What To Do When the Market Shrinks

Guess what?  As a society, Americans are not going forth and multiplying.  The number of Americans, which translates to the number of potential future customers, is growing at less than one percent annually.  In fact, the U.S. is at the lowest population levels since 1937. There are several reasons for our population stagnation, among which are fewer births as a result of Millennials marrying later in life and having fewer children when they do marry, fewer immigrants as a result of national policy and fewer deaths.  

 

Concurrently, there are population shifts. Did you know that Utah is the fastest growing state in the U.S.? Whoda thunk it?  And major metropolitan areas are not increasing their population. Combine fewer potential customers with the increased use of online retail, and you can see why brick-and-mortar stores in traditional retail hotbeds will have to respond to this changing societal dynamic.  

 

One of the points may be, according to L2 Founder and New York University Stern School of Business Professor Scott Gallaway, that the reason many mid-market to premium retailers are suffering is the ongoing erosion of the middle class. That helps explain the challenges faced by J.C. Penny, Sears and Macys (among others).  Pew Research reveals that those considered "middle class" have plummeted 11 percentage points from 1971 to 2015 and Pam Danzinger of Unity Marketing notes that the middle class' share of the nation's aggregate income has declined from 62 percent in 1970 to 43 percent in 2014.

 

While the middle class is eroding, the upper tier of the revenue producers is increasing.  There are 35 million affluent American households, of which 5 million have an annual household income exceeding $250,000. Another demographic trend affecting decorative plumbing and hardware showrooms is multi-generational households. An estimated 40 percent of Millennials are still living at home or with other family members.  That's the largest percentage of child-parent households since 1940.  The number of households with elderly parents living with their children is also increasing, signifying market opportunities for showrooms that can help homeowners modify their houses for aging in place.  This market opportunity becomes even more illuminated by the fact that only 10 percent of Americans are expected to move in a year.  That is half the number that moved in the 1960s and the lowest percentage of household turnover since 1948.

 

Baby boomers are the second largest generation in history and currently the generation with the most money. As boomers want to stay in their homes longer, targeted marketing campaigns to this demographic should generate positive returns.  Meet with your staff and brainstorm ideas of how to better serve this critical market segment.  

 

Women still control or influence the purchase of 80% of everything.  However, the number of women in the workforce has actually declined since 2000.  The Labor Department estimates that women in the workforce in 2020 will be at a lower level than it was in 1990.  The fact that fewer women are earning paychecks is not a positive trend for premium and luxury brands or brick-and-mortar retail in general.  

 

Lessons for decorative plumbing and hardware showrooms:

• Because more baby boomers are aging in place and moving less often, there are opportunities for upgrades of existing homes to develop an expertise for aging in place.
• Millennials gravitate toward experiences rather than brands or conspicuous consumption. Craft messages that tout the health and experiential benefits of a new bath.
• Women, while declining in the workforce, still make the vast majority of purchasing decisions. Make sure that your market efforts and sales approaches are female orientated.  
• There are 30 million Americans who are considered wealthy, and 5 million who are considered ultra-wealthy, e.g. household incomes in excess of $250,000.  Develop marketing campaigns that appeal to this demographic.