoppers said, meaning they will either buy or research products online, up from 30.2 percent last year.

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The ‘Dunnhumby’ concept for small business from Tom Shay

October 13, 2008

Here is another great article from Business Week. My concern is that our audience will read this and think that it does not apply to them. While our audience is not going to hire dunnhumby, you can get the advantage of the concept by doing two things:

1. Survey your customer to ask one question, “What one thing could we do to make it easier for you to do business with us?”

2. Realize that advertising is talking to the public; the public does not buy from you. Your customers buy from you and to get their attention we need to promote which is doing the little things to remind them that they are valued as customers and that you want them to return. Visit the profitsplus website to see some of our promotional ideas that you can easily implement.

Getting Inside the Customer’s Mind

Recession-hit retailers are turning to dunnhumby, a master at divining the behavior of shoppers

by Burt Helm

Like most U.S. retailers, Macy’s is battling recessionary forces. And with sales tepid and the stock price weak, the department store is embarking on a store-by-store strategy to cater to customers’ local tastes.

To help it get there, Macy’s recently became the latest sales-challenged U.S. retailer to hire a British research shop called dunnhumby. Co-founded in 1989 by marketing geeks Edwina Dunn and Clive Humby, dunnhumby doesn’t help retailers find new shoppers. Rather, by crunching data from credit-card transactions and customer loyalty programs, the outfit reveals hidden and lucrative facts about clients’ current customers. It can identify who might jump at a particular sale, or who will ditch the store if a certain product goes away. “I really think it’s some of the best intelligence available,” says Deborah Weinswig, who follows the retail industry for Citigroup.

Dunnhumby started out researching consumers for direct-mailers. Then in 1995 it got a call from Tesco. The British supermarket behemoth wanted dunnhumby to help it learn about holders of its new loyalty cards, which offer customers special discounts. Impressed by how dunnhumby helped it tailor coupons to shoppers, Tesco in 2001 bought control of the firm. Since then, dunnhumby has helped Tesco divine shoppers’ behavior in other ways. For instance, the grocer planned to ditch a poor-selling type of bread. But dunnhumby found that the so-called milk loaf was a “destination product” for a loyal cohort who would shop elsewhere if it disappeared. Tesco kept the bread.

In 2003, supermarket chain Kroger brought dunnhumby to the U.S. to do similar research. Through a joint venture in which Kroger and dunnhumby each have a 50% stake, the firm ran the grocer’s loyalty card program and advised it on how to improve in-store promotions. Dunnhumby can’t take all the credit, but Kroger has done well ever since, with sales in existing stores up more than 5% on average for the past 12 quarters, vs. the industry average of 2.7%. “They have been key to helping us create a successful loyalty program,” says Meghan Glynn, a Kroger spokeswoman.

Now other major U.S. retailers are calling on dunnhumby. Home Depot is using the firm to help it learn more about the “portfolio of professionals”—carpenters, roofers, janitors—who spend far more than the average weekend warrior. Simon Hay, CEO of dunnhumbyUSA, says the firm is bringing in representatives of each job—identified by their shopping behavior—to hear about what products they like and what they want to see. Home Depot may implement those suggestions at stores where large numbers of pros shop.

Dunnhumby’s relationship with Macy’s is nascent, but the research firm has uncovered insights elsewhere that could prove useful. While working with a major European catalogue company, dunnhumby discovered that shoppers of different body types don’t simply prefer different clothing styles, they actually shop at different times of the year. Slimmer consumers buy early in a new season. Larger folks take fewer risks, waiting until later in the season to see what will be popular. Dunnhumby could help Macy’s uncover regional quirks.

Macy’s won’t discuss its relationship with dunnhumby. But because the British firm has agreed not to work with rivals, the chain may be privy to consumer insights that the likes of J.C. Penney, Nordstrom, and Saks Fifth Avenue are not. There is no telling whether Macy’s will enjoy Kroger-style results, but in this economic climate, knowing thy customer—even a little better—can’t hurt.

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