Home for the Holidays: Opportunities in Current Consumer Behavior

With recent weeks’ economic events taking an increased toll on consumer spending, and projections for holiday sales growth ranging from 1.5% (TNS) to 2.2% (National Retail Federation), retailers are rolling out more incentive programs and price promotions and scrutinizing every aspect of their businesses.

While it’s long been clear that price would be the core driver of holiday purchasing decisions this year, the extent of consumers’ focus on getting the best deals is eye-opening.

Fully 40% are now confirming that sales/promotions will be the biggest factor in choosing where to shop, and another 13% state that “every day low prices” are most important, according to a Consumer Holiday Intentions and Actions survey conducted for NRF by BIGresearch between September 30th and October 7th. That was after Congress passed the economic rescue package, but prior to the worst of the stock market’s recent volatility.

Just 21.5% of the 8,117 consumers surveyed say that product selection will be their key driver, 13.4% cite merchandise quality and 5% to 6% cite location convenience or helpful service.

Nearly three-quarters (70%) report that they’ll be doing some shopping in discount stores, versus 58% planning to shop in department stores and 37% in clothing and electronics stores.

The average amount consumers are planning to spend is $832.36—up just 1.9% from last year, and the lowest year-over-year increase since NRF began its annual holiday surveys in 2002. Within that total, average planned spending on gifts includes $466 on family members (down from $469 last year), about $95 on friends, $27 on co-workers and $44 on other gifts. Young adults (18 to 24) plan to spend $50 less than last year.

Other spending planned includes about $95 on food, $51 on decorations, $32 on cards/postage and $23 on flowers.

A Nielsen survey of more than 21,000 households conducted in pre-meltdown September found only 6% of consumers across all income levels planning to spend more this holiday season and 35% planning to spend less—although at least at that juncture, half said they’d be spending the same. Among affluent consumers ($100,000+ income), 57% said they’ll spend the same, 32% less and 5% more.

Among consumers reporting that they’ll spend about the same overall amount this holiday season, about half said they’ll spend the same in grocery stores, supercenters and mass merchandisers. In fact, Nielsen forecasts 4.7% holiday sales growth for these classes of trade (versus 4.5% last year), albeit driven nearly entirely by price increases. Unit sales will be flat to down by 0.8% versus last year, the researcher estimates.

Other key magazine/book channels, including drug stores and bookstores, will experience declines in consumer spending, according to the Nielsen survey. 

More Home-Based Entertaining = Opportunities in Food, Decorative, Gift Ideas

Rising travel costs during this economy-dampened holiday season will clearly keep more consumers at home. (Farecast recently reported airfares up 35% for Thanksgiving and 31% for Christmas/New Year’s versus last year.)

Entertaining will be curtailed somewhat, but less so on the home front. The Nielsen survey showed 24% of consumers saying they’ll forego entertaining away from home, versus 17% saying they won’t entertain at home.

Among those planning to entertain at home, 26% to 33% (depending on income level) say they’ll decrease this spending. However, between 45% and 58% indicate they’ll be spending the same amount, and 6% to 9% plan to increase spending. (See at-home spending intentions chart in Forum enewsletter.)

In comparison, among those planning to spend on entertaining away from home, 31% to 35% said they’ll spend less this year, 38% to 51% said they’ll spend the same, and 4% to 7% said they’ll spend more.

Clearl“The trend to entertain at home continues as consumers grapple with high gas and food prices, and it bodes well for manufacturers and retailers promoting at-home options,” sums up Nielsen SVP, consumer/shopper insights Todd Hale.

Consumers’ shift to eating at home, home-based entertainment/relaxation and general renewed nesting behavior have been reflected all year in spending trends re groceries versus restaurants and other category sales trends, of course.

No surprise then that, while consumers clearly cut back on newsstand buys of many types of magazines during this year’s first half, magazines focused on at-home meal solutions generally bucked the trend.

Examples of titles showing single-copy gains included EatingWell (13.9%), Fine Cooking (13.8%), Everyday Food (8.9%), Every Day With Rachel Ray (6.2%), Saveur (5.4%), Food & Wine (4.5%), Cooking Light (3.8%), Gourmet (3.5%) and Taste of Home (3.4%). Taste of Home’s new Healthy Cooking title sold 101,000 copies in its first six months.

Further, some sources report that food titles have been considerably less affected than many magazine categories by further cutbacks in discretionary spending since late September. (See Update this issue, “Early Read on Impacts of Last Few Weeks’ Economic Rollercoaster.”)

For example, as of last week, David Algire, VP, North American retail sales for Reader’s Digest Pegasus Sales, Inc. reported seeing little or no newsstand fall-off in recent weeks for the publisher’s food-oriented titles, such as Rachel Ray and Taste of Home. (Algire has just been announced to be moving to Meredith Corp. as VP, retail sales.)

Nielsen forecasts that the stay-at-home trend will generate sales lifts in many food and practical, home-oriented product categories during the holiday period, including seasonal general merchandise (+35%), candles/incense/accessories (29%), refrigerated meat starters (27%), butter/margarine/spreads (24%), nuts (23%), soup (22%), baking mixes (22%) and kitchen gadgets (21%).

Home-baked and home-made/crafts gifts are also expected to rise in popularity, many trend-watchers have observed.

Publishers Leveraging Hot Categories, Interest Areas

Publishers are maximizing the opportunities in consumers’ demand for recipes, entertaining and family meal ideas, crafts and home decorating help.

Hachette Filipacchi Media has created combined displays featuring four Woman’s Day holiday special interest titles/SIP’s—focused on hot menus, cookies, appetizers and best food/crafts/decorating ideas for Christmas. These are being positioned at front-ends and used in aisles to cross-promote magazine and food/ingredient sales in key magazine retail channels showing the strongest seasonal trends, according to HFM senior director, retail newsstand and marketing Will Michalopolous.

Limited tests of polybagging SIP’s with WD issues are also underway, and the results thus far look good for a holiday roll-out next year, he adds.

The December issue of HFM’s Metropolitan Home, rather than being holiday-themed, is leveraging a TV special the brand made with Showtime. Showtime filed the making of “Metropolitan Home’s Showtime House,” a 19th-century home in New York City’s Gramercy Park that received a complete interior redesign, each room redone by a design star and each inspired by a Showtime series (including Dexter, Weeds, Californication, The Tudors and The L-Word).  The special will be aired on Showtime, offered as bonus features on Showtime series DVD’s, and featured in a DVD polybagged with the magazine.

HFM is now testing pricing of the December issue, and is hopeful that the extra value represented by the DVD will enable a higher cover price even in the current economic climate. “Consumers are staying home during these tough times, and looking for added value,” says Michalopolous. HFM’s Pointclickhome.com site, which features ideas, interactive tools and sweepstakes from all of its home and garden magazines, is now featuring sweepstakes that tie into the Showtime special. 

The Metropolitan Home DVD premium was inspired by the success of a similar promotion for the September fall fashion issue of Elle in Walmart stores, notes Michalopolous. A polybagged DVD enabled Elle purchasers to download one of five songs as a premium (three songs were tied to the first Disney High School Musical film being released in theaters, two were from other hot recording artists) was extremely successful. The issue, which carried a sticker promoting the DVD premium, saw a 130%-plus dollar sales lift over last year’s issue, about 50% to 60% of which was attributable to the DVD, and the rest to the magazine being moved from the mainline to checkout in WM stores. About 13% of all purchasers of the issue-with-DVD redeemed a music download.

Michalopolous credits wholesaler Anderson News with approaching FHM with the Elle DVD idea, and working closely with the publisher and retailer to execute it. (A similar promotion, featuring a DVD with content focused on a hot, new car model, is in the works for a Road &Track summer issue.)

Other Q4 magazine promotions also feature added-value elements. In a replay of a successful 2007 strategy, the October issues of Hearst’s Good Housekeeping and Country Living are polybagged together and priced at 20% off in many stores now.

RDA’s first Rachel Ray-branded SIP/bookazine is a “collector’s” holiday issue featuring 368 tips for a “fun, fast & easy” holiday and “the ultimate party planner.” The 144-page newsstand-only publication, priced at $9.99, is being featured in supermarkets and mass merchandisers in floor stands and pallet and end-cap displays, in addition to feature pockets at checkout and mainline, according to Algire. About a third of the approximately 960,000 copies printed for the special are pegged for use in some kind of promotion, he adds.

Meanwhile, the regular October issue of Rachel Ray features “113 Recipes + Tips That Hit the Spot” and “Slash Your Grocery Bills Right Now” cover lines, and the November issue carries a “Family Dinners for $10 or Less” cover line in addition to its main “101 Ways to a Stress-Free Thanksgiving” theme.

Another RDA SIP, the Taste of Home-branded Best Holiday Recipes (also priced at $9.99), has seen increased sales every year since 2004, and this year includes 320 recipes and 100 recipe cards. In stores for about two weeks now with display/promotion elements similar to the Rachel Ray SIP, the 92-page publication focuses on classic holiday recipes and gifts from the kitchen. Sales are looking “very good” so far, says Algire.

Existing food titles such as Condé Nast’s Bon Appetit and American Express Publishing’s Food & Wine are making content changes designed to tap the current economic zeitgeist, such as featuring sophisticated but inexpensive meal recipes, budget-conscious substitutes for pricey food items/ingredients, and good wines under $20.

Rodale's Prevention is upping its food content by 50% with a new section, called "Cook!." The magazine also plans to add SIP's, books and supermarket cooking events going forward.

The launch issue of Food Network Magazine, from Hearst and the Food Network, hit stores October 14th with 160 pages, including 50 ad pages featuring Kraft, Unilever and other manufacturers and retailers and distribution of 300,000. The celebrity chef-oriented title targets both food "do-ers" and "watchers" (including FN fans). Hearst has said it will publish two issues--the second is in January--before deciding whether to continue the magazine.

Cookbooks, of course, will also be on hand to encourage food and ingredients purchases. Among the paperback offerings released for the holidays are Deep Dark Chocolate:Decadent Recipes for the Serious Chocolate Lover (Sara Perry with Jane Zwinger. Chronicle, $18.95) and The Science of Good Food: The Ultimate Reference on How Cooking Works (David Joachim and Andrew Schloss. Robert Rose, $37.95), both in stores this month.

And by the way, books in general will be big gift items this year, particularly among more affluent consumers, according to Nielsen.

Personal Products Among Market-Basket Lifts Magazines Can Drive

Market-basket lifts resulting from magazine and book content are obviously more valuable than ever for retailers this holiday season.

Further, magazine articles and advertisements featuring recipes and food, entertaining and decorating ideas are not the only ones that will be helping retailers inspire more purchases of the products that consumers will be most focused on.

According to Nielsen, personal products—the ones heavily reviewed and advertised in a host of women’s and men’s fashion and general interest magazines—will be among the most popular gifts this year. For instance, sales of children’s cologne/gift sets, women’s fragrances and men’s toiletries are expected to jump by 49%, 40% and 38%, respectively.

Bed/bath linens (another staple of home decorating and women’s magazine articles/ads) will also be hot.

Among the more affluent, gift items expected to be in demand include family games and entertainment, DVD’s and mobile phones (featured/advertised in parenting, kids’, entertainment and electronics magazines), as well as fireplace accessories and  kitchen ware (featured/advertised in home, women’s and food magazines).

Studies by Dynamic Logic have consistently shown that magazines are by far the most effective medium (surpassing TV, online and all others) for driving product purchase intent.

In addition to promoting other products in stores, magazines draw shoppers into stores who are somewhat more affluent than average, and likely to have a bit more to spend, even in the current economy. A market-basket study by Management Science Associates a few years back found that magazine buyers account for 58% of both grocery dollars and grocery items, while representing only 24% of shopping households.

Women magazine readers are less price-sensitive than women as a whole, according to WSL consumer research released earlier this year.

Magazines are also the item that adults most want to see at the checkout, and provide higher true profit per unit than other front-end categories (58 cents, versus 34 cents for snacks, the next-highest profit producer), according to Willard Bishop’s recent Grocery Superstudy.

In short, providing magazines not only at the front end, but in high-visibility areas in center store and outposts near related food and other products, makes more sense than ever this holiday season. —KL