Consumers Weigh Causes and Prices Before Buying

Food retailers and CPG manufacturers that align with charitable causes largely move consumers -– but not completely.

One-third of consumers (33.1%) say the strategy doesn't make them likelier to shop in a particular supermarket; just 13.3% say it does, according to findings of the 2012 National Grocers Association-SupermarketGuru Consumer Panel Survey Report. Notably, consumers who say "no" the most are the nation's heaviest grocery spenders (36.8% of this group that spends $101 and more per week).

For the majority of consumers overall (53.6%), it depends -– on the store's prices, or on the causes it supports, or on a combination of both. People understand that charitable causes help others in need, but tough times are pretty much everywhere these days, and many already give in other ways beyond what a food store or food brand might do. So there's a limit to the charity they'll connect to their food shopping.

This resistance emerges if people don't feel as strongly about a particular cause, or if they think a store or brand inflates prices in order to deliver the support it messages about. For example, 10.9% say it depends on the causes. Another 15.8% say it depends on the prices. And 26.9% say it depends on both causes and prices.

What if prices rose to allow for donations? That would be fine for 56.7% of U.S. adults surveyed, as long as the price difference was no more than 2%. However, it would be OK with only 10.1% of consumers if the price difference swelled to as much as 5%. For a full one-third of respondents (33.2%), the amount of price difference wouldn't matter.

Related, if charitable support was keyed to a retailer's private label sales, and those prices rose, 62.3% of consumers say they'd still buy their usual amount of store brand items. About one-quarter of consumers (25.3%) say they would buy less, and 12.4% say they would actually buy more.

Will a "causes" strategy help a supermarket pull consumers from wider geographic areas? Not for most consumers, the survey findings show. A majority (53.9%) says it won't travel any farther to shop in a food store that supports causes. However, 24.2% say they would travel up to a mile or two longer, 16.1% say they would travel up to five miles more, and 5.7% say they would travel up to 10 miles farther to support a supermarket that supports causes.

Which causes are uppermost in consumers' minds today? Their Top Five (respondents could name multiple responses) are: relieving hunger (54.8%), relieving child hunger (39.9%), education (30.8%), supporting people in disaster-stricken areas (28.5%), and the environment (23.2%).

(Source: The Lempert Report, 02/14/12)

Consumers Ready to Boycott Corporate Bad Guys

When it comes to corporate responsibility, consumers aren't just paying closer attention, they're ready to kick brands that don't behave to the curb: Some 93% are willing to boycott corporations that behave poorly, and 56% have already done so.

And they are also willing to reward companies they perceive as responsible, reports the 2011 Cone/Echo Global CR Opportunity Study, with 94% saying they would buy a product that has an environmental benefit and 76% saying they have already done so in the past 12 months. Cause-related products are just as popular, appealing to 93% of the more than 10,000 consumers polled in 10 countries. And 65% have already purchased such a product.

The most important issue for companies to address? Economic development, with 34% of respondents placing it first. Combined with the environment (21%), these issues represent the attention of more than half of the 10,000 respondents. Human rights comes in a more distant third (12%).

The survey -- which included the U.S., U.K., Canada, Brazil, Germany, France, Russia, China, India and Japan -- found that while people are willing to accept a company's word on important issues (with 59% saying companies have educated them on key issues), more are willing to do their own digging. Some 36% say they have done their homework, researching a company's business practices or support of issues; 32% have given feedback directly to the company.

And while consumers say they want a dialog with companies about how they are handling these issues, they still find one-way communication most convenient, with 22% saying they want that information on a package, 21% through the media, and 16% through advertising. A smaller group wants to interact online, with 11% mentioning Web sites, 7% social media, and 3% mobile devices.

The most important element, the Boston-based Cone reports, is simply telling the truth: 88% say it's fine with them if a company isn't perfect, as long as it is honest about its efforts.

(Source: Marketing Daily, 10/04/11)

Spending on Pets Rises During Recession

Mary Louise Mills says her three dogs are spoiled rotten.

She has a 9-year-old shih tzu named Annie Lulu after Mills' grandmother, and two Pekingese -- 7-year-old Miss Daisy May and 4-year-old Elmer, whom she sometimes calls Fudd.

"They all think they're the boss," said Mills, 79, who lives in Annandale, Minn. "They've got me trained pretty well, I guess."

Mills enjoys their company; her husband died a few years ago. The dogs eat meals with her in the family room. They sleep with her in a king-sized bed and travel with her in the car whenever possible. They have a standing appointment about every eight weeks at Foxy's Pet Grooming and Boarding, which is one of the ways Mills tries to pamper her pets.

"My parents raised Dalmatians, and I've been a pet lover all my life," said Mills. "They're very important to me."

A lot of Americans feel the same way. According to the American Pet Products Association, people in the U.S. will spend more than $50 billion on their animals this year, a record. Spending in the pet economy has increased every year since 2001 and only once by less than 5 percent annually in that time.

Pet ownership is at an all-time high of 72.9 million households -- about two out of every three. About 78 million dogs and 86.4 million cats in the United States represent a 2.1 percent increase from 2010.

And those in pet-related industries in Central Minnesota say they've seen how animal lovers have made their business strong, if not recession-proof.

"I'm not surprised," said Valerie Muggli, who runs Tails of Gold, a golden retriever breeding operation. "I've found the same thing. The business really hasn't slumped. When the economy went bad, people started staying home more. They weren't taking as many vacations. They weren't gone as much. They started focusing on their home life and, for a lot of people, that includes a pet."

Muggli said she breeds about seven to 10 litters per year, depending on demand. Her puppies cost between $1,000 and $1,500, which she says is midrange for purebred golden retrievers.

"A lot of people ask 'Isn't it hard to send those puppies home with someone else?'" Muggli said. "It's a lot of work, but it's rewarding to see the joy they bring into people's homes. That's why I love doing this."

Muggli also is a dog trainer and has seen significant growth in interest in agility training.

Food, fences
Once you have a pet, the next object is to make it safe and secure at home.

Scott Potter has operated Invisible Fencing for 12 years in South Haven, Minn. A typical system from Invisible Fencing, which is a brand name and not to be confused with do-it-yourself pet containment systems, costs $1,500 to $2,000. Potter says his business isn't experiencing the record years it saw in 2006 and 2007, but it has rebounded through the recession.

"When the economy crashed, it affected our business," Potter said. "But we've been steadily gaining it back the last few years to the point where we're pretty busy now. People's pets are their family. They're like kids to some. Safety is a priority, and I see our systems save the lives of dogs and cats every day."

Potter said technological advances also have benefited the business.

"The collars pets wear with our systems now weigh less than an ounce," Potter said. "That's a lot lighter and less bulky than they used to be years ago. That's opened a lot of possibilities for different pets. Increasingly people realize it works well for cats."

Food accounts for a majority of spending in the pet economy -- an estimated $19.53 billion this year. The typical dog owner will spend $254 annually, not including treats. Average annual food spending by cat owners is $220.

Corporate representatives from PetSmart and Petco did not respond to inquiries for this story, but PetSmart recently reported second-quarter earnings were up 32 percent and net income was $61 million compared with $48 million in the second quarter of 2010.

Vet spending
The biggest increase in pet spending this year is expected to be for veterinary care -- with a total of more than $14 billion in spending.

The growth can be seen in some new pet hospitals, including Advanced Care Pet Hospital in Sartell, Minn. Tom and Pamela Gerds opened the operation in December 2009, although Pamela Gerds had been practicing as a veterinarian for 16 years in the Twin Cities.

"We did a lot of research and selected this market for a lot of reasons," said Tom Gerds, who runs the business operation of the animal hospital. "We looked at industry numbers and the number of pets and vets in the area. Based on those, we figured that the economy would bounce back and Sartell would be a good location."

Tom Gerds said pet owners mirror the bell curve of household demographics. Some people barely comply with license requirements for rabies shots. Others treat their pets as well as their own children. Different veterinarians have their niche, whether it's low-end vaccination clinics at big-box stores or full-service vets.

He said another reason vet care is accounting for a large slice of the pet economy is because pets are living longer through advanced medicine and technology.

"It's approaching the level you see for human care, compared with the days when you took your (sick) pet to the farm and then you never saw them again," Gerds said. "We can test for glaucoma and cataracts. There are a lot of things that can be treated now that people didn't run into when they put their pets down sooner. Of course, the equipment isn't cheap, and it's a significant investment for all involved. Sometimes when you tell someone who bought their cat from the humane society for $10, they look at you like you're kidding."

Veterinary care expenses this year are expected to increase more than a billion dollars from 2010. That's one reason pet health insurance has developed into a growing industry. Since 2007, it has grown by an average of about 10 percent annually -- though it's estimated only 800,000 pets in the nation are insured. Nonetheless, it is an option for pet owners who figure the luxury of such coverage is outweighed by the difficulty of a large, unwanted pet-care bill.

According to Reuters, more than 15 percent of dog owners said their pet's medical treatment would take priority over their own.

Pet benefits
Some research shows, however, the two may go hand in hand.

A recent study from the State University of New York at Buffalo found pets help lower blood pressure. According to the Waltham Centre for Pet Nutrition, pets help reduce stress. And the National Institutes of Health Technology has research that shows pets provide their owners with greater psychological stability and a measure of protection from heart disease. The same organization says pet owners make fewer doctor visits and pay lower health care costs.

The fondness people feel for their pets, the increasing number of them and the growth in human population also have contributed to growth in the pet cremation business. Peggy McStott-Voigt operates Heavenly Paws south of St. Augusta, Minn. She said her 10-year-old business saw no dip during the recession.

"It's still a priority for pet owners," she said. "These are basically family members."

Cremation service depends on the size of the animal, but an average private cremation costs about $125. A garden cremation, where multiple pets are cremated at the same time, starts at $60. Urns made of plastic, wood or granite for the ashes run from $25 to $300. Owners can have a paw print made from their pet for $18.

McStott-Voigt says Heavenly Paws is one of four pet cremation services in the state, with the others in Minneapolis, St. Paul and Duluth. She offers a memorial garden for people who use her service to spread or bury their pet's ashes if they don't have private property on which to do so.

"When the floor dropped out of the economy, people stopped spending as much on their wants and focused on their needs," McStott-Voigt said. "But this is a need for many people. I've had people keep some of the ashes in a phial on a key-chain so they can keep their pet close to them. It's a personal thing."

Shelley Bunkholt has been grooming animals since she was a kid and dabbled in the business part-time for decades. Five years ago, however, she decided this was what she wanted to do. She ended a 27-year career as an insurance underwriter and opened Foxy's Pet Grooming and Boarding.

Her business has grown to the point where she's building a new facility this month. A new pole building will take pressure off the space she uses in the garage adjacent to the log house she and her husband have on a 40-acre property.

Bunkholt boards dogs and cats in what she describes as a relaxed atmosphere. The animals have real furniture on which to rest if they wish, including couches. Her grooming operation started in her basement and has continually picked up new business through vet referrals.

"Some people don't groom as often or they've got to plan for it in their budget, but business has held up well, and we're getting new clients all the time," Bunkholt said.

She also has three dogs -- a poodle, a golden retriever and a Jack Russell terrier. She says hygiene, including dental cleaning, has become more important to pet owners. She even works with a canine chiropractor.

"People who focus on their pets give them better care, and because of that they're going to live longer," Bunkholt said. "Making life better and easier for people and their pets is what it's all about."

(Source: USA Today, 10/10/11)

City Living: What 'Urban Boom' Means for Marketers

From Ikea to Zipcar to Walmart, Advertisers Follow Consumers into Metropolitan Areas

Decades ago, people left cities for the suburbs to raise families and to live the American dream. Now we're seeing "bright flight," younger, educated Americans reversing the trend seen in their parents' and grandparents' generations.

Consumers, from yuppies to artists to homeowners unable to sell homes to empty nesters, are clustering in urban areas more than ever before. And marketers stand to benefit from it.

"We're experiencing worldwide the fastest urban boom in history," said Ann Mack, director-trendspotting at WPP's JWT. "As the U.S. population gets more urbanized and cities boom, improving human environments will become a higher priority. We'll see a flourishing of opportunities for brands across multiple categories and initiatives aimed at improving local environments, adding beauty or helping to bring communities together."

According to the U.S. Census, from 2000 to 2010, the nation's 366 metropolitan areas picked up nearly all population growth: 92.4%. The overwhelming majority, 84%, choose to live either in or in the vicinity of a city of 50,000 people or more. In fact, almost 100 million Americans, 32%, choose to live in one of the 15 largest metro areas, each of which has more than 4 million residents. The 50 largest metro areas are home to 53% of the nation's residents, and all of them except five grew over the past decade.

The 2000 Census found 105.5 million occupied housing units, of which 32.8 million or 31% were in central cities. By 2010 that had crept up to 33%, despite the significant late-decade falloff in household creation. And even among first-time homebuyers, Ms. Mack said that 77% say they want to live in an urban area.

Among the sectors seeing opportunity in urbanization are furniture manufacturing, automotive and retail.

Ikea, long known for its apartment-friendly, affordable furniture, has of late been emphasizing its small-space furniture. "The small-space focus has been a global initiative within Ikea, as many Ikea customers worldwide live in smaller, urban areas" said Janice Simonsen, U.S. design spokeswoman for Ikea. She added that the focus on small also "resonates with U.S. customers. Although historically U.S. homes tend to be larger, our customers are looking to use these spaces smarter and more efficiently."

Even so, Ikea stands to benefit from an influx of urbanites in the rental market -- a healthy market in the wake of the housing crisis -- looking for apartments and affordable furniture. Walter Molony, spokesman at the National Association of Realtors, said that vacancy rates for rental units are declining as young people or people uncertain about home ownership rent more and seek roommates. According to the Census, 34.9% of occupied homes nationwide were rented in 2010, up from 33.8% in 2000.

Ikea's doing something right. Sales rose nearly 8% worldwide in fiscal 2010 and are similarly brisk this year.

And in cities, rentals have been going beyond homes and apartments to cars. "There's a trend of people leasing more than buying outright," said Stephen Hahn-Griffiths, chief strategy officer at Leo Burnett. Zipcar, which had its IPO earlier this year but was founded in 2000, is one of the bigger car-sharing services around. It posted a 34% gain in revenue to $61.6 million compared to $46.0 million in the prior year period, for second quarter 2011. During that time, membership increased 29%.

Although car sales in the U.S. were up 6% in the first nine months of 2011 over 2010, according to Automotive News, that doesn't mean car-sharing services, which are more popular in cities, are in trouble.

"In urban areas, people -- especially millennials -- want to find practical solutions that are affordable. They're more environmentally aware than previous generations and they're keen on saving money," said Ms. Mack. She added that if Zipcar is going to feel competition from anywhere, it'll feel heat from similar car-sharing companies, such as I-Go and rental companies like Hertz, which expanded to car-sharing in Manhattan.

Not wanting to miss out, some car manufacturers are taking a more proactive approach. General Motors in 2012 will team up with RelayRides, which lets car owners share their cars with neighbors. RelayRides will use GM's OnStar to allow borrowers to unlock the cars from their mobile phones.

Mr. Griffiths said he expects the rental trend to continue beyond cars and apartments. "I would even expect to see an increase in furniture rental."

Retailers typically known for massive stores are even rolling out smaller formats fit for urban areas. Walmart is rolling out dozens of smaller stores in an effort to fight lagging sales. The chain took its Neighborhood Market grocery format and renamed it Walmart Market and began opening the stores in denser urban areas like Chicago. As of this year, the smaller grocery outposts account for about 200 of Walmart's approximately 4,400 U.S. stores. At the same time, it's working on Walmart Express, a convenience-store format that's even smaller.

William S. Simon, exec VP, president and CEO for Walmart's U.S. division, in a recent earnings call said that the company's neighborhood markets have posted positive same-store sales for 15 consecutive months and that the "Neighborhood Market format is delivering a return at the same level as our Supercenters, which have the best ROI in the company." He added that 180 more are in the pipeline.

Other downsizing retailers include office-supply chain Staples, which this summer said it planned on opening new stores that were about 15,500 square feet, down from the current layout of 18,000 square feet. Best Buy is looking to downsize its current stores, subleasing parts of its space to other retailers.

(Source: Advertising Age, 10/17/11)

Spending Restraint Is The Back-To-School Spending Byword

According to NRF's 2011 Back-to-School survey, conducted by BIGresearch, parents this year will make children scour their closets before agreeing to buy any new jeans, pencils or backpacks. Families with children in grades K-12 will spend an average of $603.63 on apparel, school supplies and electronics, within a few dollars of last year's $606.40 average. Total spending on grades K-12 is expected to reach $22.8 billion. Combined K-12 and college spending will reach $68.8 billion, serving as the second biggest consumer spending event for retailers behind the winter holidays.


NRF President and CEO, Matthew Shay, says "... families aren't opposed to spending on what they need, but want their children to take a good look at what they already have... retailers understand consumers are extremely focused on value... "

• According to the survey, Americans are compensating for the economy by:
• Purchasing more store-brand or generic items (39.9%)
• Comparison shopping more online (29.8%)
• Shopping for sales (50.0%)

Nearly half of survey respondents said the economy is forcing them to simply spend less in general (43.7%). Average spending on clothing ($220.60) and school supplies ($88.99) will slightly decrease this year. Families will also spend an average of $104.53 on shoes, a slight increase over last year.

Though average spending on computers, cell phones, mp3 players and tablet devices is expected to increase slightly to $189.51, 51.9% of families with school-aged children plan to purchase electronics this year, down from last year's historically-high 63.7 percent. The percent of people who plan to purchase apparel, shoes and supplies will decrease as well.

Department stores are expected to see a surge in back-to-school traffic thanks to popular private labels, promotions and innovative social media campaigns. According to the survey, 57.0 percent of back-to-school shoppers will head to a department store, up from 53.9 percent last year and the most in the survey's eight-year history. Back-to-school shoppers plan to make at least one purchase

• From a discount store (68.4%)
• Clothing stores (48.7%)
• Office supply stores (38.0%)
• Electronics stores (21.7%)

Additionally, more people this year will shop online (31.7% vs. 30.8% last year) and in drug stores (21.1% vs. 19.5% last year)

Parents this year will start their shopping closer to the beginning of school:

• 42.4% of families will begin shopping three weeks to one month before school
• 31.2% will begin their shopping one to two weeks before school starts, up from 24.8% last year
• 21.8% will begin shopping two months before the new school year
• 2.0% will shop the week school starts 
• 2.6% after school starts

Teenagers are expected to spend an average of $31.64 for school items, compared to $31.74 last year. Pre-teens, largely reliant on their parents for an allowance, will spend less this year ($15.12 vs. $18.27 in 2010). When it comes to how much say children have in parents' buying decisions, 61.2% of parents say their children influence 50%or more of back-to-school purchases.

And NRF's 2011 Back-to-College survey, conducted by BIGresearch, found more college shoppers this year will make adjustments to their budgets because of the economy. According to the survey, parents and students will spend an average of $808.71 on everything from apparel and electronics to dorm furnishings and food items, down from $835.73 last year.

83.7% respondents say the economy will impact their spending plans. More shoppers than last year will purchase store brand or generic products (38.0% vs. 34.1% in 2010), and more will comparison shop online (30.7% vs. 23.2% in 2010). Additionally, many shoppers are making do with last year's items (29.7%) and spending less overall (44.6%)

Shay concludes that "College students and their parents... will be looking for ways to stretch their budgets and find good deals this year... retailers will spread out their promotions to capture the attention of shoppers whenever they're in the mood to spend, and will use every resource they can to prominently promote... "

The survey found 45.8% of students and their parents will buy electronics, the lowest level since 2005. However, electronics will still take up the largest portion of shoppers' budgets with the average person expected to spend $209.93, an 11% decrease over last year's $236.94. Freshman will spend the most on electronics at $281.94 on average.

Pam Goodfellow, Consumer Insights Director, BIGresearch, says "... many college students are already armed with the latest gadgets they'll bring with them to campus... A decline in electronics spending could be due to the fact that many popular college items, like laptops, have experienced huge drops in price... "
College bound shoppers will also spend on:

• Clothing and accessories ($127.37)
• Dorm furnishings ($96.84)
• Food items ($94.60)
• School supplies ($61.48)
• Personal care items ($64.44)

47.6% of families with college-aged children will shop at a department store, up from 42.5% last year. Others will shop at:

• Discount stores (53.9%)
• Drug stores (19.4%)
• Home furnishing or home decor stores (11.2%)
• Office supply stores (33.4%)
• Clothing stores (34.2%)
• Electronics stores (19.6%)

33.4% of college families plan to shop online, up from 28.6% last year.

24.4% of college shoppers will begin their shopping at least two months before school starts, the highest percent since NRF began conducting the survey in 2003.

• 28.9% will shop three weeks to one month before school starts
• 27.9% one to two weeks before
• 9.4% the week school starts
• 9.4% after school starts

52.9% of parents say their child will live at home (vs. 51.8% in 2010), though 24.7% will live off campus at a house or apartment. 18% will live in a dorm room or college housing and 3.6% will live in a fraternity or sorority house.

The poll of 8,684 consumers was conducted from July 1-6, 2011. The consumer polls have a margin of error of plus or minus 1.0%