Friday, June 15, 2012

Smells Great Around Here: On Demand

This post is brought to you by this spring's general and local trend of a year-over-year decline in retail sales, which is making it hard for me to enjoy the perhaps-excessive benefits that I've finally qualified for, given the risk of a seniority bump due to "cost cutting measures in a challenging retail market." 

So, anyway, the title is a reference to Nirvana's 1991 "Smells Like Teen Spirit," implying that there's not that many teenagers around here. You may have heard of the song. In fact, I'm guessing to the point where I ought not play it straight.

But it's a void in my mind. I'm not sure why, because knowing stuff is hard. That's even true of what should be the most obvious thing that you can know, such as what your customers want. 

Example: what's the most popular variety of Arizona Ice Tea?

Actual field research: 

Clearly the Fruit Punch flavour is the most popular, or this displayer wouldn't be stuffed with it, right? Well, no: that one can of Ginseng and Honey flavour on the bottom shelf centre is the most popular. That's why it's all sold out. That's why someone (who will be getting into trouble for violating the schematic soon) has stuffed the displayer with excess of the least popular product in the line.

I am a little at a loss at how the marketing rep is supposed to cut through the noise, though. Once all the popular product has sold out, or is hidden in the back because the display space is full of cruft, all the sales numbers will be for Fruit Punch. How can you tell that it is the least popular item in the line when it's the only one that's selling because it's the least popular?

Are you thinking that that's pretty crazy? It is. I honestly don't think that Coca-Cola Canada is fooled. This is just something that happens, mainly because the pack size is so big.
Best Merchandising End Ever!

But it sure as heck can happen. Frito-Lay is no Coca-Cola, and check out the display above. Shareholder alert! This is not a company that knows what it's doing. The reps keep sending in as many of those orange Bite-Sized Rounds and Artisan Tostitos as they do of the Multigrain on the top shelf. That's why this display is full of them. Because they're not selling, and this is just plain bad marketing. Frito-Lay is having trouble knowing stuff.

In theory, it's not hard to cut through this kind of signal distortion. All it takes is market research, and that's done by people with huge, throbbing brains that never miss anything. I've never known anyone like that working in retail (at a responsible level), I'm sure they're out there. They, are, however, falling down on their jobs, if Kickstarter is any indication. Take this little marketing fail. Rich Burlew makes some kind of living with his self published "Order of the Stick" Dungeons & Dragons-themed comic strips. He goes on Kickstarter to finance some reprints. Thirty days later, almost fifteen thousand people signed up to buy a million dollars worth of product. Hey, publishers! You're dumb!

Now, I don't know. Maybe Burlew has a philosophical objection to publishers. Maybe there isn't a reader at Andrews McMeel kicking himself in the rear right now. But with the number of similar episodes multiplying on Kickstarter I'm losing some of my naive faith in the marketing profession.

That being said, you can only go to the pitch meeting with the information you have, and that's the point of this post. Thanks to Census Canada's indefatigable work on the national census taken in 2011, we have, for just a few days now, known some very interesting things about the way that the Canadian retail market is shaping up in the summer of 2012. I've introduced a "Speculation" tag on this blog for this post not because I love doing that speculating stuff, but because this is a classic example of speculation. I don't know, and we cannot know until the age cohort breakdowns for the US 2012 Census are released, whether the same trends hold true south of the 49th as they do in Canada. I'm speculating that they do, and riffing on that.

In sorting out the numbers, it's a little hard to see what's new and relevant here, believe me. The Canadian press is full of stories about the country's rising senior population, which is certainly a Very Important Fact, but not exactly news.

Just for a change, though, I'm going to bold the lede instead of burying it: 

The number of children aged 4 and under increased 11 per cent, the highest growth rate for that age group since the latter half of the baby boom between 1956 and 1961. It marks the first time in 50 years that Canada has seen an increase in small children in every province and territory.

(This is cut-and-pasted from the Winnipeg Free Press, although the Canadian press in general is not exactly doing a very good job of getting past straight lifts out of the Census press releases. That's why I had to cut-and-paste this out of a completely different part of this not-very-long story:

....a faster rate of growth than that for children aged 14 and under (0.5 per cent) and people aged 15 to 64 (5.7 per cent).

 Come again? To directly quote the Canada Census:

The population of children aged 4 and under increased 11.0% between 2006 and 2011. This is the highest growth rate for this age group since the 1956 to 1961 period, during the baby boom.

I hope that my tone communicates an element of frustration. I've been pushing Google around all morning trying to get at these quotes (and find the original axis labelling on the scraped Census graph posted above). Look, National Press of Canada: we've had a pretty good idea about how many Canadian 65 year-olds there would be this year since, well, 1947. There's no-one to blame but you if you get run over by that train, is all I'm saying.

The number of kids born last year? That's news. That's big news. In fact, the number of kids born since the last census is news. "News" being here defined as stuff that we didn't know before, and might help us understand the world around us. As opposed to "stuff that I can type real fast without thinking. There, my story's done, time to shoot off another resume." 

Here's the point: Get this: Canada's overall population grew by 5.9%: the working age population grew by 5.7%; the 0-15 age group grew by 0.5%; and the 0-4 population group grew by 11%. David Foot, who is admittedly not in the business of giving away his insights, points out that this is pretty much to be expected, as the putative parent generation of the 2006+ cohort is the "echo" generation. That is, they're the grandchildren of the baby boomers, and we can expect this  attenuated baby boom to extend through 2020.  

What does this mean for retailers? That we're in the early stages of a decade-long bust in the teenager population, and facing the earliest stages of a surge in babies and small children. And just as the profile of the population is changing, so will the market. 

Notice, too, that the growth numbers imply that the 5--15 age group grew by significantly less than 0.5%. I wouldn't be surprised if the overall weakness in retail sales specifically reflects a shortage of teenagers as well as an increase in babies. Teenagers make awesome impulse shoppers (maybe that's the point of the song?), meanwhile, new parents are likely taking a financial hit from child care costs and spending less on impulse items. On the bright side, they're spending more on family care products, or at least they would be if we were managing to stay on top of things, which we're not, on account of cost cutting. 

I'm not saying that the ongoing cost cutting in retail is a mistake, in its own terms. If sales are falling, there's not much that can be done by companies that need to show a profit at the end of the day. It's just that, well, you can only cut costs so far before you cease to be, and that laid-off people buy less stuff. *

 I'm also not saying that the economy is going to be saved by a surge of babies. It's just not that big. The low-growth population projection for Canada (page 86, here) shows the country's population basically stabilising at 42 million, up from 34 million, in 2051. That's a pretty low rate of growth in comparison with historic trends, and a closer look shows that immigration, which has been consistently under its 240,000/year target for years now has a magical reversion to the target number in 2031. The usual lot of alarmists warn that extending these trends (or, rather, 2003 trends, since this is another old news story) out to 2100 implies a Canadian population of 12 million. 

Twelve million! Check out the slow, upward movement of the bulge of the Canadian age pyramid

Every time it moves, more women move out of the "can have babies" part of the blue splotch. We get closer to the worst case future. Every cohort that moves through the cutoff point is another cohort contributing to the future baby bust. This has got to change, and the sooner the better.

But that's for the future, or maybe the present, if the birth rate continues to rise, as it probably won't. Is retail ready for that? No, it's not. And why not? Because the population of teenagers has only grown 0.5%. Remember that factoid? Target is coming to this market next year, and I have a quote kicking around from a spokesperson about how they're not going to take up the collective agreement in place at the  locations they've bought because unions "aren't part of their culture." Pro tip for Target: we tried hiring 500 young workers last year, and we failed. You're looking for 3000? Good luck maintaining the purity of your corporate culture. 

Or maybe Target will make it, because even though there's no teenagers to hire around here, it somehow manages not to be a employee's market right now. The reason for that is that when we lay people off to cut costs, we lay off, or cut the  hours of, teenagers! Because they have low seniority, especially compared to our staff, who are all really old. Labour problem solved.

Except that incredibly old, layoff-proof labour forces don't last forever. They retire.

So if all our workforce is old, and there's no young folk to hire, and you keep laying off the young folk you do hire, who the fuck is going to be doing the work in a few years? The answer, as far as I can tell, is "nobody." 

You know that that can't be good for sales. At the same time, it's not like we can afford to have a plan. As I've said, this cost cutting isn't coming out of nowhere.

This is not a problem for retail to fix. This is the kind of thing that you look to government to fix. Well? Like I said, if you get hit by a train that you've been watching since 1947, you have no-one to blame but yourself.

*OMG, I just realised that deflation is a positive feedback cycle! I should email my M.P. so that she can do something about it! (Like maybe grand stand against legislation increasing in the Canadian retirement age by two years.# No, wait, that's not it.)

#The two year increase starts with my birth cohort. I feel so special! Again. (Check out Table 1A in the appendix.$

$For my MA thesis, I spent a great deal of time with the Hertz/Schlick commentary on Helmholtz, which, besides being somewhat misguided, had five levels of footnotes. I've always wanted to try that. 

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