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“New Frugality” May Be an Enduring Feature of Post-Recession Economy

In Consumer Trends, economy on February 25, 2010 at 12:11 am

A “new frugality,” born of The Great Recession and evidenced by two consecutive years of declining per capita consumption, is now becoming entrenched consumer behavior that is reshaping consumption patterns in ways that will persist even as the economy rebounds, according to a new survey of 2,000 U.S. consumers from Booz & Company.

This new consumer spending report confirms a picture of pervasive retrenchment in consumer spending that spans a broad range of consumer product categories. But the survey also suggests that increased frugality may have become learned behavior, making many Americans more cautious and discerning consumers. What is more, the study suggests that these behaviors are “sticky,” and unlikely to quickly change as the economy shows signs of improvement. For example, in the next 12 months just 9% of consumers intend to spend at pre-recession levels on household products, 10% on mobile phone service, 11% on health and beauty products, and 18% on apparel, clothing, and shoes. Moreover, nearly two-thirds (64%) of consumers say they’ll shop at a different store with lower prices even if it’s less convenient for them.

“Frugal behavior is now considered trendy by many shoppers, and will continue for years to come,” said Matt Egol, a Booz & Company Partner. “In this changed environment, marketers need to develop deeper insights into shopper attitudes and behaviors in order to better align their product, pricing, and marketing communications strategies.”

Evidence of changed consumer attitudes abounds in the study. For example:

•Approximately two-thirds of the respondents (65%) say they now consider saving to be more important than spending, and that they frequently use coupons.
•More than half (55%) say they would rather get the best price than the best brand.
•More than half of consumers surveyed reduced discretionary spending on a range of categories, including dining out (58%), consumer electronics (53%), apparel (53%), and media and entertainment (51%).

Further, these attitudes are translating into strong behavioral change going forward:

•Nearly two-thirds (64%) of consumers say they’ll shop at a different store with lower prices even if it’s less convenient for them.
•Only one-third (32%) of respondents believe that their household financial status over the next twelve months will change for the better, reinforcing focus on frugal shopping behaviors such as deferring spending, trading down to lower price points, or buying their favorite brands during promotions
Several other consumer behaviors characterize the “new frugality.”

Highlights include:

Shopping itself is less impulsive and more disciplined. Recession-habituated shoppers are more inclined than ever to do research before going to the store. This was especially true, the survey revealed, in three categories: Health and Beauty (83%), Household Products (82%) and Food and Beverage (79%).

Another study conducted this past Fall by Booz & Company in collaboration with Grocery Manufacturers Association, “Shopper Marketing 3.0,” found a comparable proportion of shoppers conducting research before they shop, with a focus on finding the best prices, clipping coupons, and reading circulars for what is on sale. The “Shopper Marketing 3.0” study also found that many shoppers use price breaks to justify buying the brands they love.

The shift to private label products has accelerated and shows no signs of slowing down. In fact, Booz & Company analysis shows that private labels are likely to continue to take share from brand names. Said Egol, “Retailers are unlikely to give brands back the shelf space that private label has taken given their dependence on private label for profits. In addition, consumers are reporting generally positive experiences when trying private labels, so for some consumers they are becoming preferred brands.”

However, the move to lower price points overall, while pervasive, is not universal. Generally, shoppers are opting for lower priced brands in apparel, household products, and food. But they are less inclined to “trade down” when purchasing alcoholic beverages, tobacco, and health and beauty products.

Not surprisingly, big ticket items will continue to see the biggest household spending cuts: In the past year consumers continued to defer expenditures for items like consumer electronics (only 22% made purchases) or home improvements (23% made purchases). These behaviors will continue in 2010; only 13% and 17% respectively said they would revert to pre-recession buying habits in these categories.

Implications for Marketers

The Booz & Company survey sheds light on the challenges faced by consumer marketers and retailers emerging from the recession. Specifically, faced with the same basic economic trends, consumers are behaving differently with respect to their attitudes toward value and loyalty. Booz & Company identified six distinct, new consumer segments that can help interpret how customers shop in terms of brand loyalty, retail format loyalty, and online behaviors. These segments range from “Shopper 2.0” – young consumers who tend to buy online, regardless of product category, who are price sensitive with few brand or store format loyalties – to “Loyalists,” largely male, who are loyal to both brands and the stores where they shop, but are also avid users of the Internet for research and buying.

“This more cautious consumer approach to spending began even before the recession came into full swing but has since picked up speed,” said Booz & Company Partner Andrew Clyde. “As manufacturers lured consumers with new promotions, consumers traded down and liked the experience. As the economy recovers, marketers need to better target their strategies to preserve the value of existing brands, and avoid destroying value through too blunt a competitive response across segments.”

For retailers and consumer products manufacturers, Booz & Company identifies specific areas to spur growth and profitability coming out of the downturn:

•Building marketing strategies and tactics that address where and why consumers shop – rather than relying too heavily on demographics-based approached used for advertising buying.
•Determining differences in consumer behavior across product categories, offline vs. online shopping occasions, and specific retailers/etailers.
•Differentiating marketing messages and promotional offers to more price conscious consumers vs. those who place greater value on brand or convenience.
•Engaging shoppers along the full path to purchase, rather than treating online and in-store interactions as silos.

More Than Half of U.S. Workers Say Their Jobs are ‘In Limbo’

In economy on September 4, 2009 at 9:51 pm

More than half of employed workers surveyed (1,000 employed US workers across industries throughout the country) said their jobs are stagnant, according to Development Dimensions International’s 2009 Pulse of the Workforce survey.

What makes their jobs stagnant? When compared to those who don’t think their jobs are stagnant, those who answered “yes” to this question are twice as likely to say they:

-Had no room to advance (32% of those who said their jobs are stagnant vs. 18% who said they aren’t)
-Are less likely to be asked to do more (14% vs. 27%)
-Are given fewer exciting challenges (3% vs. 26%)

Companies trying to grow again will feel the impact of this dissatisfaction. “The economy has forced organizations to focus on profits and the bottom-line, but this data tells us they’ve forgotten about the importance of also focusing on their people–putting their organizations at risk for high turnover, poor performance and low engagement,” said Jim Davis, vice president of workforce development for DDI.

Flight risk


Workers who don’t feel they’re being used to their full potential and have no place to go are more likely to leave–the only thing stopping them now is the economy (26% of those who said their jobs are stagnant vs. 9% who said they aren’t). Half of those who said their jobs are stagnant plan to look for another job when the economy improves and are more than twice as likely to move to another company if given the opportunity (77% vs. 32%).

“Companies that have taken their eye off of the ball when it comes to their employees will lose good people to other organizations and even competitors,” Davis said. In fact, 10% of stagnant workers will only wait another month before they make a change and 1 in 4 said they’ll wait no more than 90 days.

In a slump

The slumping economy has resulted in labor lethargy. Forty-six percent of workers who said their jobs are stagnant were twice as likely to “just do their job and go home” (versus 20% of those who don’t feel stagnant). They’re also less interested in what they do, and one-third as likely to say they’re excited to go to work.

Many of today’s workers are mentally checked-out of their jobs–their workloads are increasing, but they aren’t getting interesting challenges or opportunities to learn new skills. “This mentality is putting stress on the organization now, but will be even worse as the economy improves and as companies start to bring new employees in through the front door, their current employees will be walking out of the back door,” Davis said.

A place to grow

More than half of workers did not feel stretched outside of their comfort zone with their development or job opportunities–two areas where companies could be providing their workforce with experiences to keep them engaged. This is proven by the fact that 24% of people who are being asked to take on new challenges that stretch them are also more excited to go to work.
People who said their career is stagnant also were half as likely to be recognized for their efforts (56% vs. 27%). “For most people, the paycheck isn’t enough. They need to feel valued and challenged,” Davis said.

Summer slacking

So what are people doing pass the time at the office? Workers were just as likely to check their Facebook page during work hours (15% everyday) as they were to help a co-worker meet a deadline (14% everyday) and more likely than they were to ask for or take on an extra assignment (9% everyday).
And many chose to skip the office trip altogether, as 1 out of every 5 workers played hooky (called in sick when they weren’t) up to 3 times this summer.
“Look at the people who sit around you in the office–one has probably called in sick, skipping the water cooler to go to the pool instead, another is more likely to update their Facebook status than take on a new assignment,” Davis said. “People are just trying to get by in their jobs and companies aren’t taking measures to re-engage their workers and improve productivity.”

Consumer Behavior Trends Sparked By Recession

In Consumer Trends, economy, Uncategorized on July 27, 2009 at 6:29 pm

Americans Spending Differently

According to Research and Markets, 90% of US consumers believe that they are currently living in a recession. This is indicative of an intensifying recessionary mindset influencing consumer behavior. Symptomatic of falling consumer confidence is the fact that more than one-in-three US consumers experienced a worsening financial situation, falling job security and falling confidence in the housing market in 2008-09.

The study shows that:

•56% of US consumers feel that their lifestyle has been impacted by the recession. Suddenly, they have been forced to re-evaluate their spending, including where they do their grocery shopping as well as their in-store choices.

•44% of US shoppers are frequent buyers of private label products. Many are now likely to consider private label products to be on a par, if not better than market leading brands across sectors.

•For 72% of US shoppers, lower prices have a high amount of influence over where people do their shopping. Nevertheless, the quality of products sold similar influence over their (changeable) grocery shopping destinations. This is symptomatic of the intensifying value-consciousness across FMCG product sectors.

Women More Likely To Pinch Pennies

Women are cutting back more on discretionary expenditures than men in poor economic times, according to a new survey conducted by Opinion Research Corporation. Of those who participated in the survey, 86 percent of women reported spending less on elective expenditures compared to 78 percent of men.

When asked specifically about the lifestyle changes that have been made in the past 12 months due to the current economic environment, those surveyed provided the following responses:

•58 percent of women are eating out less, compared to 48 percent of men
•54 percent of women are buying fewer clothes and shoes, compared to 40 percent of men
•48 percent of women are shopping more at discount stores, compared to 37 percent of men
•36 percent of women are cutting back on charitable giving, compared to 26 percent of men
•31 percent of women have cancelled or postponed vacations, compared to 22 percent of men
Additionally, the survey found that 22 percent of men reported making none of these lifestyle changes, compared to 14 percent of women.

“More and more women are now responsible for managing the family’s finances, and they are more cost-conscious as the economy tightens their purse strings,” said Paula DeLaurentis, managing director, strategic alliances, TD AMERITRADE. “As a result, women are cutting back on daily expenditures and luxuries now more than ever.”

The survey also revealed that the down economy has affected the lifestyles of people living in the Northeast during the past 12 months, more so than any other region in the United States, particularly the West.

Key findings include:

•52 percent of those surveyed from the Northeast have postponed a major purchase compared to 39 percent of those from the West.
•19 percent of those surveyed from the Northeast have postponed adding to the family, such as, pregnancy, adoption and foster children, compared to 7 percent of those from the West.
•50 percent of those surveyed from the Northeast are buying fewer clothes or shoes compared to 44 percent of those from the West.

Strain on Career and Relationships

The recession is also splitting up and straining more marriages and relationships in America than in eight other major nations, according to a global survey commissioned by ING DIRECT. More Americans also believe that they will have to work at least ten more years before retiring – more than any other surveyed country. Yet, Americans are the least likely to sacrifice things people in other leading nations are willing to give up like their cars and pets to save money.

Nearly three in ten Americans (29 percent) say the recession has “added stress to,” “strained,” or even “ruined” their marriage/relationship. American love lives have been the hardest hit compared to just 12 percent in Germany, 24 percent in France and 23 percent in Canada.

Americans are not just feeling the economic pressure at home; it appears to be affecting their retirement plans too. Forty percent of Americans say the current economic situation will cause them to retire at a later age. Of those Americans who said they will retire later, 34 percent think they will have to work ten or more years than originally planned.

“Whether it’s at home, in the boardroom or in the car showroom, people around the globe are affected by the recession,” said Arkadi Kuhlmann, President of ING DIRECT USA. “The long term benefit is that people are cutting costs, saving more money, and learning to build a financial buffer for their future. Clearly, some of these global trends need to become a habit.”

In general, people around the globe agree that food is the last thing they would sacrifice to save money, but no nation loves their vehicles and pets more than America. Interestingly, a recent report from market research firm IBISWorld indicates that despite the recession, families purchasing dogs and cats as pets has actually increased by 2.4 percent since last year.

When asked to name the last three things they would sacrifice to save money, 30 percent of Americans said their vehicle. Only Brits (30 percent) love their cars as much, while Italians (14 percent) and Spaniards (18 percent) are more willing to unload their vehicle. In the US, nearly a quarter of Americans (22 percent) put a high priority on pets compared to Canadians (17 percent), French (15 percent) and Italians (12 percent).

Other sociological savings trends from the study include:

Having a financial buffer in case of emergency is the most important saving goal

Austria – 53 percent
France – 43 percent
USA – 35 percent (#1 saving goal)

 

Retirement is the most important saving goal

USA – 16 percent (#3 saving goal)
UK – 6 percent
Italy – 2 percent

Avoid credit card purchases to save money

USA – 46 percent
Germany – 11 percent
Italy – 17 percent

Cooking at home, bringing lunch to work to save money

USA – 51 percent
Canada – 44 percent
Italy – 20 percent

 The online survey was commissioned by ING DIRECT and conducted by TNS in nine countries where ING DIRECT operates, including Australia, Canada, United States, United Kingdom, France, Germany, Italy, Spain and Austria. In the United States, the survey took place between May 26 – June 9, 2009 among 1,052 adults age 18+.

 

For Research and Market’s full report, “The Global Economic Crisis: The Impact On Consumer Attitudes & Behaviors in the United States”, click here.

For IBISWorld’s full report, “Economic Crisis: When Will It End?”, click here.

China Losing Manufacturing Appeal as US Companies Turn to Mexico

In business opportunity, economy, Importing from China on July 7, 2009 at 5:32 pm

A new international bridge to Mexico is set to open October 2009 in the South Texas city of Mission, Texas. The Anzalduas International Bridge, a $168-million joint project between the United States and Mexico, will be one of the newest and largest border crossings in the country, and will directly connect Mission with Reynosa, Tamaulipas – a Mexican city known for advanced manufacturing and import/export operations.

Since the passing of NAFTA, Mexico has stepped up as a major competitor to China for cost-effective manufacturing. The main reason: lower transportation costs.

Compared to China and other manufacturing hubs, Mexico offers better access to the domestic and North American markets. A shorter, faster and cheaper transportation route to move products and supplies by truck, rather than over thousands of miles by ship, rail, and truck combined.

In South Texas, specifically the Mission metro area, eight international bridges connect the area with the industrial border communities of Reynosa, Matamoros and Monterrey, Mexico — some of the largest Mexican cities dealing with maquiladoras, importing/exporting goods, and vehicle traffic.

This relationship has made Mission and its sister cities an important industrial manufacturing corridor. Sharyland Business Park in Mission is in a Foreign Trade Zone (FTZ) – a “free port” allowing materials and finished goods to be imported or re-exported without payment of customs duties.

Area leaders have also been keen to other infrastructure planning on this side of the border. A new six-lane expressway now connects Mission with its sister cities. Interstate Highway I-69, another major artery of transportation, will soon connect trade routes from Mexico and Latin America to the United States and Canada. The Anzalduas Bridge will directly connect to I-69 – facilitating trade operations between the two countries.

“In the past, when the market softens in the U.S., we have always seen an increase in companies looking at our area as a way to reduce their costs and be more competitive,” said Pat Townsend, President of Mission Economic Development Authority.
This is evident in the number of companies that have visited the region. Companies like Black and Decker, Panasonic, and ALPS Automotive are attracted to the area for its low cost of living, career opportunities and location. Every day, more companies are finding and relocating here.

Euro Retail Sales Also Taking a Hit

In Consumer Trends, economy, Uncategorized on June 29, 2009 at 5:12 pm

According to the Bloomberg Euro-Zone Retail Purchasing Managers’ Index,  retail business conditions in Europe continued to deteriorate in June, with sales, employment, purchasing of stock and margins all falling compared with May.
When compared to May, retail sales fell in all of the three largest euro countries:

 –Germany experienced the steepest drop in monthly sales of the three, and was also the only country to record a sharper rate of decline. The index fell for a second successive month from 46.3 to 46.0, signaling the largest monthly drop in sales since March and the thirteenth successive decline. The average decline for Q2 as a whole was the smallest since the second quarter of last year.
Sales fell in France for the fifth successive month. The rate of deterioration slowed to near-stagnation to register the smallest monthly decline over this period and the best performance of the three countries. The index rose from 48.3 to 49.4. For Q2 as a whole, the decline was the weakest recorded over the past three quarters.
Italy saw sales drop for the twenty-eighth consecutive month. The index rose from 46.5 to 47.0, registering the smallest monthly decline since October 2007. The rate of contraction has moderated since the record pace seen last November, meaning the average monthly drop in sales during Q2 was the smallest since Q2 2007.

Euro area retail sales were down from June 2008. The year-on-year sales index rose from 38.7 in May to 42.7. This upward movement pointed to an easing in the rate of decline from the severe pace seen one month earlier. Sales fell from a year ago in all three countries, led by Italy, which was also the only country to see an acceleration in the rate of decline. Germany reported the weakest overall year-on-year drop.

Americans Still Not Spending

In economy, Uncategorized on June 25, 2009 at 4:58 pm

spendingAccording to Mintz.com, Americans are continuing to tighten their belts through Q1 of this year. 2008 data shows users of the online personal finance service cutting spending by an average of 4% each quarter, and by another 4% in Q1 2009. Overall Q1 2009 spending was down 17% versus Q1 2008 across eight key categories. This indicates that, at a national level, the leading money management and budgeting service’s users remain concerned about the length and depth of the U.S. recession and its potential impact on family job loss and economic security.

This continuing trend of regular expense reductions tells me that consumer confidence is not yet on the rise,” said Aaron Patzer, CEO and founder of Mint.com. “Our users are looking for more concrete evidence that the U.S. economy is truly bottoming out before they’ll be returning to prior spending levels … if in fact they do. While it’s tough to know that 17% of last year’s spend has fallen out of the American economy, it’s satisfying to know that our financial management and budgeting software appears to be helping our growing user base weather one of the longest downturns in our nation’s history.”

The most dramatic decrease is in Shopping, where user spending has dropped by more than 40%, which is significant savings in aggregate, but was accomplished by a steady, gradual 3-5% cut each month in a discretionary category where that type of control is possible

Users have also cut spending quarter over quarter in Entertainment (by 24%) and Bills & Utilities (by 16%)

Other categories have fluctuated quarter over quarter based on seasonal shifts, but still show a net decline:

Spending on Gifts and Donations was down 1%, in spite of a 25% spike in Q3 and Q4 with election donations and the holiday season
Automotive spending has seen the broadest swing in spending, with the extreme variance in gas prices in the same time period, but still nets at a 24% decline over the examined quarters.

The only category that has completely recovered is Food & Dining, where spending in Q109 was actually higher than it was a year prior – but just by 2%.

“This data suggests that Mint’s current tools and guidance are working well for our users today,” said Patzer, “But there’s much more opportunity to make budgeting and planning easier and more effective for more Americans. We’ll be introducing new and improved product features and educational content in Q3 and Q4 designed to do just that.”

Economic Recovery Anytime Soon?

As unemployment continues to rise and disposable income drops, no one is anticipating a fast recovery. Consumers have become increasingly concerned for their jobs and are saving rather than spending.

According to market research firm IBISWorld and their latest report on the economic crisis, we can expect the economy to contract overall by 3% in 2009 – the worst decline in more than 50 years. The lowest point may have been reached in the first quarter, and it will not be until 2011 that overall economic activity will surpass 2008 levels.

Only 1% Of Stimulus Money Helping 95% Of American Firms

In economy, Uncategorized on June 25, 2009 at 4:32 pm

Quick fact: the U.S. Census Bureau states that 98% of all U.S. firms have less than 100 employees, and approximately 25 million firms fall into that category. These firms employ over 55% of the private sector workforce and are responsible for over 95% of all new jobs created in America.

The American Small Business League (ASBL) has found of the $2.7 trillion that has been allocated so far to stimulate the national economy, only $21 billion, or less than 1% of the funds have directly gone to small businesses.

The remainder of the funds that were allocated to businesses wound up in the hands of the top 1% of U.S. firms. President Obama has promised to create up to 4.1 million jobs. Census data indicates the top 1% of U.S. firms have not created one net new job since 1977.

That aside, Los Angeles based industry research firm IBISWorld found that commercial bankruptcies nearly doubled in March of this year since last year’s figures.

“We can expect the current upward trend in business bankruptcy filings over the first half of the year to continue this year,” said George Van Horn, senior analyst at IBISWorld.

There is evidence to suggest the economic stimulus plan is actually harming small businesses. The Wall Street bailout bills were touted as being essential to increasing access to capital for small businesses. Some of the firms that received billions in federal tax dollars are actually cutting access to capital for small businesses. A story in BusinessWeek reported that JPMorgan Chase, one of the largest recipients of the bailout funds, reduced the flow of credit lines for small businesses.

Section 107 of the original Wall Street bailout bill gave the Treasury Secretary the power to waive any provisions of the Federal Acquisition Regulations (FAR) he chooses. Paragraph 9 (b) of the bill specifically mentions the waiver of “any provision of the Federal Acquisition Regulations pertaining to minority contracting” and the waiver of provisions pertaining to “woman-owned businesses.”

The Obama Administration is supporting a new bill in Congress that could dismantle existing federal economic stimulus programs for small businesses by changing the federal definition of a small business. The new definition will allow many of the nations wealthiest venture capitalists to take billions of dollars in federal contracts previously earmarked for small businesses.

In February of 2008 President Obama stated, “It is time to end the diversion of federal small business contracts to corporate giants.” To date, the President has refused to adopt any policy to honor that campaign promise. A series of federal investigations discovered that billions of dollars in federal small business contracts are being diverted to Fortune 1000 firms.

IBISWorld Announces High-Growth Sectors For Entrepreneurs & Investors

In business opportunity, Consumer Trends, economy, Uncategorized on June 22, 2009 at 11:52 pm

There is still money to be made despite the economic climate according to industry research firm IBISWorld. The company identified the leading start-up opportunities for entrepreneurs and investors to potentially make a profit in 2009 and beyond. The high-growth sectors are identified below:

 

 

1. Landscaping Services

Revenue forecast
2011 onwards.
Average annual growth of 4.5 percent from
Start-up costs $1k – $100k+ start up costs, with the upper end
relating to the purchase of equipment.

 

The aging population is driving demand in the landscaping sector, which is also benefiting from businesses, government and time-poor households outsourcing landscaping services.

Landscaping is an attractive start-up proposition because of low barriers to entry, as well as low initial capital requirements. “Many people can commence operations with equipment they already own, and there is no need for a formal office or additional staff,” noted Toon van Beeck, senior analyst with IBISWorld.

However competition is heating up for newer players to stand out, as established enterprises firmly plant their feet in the industry. All in all, strong growth will return around 2011, when income levels are expected to recover and job insecurity subsides. In order to stay competitive, investments—such as in earth-moving equipment-will likely be required, invariably driving up the cost to enter the industry.

 

2. Tutoring, Test Preparation, Driving Schools & Other Education

Revenue forecast
2011 onwards.
Average growth of 2.1 percent per year from
Start-up costs $4K – $75K start up costs, with the upper end
relating to purchasing an existing tutoring
business/operation from an established location

 

The popularity of online tutoring services is on the rise as families increasingly value low-cost, convenient applications they can use from home. Technology continues to evolve its way into the mainstream, and students are quickly adopting this integration into such online services. Growing consumer acceptance of tutoring and exam-preparation services is also moving this area forward. Online tutorial services were once relatively uncommon, however now they are an accepted – even sought-after – part of the education sector.

“In the current market we may also see people looking to expand their product offering to include relatively simple, short courses such as in first-aid and self-defence,” van Beeck predicts.

The initial cost of establishing a business in this industry is low, with most operators being able to rent premises on an “as-required” basis. There is also minimal need for capital expenditure on specialized equipment for tutoring and exam-preparation providers, apart from computers or other technological training resources. Competition in this evolving industry is currently moderate.

 

3. Fashion Design Services

Revenue forecast
2013 onwards.
Annualized industry growth of 6.3 percent to
Start-up costs $5k – $30k

 

While entrants require innovative design and creativity, demand for industry services from growing international markets, like China, will support this area in the long-run despite the current economic situation of 2009.

The beginning stages of any new fashion business will be challenging, but for the short-run IBISWorld expects a shift in designer focus towards producing fashionable yet affordable clothing, as budget-conscious consumers drive overall prices down.

IBISWorld anticipates an industry-wide recovery in the second half of 2010, with growth to ensue as consumer confidence is restored and fashionable clothing becomes more affordable. And while the sector has low-levels of concentration, competition is high and is increasing.

van Beeck advises new entrants to differentiate their services based on creative skills, quality, and witty self-marketing rather than through advertisement.

“In recent years, smaller, independent designers have been sprouting like never before and this has given the industry the ability to move forward despite the retail sector taking a big hit. This year won’t be easy, but we anticipate strong growth will return to the market and since entry barriers and start-up costs are relatively low – along with the growing popularity of online retail – we believe this industry warrants inclusion in the list,” said van Beeck.

 

4. Community Food Services

Revenue forecast
2011 onwards.
Annualized industry growth of 6.9 percent until
Start-up costs $500- $1,000 initial capital outlay, including gas and food supply

 

Historically high un-employment rates, combined with mass displacement and foreclosures, have seen a rapid rise in the need for emergency food supplies and community based food services. For new entrants, this $5.3 billion industry provides some profitable opportunities. Characterized by low barriers to entry, minimal capital requirements, and excellent growth prospects until 2011, community food services are both a noble and lucrative industry to enter amidst the gloom.

 

5. Vocational Rehabilitation Services

Revenue forecast
2013 onwards.
Annualized industry growth of 6.2 percent to
Start-up costs $500- $1,000 initial capital outlay, including gas
and food supply

 

Rising unemployment and displaced professionals will spur demand for vocational rehabilitation services this year, as the workforce becomes starkly competitive with the increasing amount of Americans vying for work.

“Getting people back to work will be a key priority for the government, so this industry will enjoy strong federal support for at least another year or so. Demand for industry services will be strongest in the regions most affected by the subprime crisis, particularly Calif. and Fla.,” advised van Beeck.

The recession will drive demand for training and return-to-work programs, and although the level of capital intensity is relatively low and industry assistance is high, it is a tougher field to penetrate than some of the other start-up options on this list. Industry contacts and counselling skills are particularly important.

 

6. eCommerce & Online Auctions

Revenue forecast
2013 onwards.
Annualized industry growth of 12.1 percent per
Start-up costs Online retailing start up costs at $12k to $260k

 

Americans are becoming thrifty with their wallets, and with the Internet offering an array of providers for every conceivable need, consumers are better able to research and compare more inexpensive options offering the greatest value.

This industry’s phenomenal growth is expected to continue for the next few years, facilitated by relatively low operating costs that lead to higher profit margins for operators.

Technologically, the industry continues to evolve and improve. Secure payment systems such as PayPal and effective web-based self-service solutions are improving business-to-consumer relations while boosting confidence and convenience regarding online shopping.

“This industry has low entry barriers and the cost of purchasing, establishing, and maintaining a website is very low, making it an encouraging prospect for new entrants. However, people considering setting up shop in this field are advised to consider that the costs of establishing, and maintaining a more advanced e-commerce site – with enhanced functionality and features – is much more significant. Setting up and maintaining databases can require hefty initial capital investment, and maintenance costs are of course ongoing,” van Beeck added.

 

7. Automobile Towing

Revenue forecast
2014 onwards.
Annualized industry growth of 2.7 percent to
Start-up costs $20,000 – $75,000 initial capital outlay

 

As consumers are cutting back on expenditures with their vehicles and putting off repairs, the number of breakdowns and volume of motorists needing emergency roadside assistance will increase, spurring demand for maintenance and servicing. Over the long-run, ageing fleets and high traffic volumes will invariably support the need for towing services, as commuters who opted to use public transport during tough economic times move back behind the wheel once the economic climate improves.

Further more, independent contractors are often able to provide better response times if they maintain a larger fleet of tow vehicles that can service a wider area. Public and private entities often find it more cost-effective to contract for services on a per-tow or per-repair basis, rather than maintaining a fleet of vehicles with the staff to operate them. This is becoming an even more attractive alternative, as the public and private sector attempt to reduce secondary labor costs – such as health insurance and pensions.

New entrants to the industry must become accredited by the state roads or transport authority, and pay regular license fees (combined cost of around $3000), as well as complying with regulations including driver log books and environmental stipulations. The cost of a tow truck ranges from as low as $20,000 for a used vehicle, to around $60,000, and operators also need to invest in tracking and communications.

 

8. Video Game Retail

Revenue forecast
2014 onwards.
Annualized industry growth of 11.4 percent to
Start-up costs $200,000+ initial capital outlay, primarily including
the cost of a shop front, stock and supplies

 

As a growth industry, video game retailing is a viable and lucrative business option in the current climate, as video games console a growing number of consumers spending more time at home. With low barriers to entry and modest initial capital requirements, this industry is well suited for potential entrants. Further, the ability to secure contracts from game wholesalers is relatively easy to facilitate, and the only barrier for new entrants is the cost of securing stock for initial sale.

 

9. Elderly & Disabled Services

Revenue forecast
2013 onwards.
Annualized industry growth of 7.1 percent to
Start-up costs $200k – $1 million+
$200k would be the absolute lowest – new entrants need to be willing to invest in nursing
staff (who will need to work 24 hours), as well as considerable amounts of medical
equipment and mobility-assistance machines, among other expenses, driving up costs.
This can be recouped fairly swift as long as occupancy is high enough, but any entrant
would need to be cashed-up or willing to borrow heavily in a tight credit market.

 

Growth and demand is steadily rising in this field, and it is a trend IBISWorld expects to continue for the foreseeable future, as the baby boomer generation approaches retirement age – spurring renewed demand like never before for age-specific services.

“This is supported by the fact that establishment growth is considerably stronger among non-employers, with annualized growth of 8.3 percent over the current period, as opposed to 3.3 percent among employers,” explained van Beeck. Government grants could be drawn upon to establish new industry entities – bringing down start-up costs – which are still significant since operators need to invest in and often modify premises, hire qualified nursing and auxiliary staff, and seek specialized medical equipment.

“Rising federal government funding, the rise of age-related issues, and an emphasis on caring for people with disabilities (such as the New Freedom Initiative), make this industry highly prospective. Entry barriers are low, and tax concessions and rebates are available for non-profit organizations. Currently, 86 percent of industry players operate without having to pay taxes – a significant incentive.

Recession-Weary Americans Spending Less On Healthier Foods

In Consumer Trends, economy, Uncategorized on June 16, 2009 at 7:50 pm

Almost half (46 percent) of Americans are reluctant to spend more on healthier versions of food, the United Soybean Board’s (USB) 2009 Consumer Attitudes about Nutrition survey reveals. This is not for lack of interest: Of those not willing to spend more, 52 percent confirm the reason is financial. However, nutritious foods don’t always come with a hefty price tag.

According to the sixteenth annual research study, 87 percent of Americans express concern about the nutritional content of the food they eat, a number that reflects Americans’ interest in healthier foods. While consumers juggle nutrition and economic value, 88 percent still consider nutrition important when purchasing foods at the grocery store.
Within price constraints, Americans are taking greater control of their health by choosing functional foods that provide specific health benefits. According to Packaged Facts’ Functional Foods and Beverages study, U.S. retail sales for functional foods totaled $31 billion in 2008, an increase from $26.9 billion in 2006. Soymilk faired especially well in sales, although controversy surrounding soy and estrogen may start to cause a decline in demand for soy-related products. Still, 84 percent of Americans rate soy as healthy, up 25 percentage points over the last 12 years. In fact, one-third of Americans purchase foods specifically because they contain soy.

Survey Finds 91% of Consumers Still Prefer Brand Products

In Consumer Trends, economy, Uncategorized on June 15, 2009 at 7:07 pm

New consumer polling data shows that an overwhelming majority of U.S. supermarket shoppers will continue purchasing store brand products after the recession is over.

A poll conducted this month by GfK Custom Research North America for the Private Label Manufacturers Association reports that 91% of shoppers say they will keep buying store brand products after the recession ends. Conversely, only 8% of the consumer polled said they will stop buying these products.
The quality of store brand products is a big factor in convincing shoppers to keep buying them. The GfK poll found that 9 of every 10 shoppers agree that the store brand products they buy are just as good as, or better than, national brand products.
This positive experience makes shoppers eager for an even greater assortment of store brand products from which to choose. Nearly half of consumers polled said they wanted their supermarket to carry a greater assortment of private label products.

According to market research firm IBISWorld,  in-house or private label brands in supermarkets have become a significant trend within the industry.

In the meantime, the recession is still having a big impact on shoppers:
More than half (54%) of them say the recession is an important factor in their decision-making and 32% say it is very important.

Well into the recession, shoppers are still switching to store brands. The poll found that 35% of shoppers are trying store brand products in categories where they had previously only purchased national brand items. More than 3 of every 10 shoppers say they are now buying more store brand products than they were a year ago.

Related Links

Supermarkets & Grocery Stores in the US – IBISWorld industry report