Five hot markets

Jun 01, 1998 9:30 PM  By

With talk of the Internet and the year 2000 computer problem already abounding, some analysts predict that consumers will become overloaded with techno-babble. By 2001, they say, buyers will begin seeking refuge in low-tech merchandise-which suggests good times ahead for catalogers of home decor, nostalgia-themed gifts, and apparel.

Not that sales of computers will grind to a halt. That category is also pegged to continue thriving in 2001, as is the teen products market, thanks largely to demographic changes.

Home decor “In 2001, I see more of a ‘back to basics’ approach, with people fixing up their homes,” says Callie Decoster, vice president of catalog brokerage for list company The Millard Group. “People seem to be spending more time at home these days, and I expect the trend to continue.”

Indeed, nearly all industry professionals interviewed agree that home decor is the market to watch in 2001, because as the baby boomers get older, they’ll spend more of their time at home. True, the market has been lucrative since the recession of the early 1990s, when people entertained at home to save money. But even though the economy has since picked up, people still view their homes as their castles.

“The use of the home and the interest in it are increasing,” says Donald Steiner, vice chairman of $200 million-plus International Cornerstone Group, whose six catalogs include home products titles Frontgate and Ballard Designs. Indeed, according to American Demographics magazine, consumers will spend 5.5% more on home furnishings in 2000 than they did in 1995.

Which suits Christopher Bradley, president/CEO of $20 million bedding catalog Cuddledown of Maine, just fine. “We’ll continue to take a lifestyle approach to our customers and service their lifestyle needs,” he says. Bradley expects that by 2001, Cuddledown of Maine will be doing so by expanding into furniture, specifically high-end beds.

Nostalgia-themed gifts “The nostalgia market is a backlash against all the technology that’s happening,” says Andrea Lawson Gray of San Francisco-based Aesthetics Marketing. And John Ollmann, general merchandise manager for gifts catalogs Signals and Circa, published by $190 million Rivertown Trading Co., cites the Signals catalog as proof that consumers do yearn for nostalgia. The title, which launched in April ’96 and sells such items as 1920s-style posters, now has the highest average order size of any Rivertown catalog.

Tim Loretan, divisional vice president of Itasca, IL-based Enesco, a $500 million manufacturer/cataloger of collectibles, says the nostalgia market will be fueled by a growing number of baby boomers looking back to a simpler time. “The nostalgia market and its related products have done very well for us, and I expect that trend to continue.”

Apparel Hingham, MA-based cataloger DM Management has lofty goals for the future. By the end of the year, the $135 million parent of women’s apparel titles J. Jill and Nicole Summers plans on opening a 440,000-sq.-ft. facility in New Hampshire that’s large enough to accommodate a $500 million operation, which is where CEO Gordon Cooke wants to be in 2000.

Given the rise in apparel spending, Cooke may well meet his goal. According to New York-based market research firm NPD Group, consumers bought $14.3 billion worth of apparel from catalogs in 1997, up 13% from the previous year. In all, 8.4% of U.S. clothing sales came from catalogs.

Dan Davis, vice president of catalog merchandising for Redmond, WA-based cataloger/retailer Eddie Bauer, credits much of the growth in apparel, as well as in other merchandise areas, to the simplicity of shopping by mail. And he expects such simplicity to appeal to consumers in 2001 at least as much as it does to shoppers today.

“We have to simplify our shoppers’ experience for the customers going forward,” Davis says, “because customers will no longer have time to shop as much.”

Teen products According to U.S. Census data, a whopping 4 million children will turn 12 every year for the next decade. The so-called echo boom-the children of the baby boomers-will be even larger than the baby boom, which had been the largest generation in history (see “Your 21st-century customer,” cover).

“We’ve barely scratched the surface” of this market, says Stephen Kahn, president/ CEO of teenage apparel and home accessories cataloger Delia’s, whose annual sales zoomed from $5 million in 1995 to more than $100 million last year.

If competition is the sincerest form of flattery, Delia’s must be elated. “The success of Delia’s has attracted several new catalog competitors, such as retailer Wet Seal and Fulcrum Direct’s Zoe,” says Nick Holland of Ulin and Holland, a Boston-based investment banking firm.

But Kahn doesn’t appear to be looking over his shoulder at the competition. “We are staking out territory on the Web,” he says-a savvy move, given teens’ familiarity with the Internet. “We have a database with more than 4 million names, and we’re focused on data mining and learning everything we can about our customers.”

Computers Similar to the teen market, the computer/high-tech market has been marked by rapid growth and high expectations. According to San Jose, CA-based market research firm Dataquest, mail order companies, including Internet marketers, accounted for nearly 20% of all PC unit sales in the U.S. last year.

For catalogers such as $12.3 billion Dell Computers and $6.3 billion Gateway 2000 (which is changing its name to “Gateway” in time for the millennium), their fate rests largely on customer retention, says Victor Hunter, president of Milwaukee consultancy Hunter Business Direct. “Companies like Dell and Gateway will be staffing up to provide increased service, as the number of resellers in the marketplace will triple by 2001,” he says.

Austin, TX-based Dell is growing more than twice as fast as any of its competitors. Sales have soared from $3.4 billion to $12.3 billion in just three years, and the company says it sells nearly $4 million worth of computers a day via the Internet, compared to $1 million a day last year. To keep its huge customer base, service is “definitely something we are going to focus on,” says Dell spokeswoman Libba Letton. “One of the ways we hope to gain market share is by retaining the business we have, because if we are the single point of contact, we are better able to fulfill our customers’ needs and expectations.”