It’s All About Jobs
In the past several months, I've been inundated with calls about my outlook on 2009. There are varying degrees of optimism, pessimism and panic. Without a doubt, the economy's short-term ups and downs will have a significant impact on consumer behavior. If someone is upside-down in a mortgage, facing foreclosure, likely to lose a job or reducing debt, the chances are good they won't be seen in the garden center. If a family is cutting back by forgoing this year's vacation and jobs are secure, we can likely count on their money.
Generally, household spending is closely aligned with consumer confidence and the employment outlook. In most households, early-stage "belt tightening" centers on trading down in basic necessities: food, clothing and shelter. The industries reeling are fine-dining and casual-dining establishments. (For what's it's worth, McDonald's is going gangbusters.) As it relates to clothing, a recent discourse in my household went as follows: "Do you really need this new shirt? The last time I looked, your closet was pretty full." And we all know about the shelter part: People are staying put and postponing big projects, or they are trading down to less expensive or less elaborate options.
Jobs Are Key
The key to a healthy lawn and garden industry in the next five years will be job creation. The cycle used to be predictable: Young people would graduate from college, buy homes and start families. In their late 20s and early 30s, gardening and lawn care become bigger priorities. Today, we have a massive number of young adults in college. Despite the price correction in the housing market, if the jobs don't materialize, this cohort will be challenged to save for a down payment (the norm moving forward) and pay a mortgage.
Concurrently, baby boomers are re-evaluating their plans for the next five years. In the future, Social Security benefits may be reduced. Even if the stock market were to rise 5 percent a year, it would take more than 10 years for retirement portfolios to return to where they were before the stock market "meltdown." Some economists speculate that this will cause many Baby Boomers to delay retirement. The "imperfect storm," so to speak, is large numbers of young people and Baby Boomers alike competing for jobs in a sluggish labor market.
The bottom line: If the jobs don't materialize, this will have a long-term effect on the entire home improvement industry and a profound impact on consumer behavior.
The Changing Consumer
If you asked me to sum up today's gardening consumer, especially the new ones coming into the market for the first time, I'd give you the usual answers:
Consumers are less knowledgeable about gardening, and we're still talking over their heads.
The gardening hobbyist is virtually nonexistent, and the decorator dominates the market. Plant purchases are becoming more solution driven (what will look good around my mailbox, for example).
The consumer is more project driven than seasonally driven.
Gardening is a subset of home improvement and primarily a means to beautify their surroundings.
I still believe these structural changes in consumer behavior are intact, but serious events can alter consumer behavior. Depending on how this recession runs its course — and if we can successfully reignite household formation patterns — consumers may be very different two to five years from now. There are already some early indicators of shifting behaviors.
Vegetable gardening. There are several trends fueling vegetable gardening. The spike in food prices from 2007 to 2008 was the "tipping point" for many households to start their own food production. Now that food-price inflation has slowed, the trend sustains itself through concerns of food quality and safety. There is a strong wellness movement in this country and a recognition that we have to start eating better.
Seeds. We know that vegetable seed sales are strong. This is speculation on my part, but could a more frugal consumer in the future shift some of their annual and perennial purchases back to seed?
Plant swapping and sharing. I can say with some confidence that while my grandmother had a beautiful yard, she never purchased a plant. A once-popular pastime was to swap plants and cuttings with her friends and neighbors. Although we hear that this is happening more recently, we don't know the prevalence of this trend or whether it will last.
Shift from DIFM to DIY. The most dramatic change in the past six months has been the proportion of households that are shifting landscaping design and installation responsibilities from professional providers (do-it-for-me) to themselves (do-it-yourself). This is true of all home-improvement categories, including remodeling. We think this will be a positive buffer for the DIY market as some households forego purchases altogether.
We will be monitoring these industry shifts closely. Without question, how and when we emerge from the current economic downturn will play a large role in predicting future consumer behavior. For now, keep reminding yourself that the desire for a beautiful lawn and landscape is timeless and universally appreciated. That won't go away. How consumers achieve the end result is what will likely change.
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