Brand and price battle for attention
It’s a question as old as the cash register: What’s the key purchase motivator for the consumer — brand or price?
Everyone has his or her opinion. On top of it comes new research from Media, Pa.-based ICR, the international research and consulting firm, conducted on behalf of HCN, investigating how consumers are currently shopping various home improvement categories.
Short answer: It all depends on the category.
One thousand homeowners were interviewed and asked whether brand or price was more important when shopping various categories (see chart). The nationally representative sample yielded some interesting results. From a high-level perspective, brand was the winner in many categories with some exceptions. As usual however, the devil is in the details, and in some cases the overall results clouded some of the more specific insights when results were examined in more detail.
"One of the things this research pointed out was even in still challenging economic times, the home is considered an investment and consumers want to use the best brands they can afford," said Mark Delaney, VP client service at ICR. "Marketers should pay particular attention to how that sentiment varies by category and by demographics, such as age and income."
In categories such as kitchen appliances and power tools, brand was the clear winner as shown in the chart. However, in categories such as roofing materials and carpeting, price was the clear motivator.
There was little surprise in the roofing category. (Most homeowners would be hard-pressed to name roofing brands.) But the carpeting results were curious, according to Delaney.
"We had thought carpeting would score higher for brand than it did," he said. "This is perhaps illustrating the very cost-focused advertising by flooring retailers."
Age plays a significant role, according to the results. For example, the older the consumer, the more likely he or she will buy based on brand. In the case of exterior paint, 65-plus-year-old consumers bought based on brand 69% of the time — a full 10 percentage points higher than any other age group. In the case of carpeting, 43% of those in the 65-plus-age group bought based on brand — a full 13 percentage points higher than the next highest scoring age group of 35- to 44-year-olds.
"One theory certainly is that older consumers have more experience purchasing these categories," Delaney said, adding that buying a trusted brand is an age-old strategy of saving money in the long run.
Of course, gender roles weigh heavily on purchase decisions.
In the case of power tools, men are from planet "Brand," at 71% — and 57% for females. In the case of major kitchen appliances, however, men and women march in lock step, with 61% saying they favor brand over price, according to the data.
"This makes sense, given that kitchen appliances are one of the most widely advertised of the categories we examined — at least in terms of a mainstream audience. Apparently males and females both enjoy showing off their updated appliances to friends and neighbors," Delaney said.
ICR is an international consulting firm based in Media, Pa. It specializes in sectors, including home and home remodeling, and consumer package goods.
Preparing for the Affordable Care Act, and ‘the new norm’
Even before her hour-long presentation at the Do it Best May Market on the Affordable Care Act (ACA), Annette Bechtold was questioned about its potential impact on hardware retailers.
It happens all the time to Bechtold, senior VP regulatory affairs and reform initiatives for Digital Insurance.
"I laugh when I’m told ‘you have an hour,’" Bechtold said about her presentation, "Preparing for Health Care Reform in 2014, What Employees Need to Know." "We could spend a day on it."
That’s because the implications of the 2014 ACA requirements are as immense as they are complicated — so much so that many business owners have trouble wrapping their heads around it.
Bechtold said the industry — not just home improvement stores — has preferred to ignore ACA rather than prepare for what she called "the new norm." She noted, "A lot of employers have been asleep on this issue, hoping it would just go away. Recent statistics show the majority of employers haven’t adequately prepared to meet the requirements, and less than 40% have developed a clear strategy for implementation."
Some key terms businesses should be familiar with:
Affordable Insurance Exchange
Also known as the health insurance "Marketplace," the Affordable Insurance Exchange is a new transparent, competitive insurance marketplace where individuals and small businesses can purchase affordable and qualified health benefit plans. The Marketplace for small employers, known as the Small Business Health Options Program (SHOP), and the Individual Marketplace for consumers and those who are self-employed, will open in all states Jan. 1, 2014. Enrollment begins Oct. 1, 2013.
Employer Shared Responsibility
Employers of a certain size will be subject to the Employer Shared Responsibility provision of the law. Beginning in 2014, business owners with at least 50 full-time or full-time equivalent (FTE) employees that do not offer health coverage to their full-time employees may be subject to a shared responsibility payment (i.e., fine) under the healthcare law.
Bechtold said that while many hardware stores staff fewer than 50 FTEs, owners should be aware of the calculation methods used. An FTE provides 30 hours or more of weekly service, or 130 hours if using a monthly standard. For example, if a company hires 38 full-timers and 25 part-timers who work 12 to 24 hours per week, the equivalent FTE calculation over a 12-month period would be 50.1, putting the company in a large employer class, and thus subject to the Employer Shared Responsibility provision.
Small Business Health Care Tax Credits
The ACA offers tax credits for eligible small businesses that choose to provide insurance to their employees for the first time, or maintain the coverage they already have. To qualify for a small business healthcare tax credit of up to 35%, a business must have fewer than 25 FTEs, pay average annual wages below $50,000, and contribute 50% or more toward employees’ self-only health insurance premiums. In 2014, this tax credit goes up to 50% and is available to qualified small businesses that purchase coverage in the SHOP Marketplace.
Another tricky issue is that of "variable hour employees," Bechtold told the Do it Best group. Under the new guidance, an employee is considered variable-hour if, at date of hire, it cannot be determined that the employee would be expected to work at least 30 hours per week on average. An example would be a retail employee hired to work full time during the holiday season, but who is reasonably expected to work only part time (less than 30 hours) afterwards. "It can be a big dilemma if you don’t know how many hours they will work in a given year," Bechtold said.
She noted that while smaller employers are exempt from the health insurance mandate, some might still want to offer coverage to be competitive in the marketplace and to attract and retain talent.
Bob Taylor, CEO of Do It Best, had mixed emotions about the strong showing at Bechtold’s session. "I’m glad we’re able to provide that resource, and I’m glad that members saw it as an informational opportunity," he said. "But, the reality is, that’s not a session that we should have to be presenting. It’s unfortunate that that’s a distraction from so many members’ businesses and an opportunity to increase their profits, and they have to be distracted by that."
Expectations cool down (in spots) for July
Temperatures in July 2013 will be much cooler than last year across the North Central United States, and retailers are going to feel the impact.
That’s part of the forecast from Bethlehem, Pa.-based Weather Trends International.
While temperatures frequently crested the 100-degree mark last year, temperatures will be even warmer than last year in the South and along the West Coast.
In the East Coast, residents can expect weather that’s warmer than normal, but cooler than a year ago, according to the Weather Trends forecast.
Showers and storms will be more frequent across the Plains this year, easing drought concerns. The trend will also increase the need for cleanup categories to handle any subsequent wind damage and flash flooding.
Cooler weather in the North Central states is expected to boost year-over-year outdoor categories, as extreme heat last year drove more consumers indoors into climate-controlled areas — as opposed to spending time on their decks and patios.
Tropical activity will be subdued for much of the month of July. However, at the end of the month the odds increase dramatically for at least one storm to form. The highest probability of landfall lies somewhere from Florida to New Orleans. The most likely cause of damage will be flooding, as storms in July tend to stall over land, slowly depositing rain.
Recommendation for Southern retailers in the South: Preposition cleanup supplies, such as tarps, plywood, bleach, mops and buckets.