Vendors Forge Ahead
In spite of the gloomy economic outlook, gifts and decorative accessories vendors persevere and look ahead to brighter days.
By Caroline Kennedy and Judi Fulbright -- Gifts and Dec, 12/1/2008 12:00:00 AM
“It's tough out there!” That simple statement sums up the common assessment of the current economy made by gifts and decorative accessories vendors responding to this year's Gifts & Decorative Accessories Trends & Forecasts survey. And it's a stronger warning of difficult business conditions than that issued a year ago.
Looking back, vendors noted a rising cost of living, the start of higher fuel costs, the unsettled question of the impending Presidential election and other conditions combining to produce a challenging business climate for an industry which, in essence, produces product that consumers don't have to have. Yet, in spite of the cautious outlook, the year started off on a positive note with vendors reporting strong sales at the winter markets, even though buyer attendance seemed to be somewhat “off.” This trend continued through the summer markets, although reviews were more mixed.
Nevertheless, as the year progressed toward the period when this survey was conducted (September and October), overall economic conditions became more worrisome as news of a credit crunch, mortgage crisis, rising unemployment, failing banks, falling stock prices and high energy prices grabbed headlines and unsettled consumer confidence. One vendor respondent even cautioned, “We haven't bottomed out yet.”
Vendors are realistic enough to admit that change may not be forthcoming very soon. “I see a very weak market and depending upon how the new President does, I do not see an uptick until the middle of 2009,” remarked one respondent.
Yet, although very cautious, many vendors still remain hopeful. “Persevere!” “Stay positive!” “…hang in there!” they advise, and business will improve. And with that attitude of fortitude, they look ahead to 2009 knowing that they cannot stand still. If they want to persevere, they must continue to move forward. After all, this is a business that thrives on the “What's new?”
Creating the New
Because of the buyers' ever-present quest for what's new, nearly three-fifths of the vendors surveyed plan to introduce new collections or lines in 2009, with the median number of new lines equaling four, a figure that remains the same as in 2008 and, in fact, has been a constant for several years. Of those vendors introducing new collections or lines, 64 percent responded that the number of new lines or collections they will introduce is equal to what they did in 2008; and interestingly, those who said that they would introduce fewer new lines/collections (18 percent) equalled those who said they would introduce more. What this means is that buyers going to market or working with their reps can look forward to seeing about the same number of new product lines overall to freshen up their merchandise mix as in previous years.
While customer feedback is taken into consideration, vendors for the most part depend on their own experience, trend awareness and market research when developing their new product lines. And although many manufacturers do expand their product offerings into new categories as a part of their business plan, consistent with 2007's results, slightly more than one-third of the vendors surveyed noted that customers ask them to develop products not typically represented in their line. One of the most frequently requested categories is custom product developed just for their store; other frequently mentioned categories are jewelry, product for kids and men, green or environmentally friendly lines, candles, reed diffusers, and lower priced lines.
When it comes to sales comparisons and expectations, this year's survey answers are somewhat surprising when compared to 2007, but not so surprising in view of the change in economic conditions over the course of the year. As the year comes to a close, slightly more than half of respondents (51 percent) reported lower sales in 2008 than in 2007, while 27 percent report sales about the same; only 22 percent say sales are higher in 2008 than in 2007. These figures are dramatically different from what respondents in 2007 predicted for their 2008 results; nearly three-quarters of vendors predicted higher sales in 2008 than in 2007. Nevertheless, many vendors have a positive outlook for 2009, with 45 percent anticipating higher sales than in 2008 and another 38 percent predicting comparable sales. Only 17 percent anticipate sales being down in 2009 compared with 2008.
Targeting the Customer
Who is the core customer that vendors are targeting for their product? The primary target group continues to be the Baby Boomers (representing ages 44–62). They remain the largest prime customer group, with nearly half of vendors reporting them as a target. Although the Boomer consumer still represents a significant number of shoppers with a high proportion of disposable income, this figure is slightly down from 2007 as other consumer target groups take on a higher shopper profile. It is the Gen-Y (14–32 years old) and the Tweens (ages 8–12) who are the growing focus for vendors' product development; nearly one-third are targeting Gen-Y, up from one-quarter in 2007, and one-fifth are focusing more on Tweens, up from one-sixth.
To reach these target customer groups, the gift specialty stores are still the largest and most important sales channel. This channel, though, is declining, with 64 percent of vendors, or about two-thirds, reaching consumers in this way, compared to 73 percent in 2007 and 80 percent in 2006. And although the gift specialty store is still regarded by many as a vendor's most important and fastest growing sales outlet, these figures, too, continue to decline compared with previous years.
Where do vendors perceive growing opportunity to reach the consumer with their products in 2009? Through home accessories stores and direct-to-the-consumer channels via catalogs and the Internet. At least 25 percent of all the respondents to Gifts & Decorative Accessories' survey viewed home decor stores and direct-to-consumer channels as their fastest growing sales outlets.
Tracking Design Trends
At a time when the economic outlook is dim and the business climate is less than robust, vendors are not straying far from the tried and true when it comes to color and design. Modern/contemporary still ranks as the top design trend, but holds the position with less dominance than it has in the two previous years. On the other hand, no other style seems to be really moving up to take over as the dominant trend; eclecticism is more the order of the day.
Perhaps as a reflection of these tenuous times, Spiritual/religion gained a little ground, moving into second place over Traditional. Retro stayed about the same percentage-wise, but moves ahead of Coastal/cottage, which dropped about seven percentage points of importance. The once hot, now not, styles of Asian and celebrity/pop culture have moved to the “out” or cooling off list, joining Safari/adventure, Americana, Tropical/island and Lodge/cabin.
Earth tones continue to top the list as the most dominant color scheme. This complements the continuing interest in the green movement and rising demand for sustainably produced and earth-friendly products. Two-thirds of respondents reported earth tones to be “Very important” or “Important” for 2009. Black and/or white dropped, and significantly so, to third place under Brights. For 2008, Black and/or white weighed in with 62 percent of respondents indicating that it was “Important” or “Very important”; only 50 percent of the vendors feel that it is so for 2009. Interestingly, although Earth tones have lost some of their dominance as a color choice, vendors don't see any other color group challenging their position at the top of the heap the way Black and/or white did in 2008. There's not much other change from the last year's directions, although Metallics, Neutrals and Jewel tones are still expected to catch on. And Primary colors show a slight gain, perhaps in view of vendors targeting Tweens more.
Licensed designs are losing some ground in importance for 2009. Fashion designer licenses still top the list, but now fewer than half of the respondents view them as important. And while Sports/collegiate has moved up the ranks to third place, its percentage of importance has not changed. Adventure/lifestyle dropped from third place to sixth.
Virtual Gift World
The Internet has become a more common business tool, and is changing the way vendors and retailers do business in the gift industry. Of the vendors responding to Gifts & Decorative Accessories recent survey, 68 percent have an online catalog, and of those who have an online catalog, 62 percent allow retailers to place orders online. And placing online orders they are; vendors allowing online ordering noted that the number of retailers using the Internet to place orders increased by a net of 59 percent in 2008 compared with 2007. (Note: Net change = the percentage of vendors reporting higher online orders minus the percentage reporting lower online orders.)
This figure seems to indicate the growing use of the Internet by retailers to research and source products, and communicate with vendors.
For vendors, the Internet may represent an opportunity to reach out directly to the consumer, but sales to consumers are not yet what they anticipate. Thirty-eight percent of responding vendors sell directly to consumers via their website, with sales representing a median of 5 percent of their total revenue in 2008, down from 8 percent in 2007 and significantly less than the 12 percent they projected their online consumer sales would be in 2008. Nevertheless, they remain confident that their online consumer business will grow to a projected 10 percent in 2009.
Of the 62 percent of responding vendors who don't currently sell to consumers online, about one-half don't think that they will do so in the foreseeable future, but 27 percent are very likely to start, with the bulk of them very likely to do so in 2009.
Communication between vendor and retailer has always been important in maintaining a good business relationship. E-mail is more commonly being used for this purpose, and 45 percent of vendors did more things in 2008 to encourage or increase the volume of e-mail communication with customers. Things they are doing include sending out periodic e-mail alerts/announcements/newsletters to the e-addresses that they have collected; this takes on greater importance in servicing their customers with the difficult economy and fewer buyers traveling to markets. These messages help keep those customers up-to-date on new products and specials between markets and sales rep visits. One-third of the respondents noted their communication with their customers via e-mail increased significantly in 2008, while 44 percent said that it increased slightly.
Looking ahead to the coming year, the outlook is far from sure, but our survey indicates that many are holding a more positive view: “[The] economic times [are] effecting sales for all ... reps, in-store buyers and trade shows. I expect that this will change somewhat after the election, and the economy improves.”
Design Directions
Percentage of vendors who say design direction is rising minus the percentage who say design direction is fading
| Heating up | 2009 | 2008 | 2007 |
| Modern/contemporary | 37% | 43% | 50% |
| Spiritual/religious | 26% | 22% | 22% |
| Traditional | 22% | 27% | 22% |
| Retro | 19% | 18% | 27% |
| Coastal/cottage | 14% | 19% | 24% |
| Classical | 12% | 13% | 22% |
| Asian and Celebrity/pop culture have shifted from the lower rung of the Heating up group to the definitely Cooling off group this year. | |||
| Cooling Down | 2009 | 2008 | 2007 |
| Safari/adventure | -26% | -30% | -29% |
| Americana | -16% | -22% | -4% |
| Asian | -14% | 2% | 2% |
| Tropical/island | -8% | -4% | -17% |
| Lodge/cabin | -6% | -1% | -3% |
| Celebrity/pop culture | -5% | 2% | 11% |
| Note: Measured on a scale of 1 to 3, with 1 equal to "Fading," 2 equal to "Same" and 3 equal to "Rising." | |||
Color schemes
Percentage of vendors reporting color schemes as "Important" or "Very important"
| 2009 | 2008 | 2007 | |
|
Note: Measured on a scale of 1 to 5, with 1 equal to "Not very important" and 5 equal to "Very important."
|
|||
| Earth tones | 67% | 64% | 63% |
| Brights | 53% | 50% | 50% |
| Black and/or white | 50% | 62% | 61% |
| Metallics | 46% | 49% | 39% |
| Neutrals | 45% | 47% | 45% |
| Jewel tones | 41% | 46% | 40% |
| Tropicals | 32% | 33% | 30% |
| Primary colors | 31% | 28% | 28% |
| Midtones | 23% | 30% | 26% |
| Pastels | 21% | 25% | 19% |
Licenses
Percentage of vendors reporting licenses as "Important" or "Very important"
| 2009 | 2008 | 2007 | |
|
Note: Measured on a scale of 1 to 5, with 1 equal to "Not very important" and 5 equal to "Very important."
|
|||
| Fashion designers | 43% | 50% | 48% |
| Artists/illustrators | 42% | 44% | 39% |
| Sports/collegiate | 39% | 39% | 45% |
| Book/movie characters | 38% | 40% | 41% |
| Nostalgic | 38% | 40% | 40% |
| Adventure/lifestyle | 36% | 42% | 41% |
| Pop characters | 32% | 36% | 33% |
| Historical/Americana | 22% | 21% | 20% |
Products Manufactured/Distributed
Percentage of vendors producing
| 2008 | 2007 | 2006 | |
| Home accent pieces | 45% | 42% | 48% |
| Holiday decor | 39% | 32% | 28% |
| Tabletop | 30% | 25% | 27% |
| Candles/candle accessories | 25% | 24% | 24% |
| Garden decor | 24% | 26% | 22% |
| Frames/desk accessories | 23% | 21% | 20% |
| Stationery/greeting cards | 21% | 21% | 24% |
| Collectibles | 21% | 20% | 17% |
| Baby/infant | 20% | N/A | N/A |
| Jewelry/fashion accents | 18% | 19% | 18% |
| Products for kids | 14% | 21% | 22% |
| Personal care/aromatherapy | 12% | 10% | 11% |
Distribution Channels
Percentage of vendors distributing through
| Percentage of vendors distributing through the channel** | Most important channel | Fastest-growing channels, 2009* | |||||
| 2006 | 2007 | 2008 | 2006 | 2007 | 2008 | 2009 | |
|
* Percentage of vendors identifying as one of three channels showing the greatest sales growth for 2009.
** More than one response was allowed. |
|||||||
| Gift specialty store | 80% | 73% | 64% | 42% | 39% | 34% | 36% |
| Home accessories store | 68% | 58% | 57% | 9% | 12% | 15% | 28% |
| Direct-to-consumer (e.g. catalog/TV/Internet) | 43% | 38% | 39% | 6% | 7% | 8% | 25% |
| Florist/garden center/nursery | 57% | 48% | 42% | 2% | 5% | 7% | 13% |
| Stationery/card shop | 59% | 48% | 42% | 9% | 6% | 7% | 8% |
| Department store (e.g., Macy's) | 36% | 36% | 29% | 4% | 4% | 6% | 10% |
| Museum/resort/souvenir store | 63% | 53% | 41% | 7% | 5% | 4% | 10% |
| Bookstore | 48% | 39% | 36% | 4% | 3% | 4% | 10% |
| Discount department store (e.g., Target, Wal-Mart) | 21% | 20% | 16% | 5% | 4% | 3% | 12% |
| Toy/hobby shop | 24% | 22% | 25% | 2% | 1% | 2% | 3% |
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