The New Domestic Economy

THE NEW DOMESTIC ECONOMY: How Marketing to Moms and At-Home Millennials Can Help Retailers Thrive During a Recession KELLY MOONEY President and CXO, Resource Interactive and co-author of The Open Brand PRESENTED BY: SPONSORED BY: SPONSORED BY:

RECESSION OBSESSION

THE LOST DECADE? Median household income in 2008 slipped to $50,303 from $51,295 in 1998. Source: U.S. Census Bureau, 2009 DEPRESSION DEPRESSION

Percent Change Same Store Sales August 2009 vs. August 2008 TJX Aeropostale Companies Costco Limited Kohl's Brands Buckle Gap, Inc. American Target Eagle JCPenney Neiman Marcus Hot Topic Abercrombie & Fitch Saks Source: Retail Forward, November 2009

Shifting gears... Real Personal Consumption per Capita vs. Savings YEAR OVER YEAR CHANGE / PERCENT SAVINGS CONSUMPTION Source: EconomPic Data, June 2009

Sales at Goodwill stores open at least a year rose 7.1% in the first three months of 2009 over the same period a year earlier. Source: NYT, June 10, 2009

90% of the U.S. respondents said that their households had reduced spending as a result of the recession. 45% of those who reduced spending did so by necessity, 55% by choice McKinsey Quarterly, March 2009 CONSPICUOUS CONSPICUOUS CONSUMPTION CURTAILING

After completing a shopping 5.3% felt guilty and 20% said they were WWD, April 2009 CONSPICUOUS CONSPICUOUS CONSUMPTION CURTAILING

the web is projected to influence 50% of offline sales by 2012 TOTAL SALES (millions) Offline Sales Total Online Impact 50% 48% 45% 47% 42% 38% Offline Sales Influenced by Online Online Sales 2007 2008 2009 2010 2011 2012 Jupiter: US Online Retail Forecast, 2007 - 2012

Q. How has the consumer changed? Will the changes be enduring? Is there untapped opportunity in this crisis for online retailers?

Remember the 1990s?

basement but kids, it turned out, were still willing to pay up to fit in Source: No Logo, Naomi Klein

GEN Y: The prematurely affluent generation

1st wave feel recession is unfair Besides fear, how do most Millennials feel about the recession? A narcissistic sense of being unfairly burdened. Yet some optimism emerges as well. My generation is being dealt an unfair NO FAIR! blow because of this recession The current situation with housing prices actually makes me feel optimistic about buying a home All of the online resources for jobs searches and networking make me feel less anxious about losing/finding a job If the employment situation worsens, I may have to move back in with my parents My friends are doing interesting entrepreneurial things to make more money Most of the people my age that I know are not that worried about the recession % who agree start my own business Among young adults 18-29 Source: JWT, 2009

Thrift is an alien virtue

OUR METHODOLOGY SECONDARY SYNTHESIS 150+ articles, Forrester, Nielsen, McKinsey, ExactTarget, JWT, Gen Buy + hief urchasing fficer PRIMARY RESEARCH • 20 in-person interviews • 50 online participants in a 10-day forum discussion with Harris Interactive • Tested 3 RI visual prototypes • Conducted survey with BIGResearch • Partnered with ExpoTV • Tapped RI Trendwatching practice hief nfluencing fficer

DIGITAL TEEN •Age 13-18, mix of race, income- earning/non-income-earning •Shops online, regular internet and email user, use of social networking and SMS and owns cell phone. DIGITAL MOM •Age 30-55, mix of married/single, income, and race •Shops and purchases online; frequent email user; some use of blogs, social networks, and/or Twitter, online reviews and texting.

UNDERSTAND THE REWIRING

RECESSION SHOPPING BRAND DIGITAL

DIGITAL TEENS Forced to grow up faster Typical teen egocentric worries displaced. DIGITAL MOMS Reconciled yet feeling fortunate Chance to reset family values, become more resourceful, prepare for the future.

81% of household heads say that kids are aware of the recession and the impact it is having on household budgets. Source: Ad Age, April 2009 generations who over- consumed. So I hope we can learn from their mistakes and be the generation that lives within Alicia, 18

2nd wave facing recession head-on Recession-related issues have replaced more typical teenage ego-centric worries as their top concerns. (Among teenagers 13-19) If there will be good jobs when I graduate 293 things I like because of the recession 251 How my parents are doing money-wise 249 The condition of planet Earth that will be 221 left to my generation 201 How attractive I am to others 180 Which college I/my family can afford 151 Which college will accept me 143 How many friends I have 92 How popular I am at school 78 75 Keeping up with what other kids my age have 73 Base = 100 Source: JWT, 2009

Teens have become more enterprising, unemployment at record high 26% grandparents, parents aunts & uncles eBay, Craigslist jobs (babysitting, dog walking, etc.) allowance

recession can come on and how long it can take to get out of one. set a good example for my children and teach them to be smarter Alanna, 34 lesson in how to live within your means and separate wants from needs. Pamela, 47

DIGITAL TEENS Savvier about financing their purchases Have discovered online research, coupons, clearance racks, selling and swapping. DIGITAL MOMS Smarter, prouder about living with less Distinguishing between needs vs. wants, relying on codes and coupons, shopping clearance first.

actually save my money before I make a purchase. business as a young man John, 16 69% of young people now research all purchases before they buy anything. Source: OTX, May 2009 Luke, 13

Over the next five years, moms of teens plan to: 57% consider purchases carefully 57% be more price conscious 55% stick to a budget 57% dine out less Source: BIGResearch, July 2009

habits will not change back once the recession is over. We are not lacking for the basics and still have a wonderful life. Less is more Blanca, 43 Coupon sites have been the second-most-visited category on the Internet behind job sites for about a year. Source: eMarketer, May 2009

DIGITAL TEEN Holding out Deferring purchases and selectively trading down or changing channels DIGITAL MOM Trading WAY down before their own; rethinking luxury

to give up. I notice the difference in quality so I usually compromise by buying good brands on sale. Alicia, 18 Brand loyalty is increasingly important among 13-21 year any brands. I maybe olds, as 73%now shop at a fixed group of but I still buy the same stores. David, 17 Source: Euro RSCG Discovery survey, May, 2009

Favorite Brands During the Recession, Resource Interactive and Harris Interactive, 2009

SHOPPING DIGITAL MOMS Favorite Brands During the Recession, Resource Interactive and Harris Interactive, 2009

specific brands anymore. I realized that a $300 purse as much as my kids need clothes and Keri-Anne, 32 43% are buying store Target shopping brands instead of national going now .... or high-end brands. previously it was Source: TNS Retail Forward, August 2008 Sheryl, 49

DIGITAL TEENS Seeking independence from adults through digital devices more ways to experience freedom DIGITAL MOMS Seeking control and connection A means of getting answers and more value, monitoring kids, finding social fulfillment

-generation gap between under-twenty and over- progression of technology in the GenBuY, October 8, 2009

Reliance on texting and SNing Net Change in Communication Usage by 15-17 year olds in last 6 months 44 • Texting, social networking grow at IM's expense • Email usage rising slightly, % NET CHANGE IN USAGE significantly more among 25 smartphone owners (25% of teens) Instant 4 Message % more often - % less often Text Social Email Network (7) Source: Exact Target, July 2009

focused on communication that iPhones are the new jean. Source: AdAge.com, April 2009 Most of 8-14 year olds report having online chores including sharing pictures with relatives (38%) and getting driving directions DIGITAL = (35%). Teenage Source: GenBuY, October 8, 2009 Freedom

almost always check online Louise, 49 40% of total online spending came from $100K HH consumers, who increased shopping by 17% in Q4, 2008. Tracee, 51 Source: comScore, 2009

SHOPPING Moms with teens said the internet... 46% Helped me save money through access to easier price comparisons, coupons, and deal alerts. 41% Helped me become a smarter shopper; product reviews and ratings, blogs, and product information has helped me make more informed purchases. 21% Helped me make money through selling things I no longer need on sites like Craigslist, eBay, etc. DIGITAL MOMS Source: BIGresearch and Resource Interactive, August 2009

UNDERSTAND THE REWIRING  Listen with a new ear let go of truisms!  Seek to understand the clashing value systems  Identify new segments to serve or new ways to deliver value

UNDERSTAND THE REWIRING DECONSTRUCT THE (CO-) SHOPPING JOURNEY

TEENS: I WANT I NEED I WANT PRESENT SHARE DESIRE BUILD THE CASE NEGOTIATE ACQUIRE THE CASE & SWAP Search Text past friends emails for about promo Check Send meeting codes Lucky at phone pix Poll at mall Your to Mom friends Service from store on Check app Upload List new Facebook Mobile pix to item on Download wall Review SMS Facebook Craigslist film trailer items to iPhone Visit held in fan page Stream Google brand/store cart Check her Earmark fave TV site and build Check PayPal Wear to wish list game & Post magazine show on + brand store for Student take outfit on ad Hulu name clearance Account snaps Polyvore Post Q. on Say yes Discuss on Bill Ratings favorite Google upcoming My & mom Check item reviews blog Assign gift cards Parents Check out more comparison Visit the shopping web chores in shopping cart site exchange sites for $ MOMS: SELF- EVALUATE COORDINAT OBSERVE DIFFUSE NEGOTIATE E PURCHASE EDUCATE RATIONALE & RE-ARM

DECONSTRUCT THE (CO-) SHOPPING JOURNEY  Create new hooks that support needs-based shopping and teens' fact-finding zeal  Allow moms and teens to shop together without being together  Look for ways to help moms help teens become financially responsible

UNDERSTAND THE REWIRING DECONSTRUCT THE (CO-) SHOPPING JOURNEY INNOVATE YOUR WAY OUT

TEENS are impressively savvy MOMS want to feel smart with their OWN money about how they maximize because their shopping because transaction more fully. they have budget limitations. However, they need help However, shopping within a budget. for impulse.

TEENS MOMS Very receptive overall Very receptive overall Most indicated this saves time and makes it easier Some questions/concerns (and more fun) to shop within their budget details and in-store pick-up Some suggested it makes See the promise for their them smarter about money teens, as it would teach spending within their means; and ideal for holiday shopping

INNOVATE YOUR WAY OUT  Begin with an Insight Formula  Create rapid prototypes  Test, (fail quickly), learn, launch agility is key!

Enable social Monetize your Facebook page Add Raves to your shopping Ratings & Reviews Offer convenience through social media ??? Stretch budgets with collective gift giving

Use messaging to tap Use social networks to share into thrift mentality shipping codes or offers Make meaningful service changes based on feedback Autofill codesand special offers; deal expiration alerts Offer new utility/fun Shift the dialog Get more relevant at the shelf level

A crisis is a terrible thing to waste. Paul Romer, Stanford economist

www.resource.com Sponsored by: Special thanks to our research partners: by Kit Yarrow and Jayne O'Donnell

www.resource.com thank you. FOR MORE INFORMATION ABOUT RESOURCE INTERACTIVE, EMAIL: inquiry@resource.com

The New Domestic Economy

by Resource Interactive on Jan 20, 2010

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The New Domestic Economy — Presentation Transcript