The Just-in-Time Consumer

By ELLEN BYRON

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When the economy sank two years ago, Rebecca Seabern realized she could shrink her grocery bill just by eating into her crammed kitchen pantry.

"I had eight boxes of lasagna in there and a year's worth of paper towels," says Ms. Seabern, a 31-year-old accountant and married mother of two in San Antonio. Today, Ms. Seabern still has her job, but her antipathy to hoarding hasn't changed. "I've stopped purchasing things just to have them on hand," she says, preferring to make bigger mortgage payments instead.

The Great Depression replaced a spendthrift culture with a generation of frugal savers. The recent recession, too, has left in its wake a deeply changed shopper: the just-in-time consumer.

For over two decades, Americans bought big, bought more and stocked up, confident that bulk shopping, often on credit, provided the best value for their money. But the long recession—with its high unemployment, plummeting home values and depleted savings accounts—altered the way many people think about the future. Manufacturers and retailers report that people are buying less, more frequently, and are determined to keep cash on hand.

"Consumers are saying, 'I'm going to buy what I need for a specific period of time,' rather than loading up and buying two or three extra units just because they can get a good price on it," says Richard Wolford, CEO of Del Monte Foods Co. He calls the phenomenon "need it now."

Executives peddling wares from canned goods to cashmere say the shift in consumption habits is prompting them to change how they produce, package, price and deliver their goods.

Food and household-product manufacturers, including Del Monte and Kimberly-Clark Corp., are rolling out smaller package sizes for consumers who would rather buy a week's worth of toilet paper or dog food than stock up for a month.

Grocers are trying to accommodate smaller but more frequent shopping trips. Supervalu Inc. is changing displays more often.BJ's Wholesale Club Inc. is going after a new clientele of families and individuals by selling eggs and margarine in smaller lots.

Apparel makers and retailers such as Elie Tahari and Net-a-Porter.com are changing their production and selling schedules for shoppers who increasingly want to buy their clothes in season rather than ahead of time.

The new buying behavior is expected to be on full display this holiday season, which kicks into high gear the day after Thanksgiving, known as "Black Friday."

Shoppers are further behind in holiday shopping compared with previous years, with just 15.7% of their holiday shopping completed as of the week ended Nov. 14, compared with 20.5% completed during the same period last year and 28.3% in 2008, according to trade group International Council of Shopping Centers.

"There's going to be a pause before purchase: Consumers will ask themselves, 'Do I really need this, can I really afford this?'" says Thom Blischok, president of global innovation and strategy for SymphonyIRI Group, a market research firm. He expects a U-shaped purchase cycle, with big sales at the start and the end of this holiday season. "If I shop on Black Friday, I'll get a helluva deal, and if I wait a couple of weeks, I'm going to get another helluva deal."

So far, the impact of just-in-time buying on the corporate bottom line is mixed. Smaller unit sizes, for example, generally mean higher prices—and therefore higher profit margins for manufacturers.

Still, the phenomenon is so new it hasn't shown up broadly in earnings. A Kimberly-Clark spokeswoman notes that potentially higher profits on smaller packages can be offset by higher manufacturing costs.

And companies are still reeling from lower sales volumes that began in 2008 with what some dub "pantry deloading." Over the past two years, the number of items kept in American pantries has fallen about 20%, according to a recent SymphonyIRI survey. Consumers are also cutting back on the range of goods they stock.The average household had 369 unique items in its medicine cabinets, pantries and cosmetics bags this year, compared with 404 in 2006, the survey found.

Procter & Gamble Co. has been tracking consumers' pantries since mid-2008, believing them to be a reliable gauge of how the recession has changed shoppers' behavior. About one-third of consumers are changing their pantry levels, P&G's research indicates, with about 75% of those cutting back on inventory.

P&G expects consumers' leaner, pickier shopping habits to last. "There's almost a confidence and pride in the ability to make tailored choices for themselves," says Joan Lewis, P&G's global consumer and market knowledge officer.

The new shopping behavior is having a big effect on club stores, the ultimate pantry-filling destinations, which offer low prices but require bulk purchases. Some, including Costco Wholesale Corp. and BJ's, have reported increased shopping-trip frequency and decreased transaction sizes. To adjust, some discounters are rethinking their businesses.

BJ's, based in Natick, Mass., began courting new customers two years ago to expand its membership, including smaller households and empty-nesters. It began shrinking its package sizes, in part to lure shoppers more interested in weekly purchases than monthly stock-ups. Now, the chain of 191 stores sells cartons of 18 eggs, instead of only five-dozen egg packages. It offers two containers of margarine of nearly two pounds each instead of only five-pound buckets.

The margarine change alone resulted in 46% more members who bought margarine, the company says. BJ's credits the shift to smaller package sizes with driving an increase in membership fees of 6% in the quarter ended Oct. 30.

"This concept that club stores are only for the stock-up visit—I don't think that's true anymore," says Bruce Graham, BJ's senior vice president of food.

BJ's is trying to make its stores more attractive and change promoted items to encourage more frequent visits. For example, it is including more seasonal products into its wall of featured items at the entrance of the store, including pumpkins, fresh flowers and amaryllis bulbs.

The changes at retail are often prompted by manufacturers. This summer, Del Monte began reducing the number of canned fruits and vegetables in multi-packs sold at club stores—and advising other retailers to reduce the number of cans required to qualify for a discount. The company realized consumers were more worried about overall cost, even if it meant a higher cost per can.

"There is a much lower incidence of pantry stock-up shopping trips and a much increased incidence of quick trips," says Del Monte's Mr. Wolford. Del Monte won't comment on whether smaller package sizes have boosted its bottom line. Analysts say profit margins could rise slightly over time. But the bigger advantage may be capturing a sale from an otherwise-wary consumer.

With the smaller package size, "you don't lose sales and you stem the profit erosion," says Bill Chappell, an analyst at SunTrust Robinson Humphrey. "But you don't necessarily recoup" the lost sales and profits.

Just-in-time consumption is also disrupting long-established purchase cycles, including the annual back-to-school shopping ritual. Normally, demand for school supplies begins in early July and runs through mid-August. But this year, the prime season shifted to late July through September, says Mark Ketchum, chief executive of Newell Rubbermaid Inc. He says the company's Paper Mate and Uni-ball pens and Sharpie markers sold well, albeit three to four weeks later than normal.

Delayed purchases affected the entire pen market. "The total market waited until later in the year and seemed to shift behind a shopper desire not to make a mistake," Mr. Ketchum says. He adds that the premium-pen category, thanks to new-product introductions, grew in sales at the expense of the low-end market.

As a result of delayed buying, Newell overhauled its manufacturing process and simplified its product portfolio. This will enable it to better handle last-minute surges in demand for popular Christmas gifts like its Irwin pliers and Calphalon cookware. "It's better for our inventory situation and our manufacturing to be able to produce and ship in a more even pattern, rather than all at once," Mr. Ketchum says.

Shoppers of high-end discretionary products are shifting to just-in-time buying as well.

Kathi Toll, a 49-year-old business consultant in Chicago, used to enjoy browsing beauty counters and indulging in new products as a pick-me-up. Last year she decided to use up what she already had—piles of La Mer, Clinique and Estée Lauder products—as a way to save cash while she pursues an advanced degree. "I have boatloads of this stuff, and it's time I used it up," she says.

Beauty brands are taking note. Before the economic downturn, loyal users of luxury skin-care line La Prairie used to buy multiple bottles of skin creams at a time, even though the products can top $500 apiece. But two years ago, "they started waiting until their jar was empty before they bought another, about every 90 to 120 days," says Lynne Florio, president at La Prairie, owned by Beiersdorf AG.

Noting that some consumers seemed to want to buy even less at a time, last year La Prairie began selling half-sizes of moisturizers, eye creams and serums. The smaller sizes, which cost about 20% less than full-size counterparts and are only sold for limited periods each year, help draw new and longtime users to the line when they're not ready to invest $1,000 or more on the complete regimen.

"Did we lose customers during the economic crisis? No," says Ms. Florio. "They're just coming more often and buying a little less replenishment at a time." La Prairie's business year-to-date is up compared with 2009, and the company says it expects to see a gain next year.

Shoppers have long groused that the clothing and shoes in stores are often out of step with the weather outside. Now, they're protesting with their wallets. "It was around April of this year when we really started to realize that consumers are willing to spend cautiously on things they need to have, but only when they need it," says Mike Berry, director of industry research for MasterCard Advisors SpendingPulse, a unit of MasterCard Inc.

From 2003 to 2008, women's apparel sales tended to peak in September, Mr. Berry notes. "When the economy is sailing high...people buy new fashions as soon as they're on the shelf, rather than buying a sweater to stay warm," Mr. Berry says.

But this fall, that habit changed. In September, when new fall fashions hit stores, sales of women's apparel fell 0.2% compared with the year before, while footwear was up just 0.7% according to MasterCard. By October, when cooler weather hit, apparel and footwear sales rose 5.3% and 5.9%, respectively. Markdowns didn't play a role in the uptick, Mr. Berry says.

To better accommodate women who want to buy now, wear now, Net-a-Porter has changed tack: It stopped heavily discounting seasonal items like boots and coats a few months after they shipped—as many other retailers do—to make sure it has goods in stock to match the weather. "There's the challenge that other retailers are marking those items down, but it's a risk we're willing to take," says Holli Rogers, Net-a-Porter's buying director.

To maintain a steady supply of new fashions throughout each season, Net-a-Porter has been inking deals with designers for exclusive collections with later delivery dates. This summer, British label Issa will offer a line of bright, summery lace dresses on Net-a-Porter in April or May, instead of the typical delivery in February. "You want to make these purchases when you need it, not way in advance," Ms. Rogers says.

Olfactory Marketing Perspectives

Corporate Scent (March 17th, 2010)

Retail Scent Marketing on Today Tonight (November 10th, 2010)

Allan McRitchie, British perfumer and marketing consultant, speaks about perfume in consumer products. (September 9th, 2010)

Is Coffee Losing Steam Among the Next Generation?

By JANET MORRISSEY

Monday, Nov. 15, 2010

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When 24-year-old Alex Stein is looking for a morning pick-me-up, he doesn't reach for a cup of cappuccino as his parents Len and Berdie did daily while he was growing up in Westchester County, New York — he grabs an energy drink. Coffee just doesn't cut it with him. "The taste is just so bitter — I couldn't have more than a couple of sips of it without needing to wash it down with water," he says.

A recent report from Mintel, a market-research firm, predicts that Stein's generation may become coffee-resistant unless marketers find ways to make coffee drinks relevant for kids under the age of 25. Demand for coffee remains robust among people aged 45 and over thanks to older customers, who will likely drive coffee's sales growth over the next five years, the report said.

However, the habits of the younger demographic make the industry's longer-term outlook murkier. According to the report, only 27% of people in the 18-to-24 age group consume coffee daily, with many citing taste, health concerns and a penchant for sweet energy drinks as factors keeping them away from coffee. By contrast, 75% of those ages 45 to 54 and 80% of those 55 to 64 have a daily cup of joe. Only 28% of the younger group said they liked the taste of coffee on its own, compared with 53% of 45-to-64-year-olds and 61% of those 65 and older. And members of the younger demographic who do drink coffee tend to visit cafés, where they can find sweeter-tasting blends like frappuccinos for their caffeine fix.

Stein discovered energy drinks at the University of Cincinnati after he spotted a blue-and-silver Mini with a giant Red Bull can on its hatch trolling around campus, offering free samples. After trying Red Bull, an energy drink that contains taurine and caffeine, and other such beverages, he's never looked back. Today, as a working architect in Manhattan, Stein says he still reaches for energy drinks — never coffee.

Matt Yemma, a 26-year-old public-relations consultant, started swigging energy drinks while in college. "I believe the aggressive marketing of energy drinks such as Red Bull to the younger generation, mixed with the lousy taste and feeling that coffee gives me, is why I, and the younger generation, is gravitating away from drinking coffee," he says. "Even nowadays, if I'm really flagging in the afternoon, I'll just rip a Red Bull."

Should the coffee industry get anxious about these findings? "The concern is real," says Bill Patterson, a senior analyst at Mintel. He dismisses suggestions that the trend is a youth fad that kids will outgrow. "The older generations that now drink coffee were brought up on coffee, they always drank coffee, and they've taken that coffee-drinking habit all the way through their life," says Patterson. "I do not see the younger generation reaching middle age — late 30s and beyond — and going, 'Oh, I'm going to start drinking coffee now.' The mold has been broken."

Patterson suggests that coffee companies consider expanding into the energy-drink sector similar to the way Coca-Cola successfully moved into bottled water and noncarbonated drinks when competition began diluting sales of Coke. Industry experts speculate that coffee companies could turn the tide if they start launching aggressive marketing campaigns targeting younger people through social networks, coffee bars and high-profile ads that tout coffee's energy and mental-stimulation benefits.

Coffee is the alpha energy drink, and yet it's not being promoted that way, says John Glass, a managing director at Morgan Stanley. "Over the last five to 10 years, you've seen the explosion of Red Bull and other energy drinks because they've become so big and so aligned with action sports and stuff that's popular with the younger 20-something generation," says Yemma. "You don't see much marketing in the coffee sector."

Analysts say the coffee industry also needs to focus its marketing on specialty and gourmet coffees. "Starbucks paved the way" for this trend by introducing espresso-based drinks enriched and sweetened with cream, steamed milk, caramel syrup and other additives, says Mitchell Pinheiro, an analyst at Janney Montgomery Scott LLC. "They upscaled the coffee," says Harry Balzer, a senior executive at NDP Group, a market-research firm. Demand for common coffees is waning, says Pinheiro.

Coffee has to party more too. Irma Zandl, president of Zandl Group, a New York consumer-research group, notes that it was Red Bull's introduction into the bar scene, where people would order the drink with vodka, that first attracted consumers to it. (And exposed the company to criticism.) Likewise, "the best way to get them to consider buying a coffee machine and buying coffee is if they've had that experience in a fabulous coffee bar," she says. Zandl cites the Stumptown café in the Ace Hotel in New York City as an example.

Young people will dictate the coffee industry's long-term survival. "The baby boomers are getting older now," and the generation of 18-to-24-year-olds will likely be larger than the boomers as they grow up, says Glass. "Any long-term vision of any consumer business probably has to figure out how to appeal to that group." That could keep some coffee marketers awake at night, even if they're drinking decaf.

But Will It Make You Happy?

August 7, 2010

By STEPHANIE ROSENBLOOM

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SHE had so much.

A two-bedroom apartment. Two cars. Enough wedding china to serve two dozen people.

Yet Tammy Strobel wasn’t happy. Working as a project manager with an investment management firm in Davis, Calif., and making about $40,000 a year, she was, as she put it, caught in the “work-spend treadmill.”

So one day she stepped off.

Inspired by books and blog entries about living simply, Ms. Strobel and her husband, Logan Smith, both 31, began donating some of their belongings to charity. As the months passed, out went stacks of sweaters, shoes, books, pots and pans, even the television after a trial separation during which it was relegated to a closet. Eventually, they got rid of their cars, too. Emboldened by a Web site that challenges consumers to live with just 100 personal items, Ms. Strobel winnowed down her wardrobe and toiletries to precisely that number.

Her mother called her crazy.

Today, three years after Ms. Strobel and Mr. Smith began downsizing, they live in Portland, Ore., in a spare, 400-square-foot studio with a nice-sized kitchen. Mr. Smith is completing a doctorate in physiology; Ms. Strobel happily works from home as a Web designer and freelance writer. She owns four plates, three pairs of shoes and two pots. With Mr. Smith in his final weeks of school, Ms. Strobel’s income of about $24,000 a year covers their bills. They are still car-free but have bikes. One other thing they no longer have: $30,000 of debt.

Ms. Strobel’s mother is impressed. Now the couple have money to travel and to contribute to the education funds of nieces and nephews. And because their debt is paid off, Ms. Strobel works fewer hours, giving her time to be outdoors, and to volunteer, which she does about four hours a week for a nonprofit outreach program called LivingYoga.

“The idea that you need to go bigger to be happy is false,” she says. “I really believe that the acquisition of material goods doesn’t bring about happiness.”

While Ms. Strobel and her husband overhauled their spending habits before the recession, legions of other consumers have since had to reconsider their own lifestyles, bringing a major shift in the nation’s consumption patterns.

“We’re moving from a conspicuous consumption — which is ‘buy without regard’ — to a calculated consumption,” says Marshal Cohen, an analyst at the NPD Group, the retailing research and consulting firm.

Amid weak job and housing markets, consumers are saving more and spending less than they have in decades, and industry professionals expect that trend to continue.Consumers saved 6.4 percent of their after-tax income in June, according to a new government report. Before the recession, the rate was 1 to 2 percent for many years. In June, consumer spending and personal incomes were essentially flat compared with May, suggesting that the American economy, as dependent as it is on shoppers opening their wallets and purses, isn’t likely to rebound anytime soon.

On the bright side, the practices that consumers have adopted in response to the economic crisis ultimately could — as a raft of new research suggests — make them happier. New studies of consumption and happiness show, for instance, that people are happier when they spend money on experiences instead of material objects, when they relish what they plan to buy long before they buy it, and when they stop trying to outdo the Joneses.

If consumers end up sticking with their newfound spending habits, some tactics that retailers and marketers began deploying during the recession could become lasting business strategies. Among those strategies are proffering merchandise that makes being at home more entertaining and trying to make consumers feel special by giving them access to exclusive events and more personal customer service.

While the current round of stinginess may simply be a response to the economic downturn, some analysts say consumers may also be permanently adjusting their spending based on what they’ve discovered about what truly makes them happy or fulfilled.

“This actually is a topic that hasn’t been researched very much until recently,” says Elizabeth W. Dunn, an associate professor in the psychology department at the University of British Columbia, who is at the forefront of research on consumption and happiness. “There’s massive literature on income and happiness. It’s amazing how little there is on how to spend your money.”

CONSPICUOUS consumption has been an object of fascination going back at least as far as 1899, when the economist Thorstein Veblen published “The Theory of the Leisure Class,” a book that analyzed, in part, how people spent their money in order to demonstrate their social status.

And it’s been a truism for eons that extra cash always makes life a little easier. Studies over the last few decades have shown that money, up to a certain point, makes people happier because it lets them meet basic needs. The latest round of research is, for lack of a better term, all about emotional efficiency: how to reap the most happiness for your dollar.

So just where does happiness reside for consumers? Scholars and researchers haven’t determined whether Armani will put a bigger smile on your face than Dolce & Gabbana. But they have found that our types of purchases, their size and frequency, and even the timing of the spending all affect long-term happiness.

One major finding is that spending money for an experience — concert tickets, French lessons, sushi-rolling classes, a hotel room in Monaco — produces longer-lasting satisfaction than spending money on plain old stuff.

“ ‘It’s better to go on a vacation than buy a new couch’ is basically the idea,” says Professor Dunn, summing up research by two fellow psychologists, Leaf Van Boven and Thomas Gilovich. Her own take on the subject is in a paper she wrote with colleagues at Harvard and the University of Virginia: “If Money Doesn’t Make You Happy Then You Probably Aren’t Spending It Right.” (The Journal of Consumer Psychology plans to publish it in a coming issue.)

Thomas DeLeire, an associate professor of public affairs, population, health and economics at the University of Wisconsin in Madison, recently published research examining nine major categories of consumption. He and Ariel Kalil of the University of Chicago discovered that the only category to be positively related to happiness was leisure: vacations, entertainment, sports and equipment like golf clubs and fishing poles.

Using data from a study by the National Institute on Aging, Professor DeLeire compared the happiness derived from different levels of spending to the happiness people get from being married. (Studies have shown that marriage increases happiness.)

“A $20,000 increase in spending on leisure was roughly equivalent to the happiness boost one gets from marriage,” he said, adding that spending on leisure activities appeared to make people less lonely and increased their interactions with others.

According to retailers and analysts, consumers have gravitated more toward experiences than possessions over the last couple of years, opting to use their extra cash for nights at home with family, watching movies and playing games — or for “staycations” in the backyard. Many retailing professionals think this is not a fad, but rather “the new normal.”

“I think many of these changes are permanent changes,” says Jennifer Black, president of the retailing research company Jennifer Black & Associates and a member of the Governor’s Council of Economic Advisors in Oregon. “I think people are realizing they don’t need what they had. They’re more interested in creating memories.”

She largely attributes this to baby boomers’ continuing concerns about the job market and their ability to send their children to college. While they will still spend, they will spend less, she said, having reset their priorities.

While it is unlikely that most consumers will downsize as much as Ms. Strobel did, many have been, well, happily surprised by the pleasures of living a little more simply. The Boston Consulting Group said in a June report that recession anxiety had prompted a “back-to-basics movement,” with things like home and family increasing in importance over the last two years, while things like luxury and status have declined.

“There’s been an emotional rebirth connected to acquiring things that’s really come out of this recession,” says Wendy Liebmann, chief executive of WSL Strategic Retail, a marketing consulting firm that works with manufacturers and retailers. “We hear people talking about the desire not to lose that — that connection, the moment, the family, the experience.”

Current research suggests that, unlike consumption of material goods, spending on leisure and services typically strengthens social bonds, which in turn helps amplify happiness. (Academics are already in broad agreement that there is a strong correlation between the quality of people’s relationships and their happiness; hence, anything that promotes stronger social bonds has a good chance of making us feel all warm and fuzzy.)

And the creation of complex, sophisticated relationships is a rare thing in the world. As Professor Dunn and her colleagues Daniel T. Gilbert and Timothy D. Wilson point out in their forthcoming paper, only termites, naked mole rats and certain insects like ants and bees construct social networks as complex as those of human beings. In that elite little club, humans are the only ones who shop.

AT the height of the recession in 2008, Wal-Mart Stores realized that consumers were “cocooning” — vacationing in their yards, eating more dinners at home, organizing family game nights. So it responded by grouping items in its stores that would turn any den into an at-home movie theater or transform a backyard into a slice of the Catskills. Wal-Mart wasn’t just selling barbecues and board games. It was selling experiences.

“We spend a lot of time listening to our customers,” says Amy Lester, a spokeswoman for Wal-Mart, “and know that they have a set amount to spend and need to juggle to meet that amount.”

One reason that paying for experiences gives us longer-lasting happiness is that we can reminisce about them, researchers say. That’s true for even the most middling of experiences. That trip to Rome during which you waited in endless lines, broke your camera and argued with your spouse will typically be airbrushed with “rosy recollection,” says Sonja Lyubomirsky, a psychology professor at the University of California, Riverside.

Professor Lyubomirsky has a grant from the National Institute of Mental Health to conduct research on the possibility of permanently increasing happiness. “Trips aren’t all perfect,” she notes, “but we remember them as perfect.”

Another reason that scholars contend that experiences provide a bigger pop than things is that they can’t be absorbed in one gulp — it takes more time to adapt to them and engage with them than it does to put on a new leather jacket or turn on that shiny flat-screen TV.

“We buy a new house, we get accustomed to it,” says Professor Lyubomirsky, who studies what psychologists call “hedonic adaptation,” a phenomenon in which people quickly become used to changes, great or terrible, in order to maintain a stable level of happiness.

Over time, that means the buzz from a new purchase is pushed toward the emotional norm.

“We stop getting pleasure from it,” she says.

And then, of course, we buy new things.

When Ed Diener, a psychology professor at the University of Illinois and a former president of the International Positive Psychology Association — which promotes the study of what lets people lead fulfilling lives — was house-hunting with his wife, they saw several homes with features they liked.

But unlike couples who choose a house because of its open floor plan, fancy kitchens, great light, or spacious bedrooms, Professor Diener arrived at his decision after considering hedonic-adaptation research.

“One home was close to hiking trails, making going hiking very easy,” he said in an e-mail. “Thinking about the research, I argued that the hiking trails could be a factor contributing to our happiness, and we should worry less about things like how pretty the kitchen floor is or whether the sinks are fancy. We bought the home near the hiking trail and it has been great, and we haven’t tired of this feature because we take a walk four or five days a week.”

Scholars have discovered that one way consumers combat hedonic adaptation is to buy many small pleasures instead of one big one. Instead of a new Jaguar, Professor Lyubomirsky advises, buy a massage once a week, have lots of fresh flowers delivered and make phone calls to friends in Europe. Instead of a two-week long vacation, take a few three-day weekends.

“We do adapt to the little things,” she says, “but because there’s so many, it will take longer.”

BEFORE credit cards and cellphones enabled consumers to have almost anything they wanted at any time, the experience of shopping was richer, says Ms. Liebmann of WSL Strategic Retail. “You saved for it, you anticipated it,” she says.

In other words, waiting for something and working hard to get it made it feel more valuable and more stimulating.

In fact, scholars have found that anticipation increases happiness. Considering buying an iPad? You might want to think about it as long as possible before taking one home. Likewise about a Caribbean escape: you’ll get more pleasure if you book a flight in advance than if you book it at the last minute.

Once upon a time, with roots that go back to medieval marketplaces featuring stalls that functioned as stores, shopping offered a way to connect socially, as Ms. Liebmann and others have pointed out. But over the last decade, retailing came to be about one thing: unbridled acquisition, epitomized by big-box stores where the mantra was “stack ’em high and let ’em fly” and online transactions that required no social interaction at all — you didn’t even have to leave your home.

The recession, however, may force retailers to become reacquainted with shopping’s historical roots.

“I think there’s a real opportunity in retail to be able to romance the experience again,” says Ms. Liebmann. “Retailers are going to have to work very hard to create that emotional feeling again. And it can’t just be ‘Here’s another thing to buy.’ It has to have a real sense of experience to it.”

Industry professionals say they have difficulty identifying any retailer that is managing to do this well today, with one notable exception: Apple, which offers an interactive retail experience, including classes.

Marie Driscoll, head of the retailing group at Standard & Poor’s, says chains have to adapt to new consumer preferences by offering better service, special events and access to designers. Analysts at the Boston Consulting Group advise that companies offer more affordable indulgences, like video games that provide an at-home workout for far less than the cost of a gym membership.

Mr. Cohen of the NPD Group says some companies are doing this. Best Buy is promoting its Geek Squad, promising shoppers before they buy that complicated electronic thingamajig that its employees will hold their hands through the installation process and beyond.

“Nowadays with the economic climate, customers definitely are going for a quality experience,” says Nick DeVita, a home entertainment adviser with the Geek Squad. “If they’re going to spend their money, they want to make sure it’s for the right thing, the right service.”

With competition for consumer dollars fiercer than it’s been in decades, retailers have had to make the shopping experience more compelling. Mr. Cohen says automakers are offering 30-day test drives, while some clothing stores are promising free personal shoppers. Malls are providing day care while parents shop. Even on the Web, retailers are connecting on customers on Facebook, Twitter and Foursquare, hoping to win their loyalty by offering discounts and invitations to special events.

FOR the last four years, Roko Belic, a Los Angeles filmmaker, has been traveling the world making a documentary called “Happy.” Since beginning work on the film, he has moved to a beach in Malibu from his house in the San Francisco suburbs.

San Francisco was nice, but he couldn’t surf there.

“I moved to a trailer park,” says Mr. Belic, “which is the first real community that I’ve lived in in my life.” Now he surfs three or four times a week. “It definitely has made me happier,” he says. “The things we are trained to think make us happy, like having a new car every couple of years and buying the latest fashions, don’t make us happy.”

Mr. Belic says his documentary shows that “the one single trait that’s common among every single person who is happy is strong relationships.”

Buying luxury goods, conversely, tends to be an endless cycle of one-upmanship, in which the neighbors have a fancy new car and — bingo! — now you want one, too, scholars say. A study published in June in Psychological Science by Ms. Dunn and others found that wealth interfered with people’s ability to savor positive emotions and experiences, because having an embarrassment of riches reduced the ability to reap enjoyment from life’s smaller everyday pleasures, like eating a chocolate bar.

Alternatively, spending money on an event, like camping or a wine tasting with friends, leaves people less likely to compare their experiences with those of others — and, therefore, happier.

Of course, some fashion lovers beg to differ. For many people, clothes will never be more than utilitarian. But for a certain segment of the population, clothes are an art form, a means of self-expression, a way for families to pass down memories through generations. For them, studies concluding that people eventually stop deriving pleasure from material things don’t ring true.

“No way,” says Hayley Corwick, who writes the popular fashion blog Madison Avenue Spy. “I could pull out things from my closet that I bought when I was 17 that I still love.”

She rejects the idea that happiness has to be an either-or proposition. Some days, you want a trip, she says; other days, you want a Tom Ford handbag.

MS. STROBEL — our heroine who moved into the 400-square foot apartment — is now an advocate of simple living, writing in her spare time about her own life choices atRowdykittens.com.

“My lifestyle now would not be possible if I still had a huge two-bedroom apartment filled to the gills with stuff, two cars, and 30 grand in debt,” she says.

“Give away some of your stuff,” she advises. “See how it feels.”

In Ikea's China Stores, Loitering Is Encouraged

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By letting visitors linger, the Swedish chain hopes they will buy as their incomes rise

By Michael Wei

Yang Shuqi paces the aisles of an Ikea store in Beijing, looking for a "small bed with toys." She's not planning to buy one—her grandson Beibei just needs to take a nap. Unfortunately on this Saturday afternoon, every bed in the 43,000-square-meter (463,000-square-foot) store is occupied, with some children and adults fast asleep under the covers. Managers at the Swedish furniture retailer don't mind. They figure that the more customers choose to relax in its Western-style showrooms or grab a cheap snack at the in-store restaurants, the more likely they'll be to make a purchase once their incomes catch up with their aspirations.

"The idea is that maybe if you've been visiting Ikea, eating meatballs, hot dogs, or ice cream for 10 years, then maybe you will consider Ikea when you get yourself a sofa," says Ian Duffy, the company's Asia-Pacific president.

Ikea plans to more than double the number of its stores on the mainland by 2015, to 18, on a bet that incomes in China will continue growing at a fast clip. (Per-capita gross domestic product has more than tripled in the past decade alone). The chain said last month it will add $300 million to the $1.2 billion already being spent by a developer it partly owns to incorporate stores into new malls. The world's largest home furnishings retailer also has three outlets in Hong Kong among more than 300 worldwide.

Market researcher Euromonitor International expects China's home-furnishings market to surge 17 percent this year, to $28 billion. "Government stimulus spending and favorable policies toward retailing and consumer lending have encouraged overall retail growth in China," says Alex Liu, a Euromonitor analyst in Shanghai. Ikea, which has been in China since 1998, doesn't break out sales for the country; Euromonitor figures the Swedish retailer has the biggest share of China's home-furnishings market, at about 7 percent.

Ikea's Scandinavian-design furniture and in-store cafeterias serving Western fare are big draws for up-and-coming Chinese. "I like the environment," says Zhang Xihua, a 62-year-old retired schoolteacher from Wenzhou, who makes it a point to drop in at an Ikea store in the northeastern section of Beijing when she visits her son. "It makes you feel like you're abroad."

China's real estate boom also is bringing customers to Ikea. Property sales in the first nine months of this year rose 15.9 percent from the year before, the nation's statistics bureau said on Oct. 15.

Even after years of record-breaking economic growth, however, China's per-capita gross national income ranked 120th by purchasing power last year, according to the World Bank. So, for now, there's a lot more looking than buying for many Ikea visitors. At the Beijing store, Xu Nan, a 22-year-old college student, had one of her friends snap a photo of her lounging on a black Vreta sofa that sells for 7,999 yuan ($1,197)—the equivalent of one-third of China's annual per-capita GDP. "I'm still living in a dorm, but I want my future home to look like this," she says.

The bottom line: Ikea stores are popular with Chinese consumers, but many browse rather than buy. The chain, eager to build its brand, doesn't mind.

Wei is a reporter for Bloomberg News in Beijing.

Neural Advertising: The Sounds We Can't Resist

Monday, Mar. 01, 2010

By Jeffrey Kluger

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If you're like most people, you're way too smart for advertising. You flip right past newspaper ads, never click on ads online and leave the room during TV commercials.

That, at least, is what we tell ourselves. But what we tell ourselves is hooey. Advertising works, which is why, even in hard economic times, Madison Avenue is a $34 billion–a–year business. And if Martin Lindstrom — author of the best seller Buyology and a marketing consultant for Fortune 500 companies, including PepsiCo and Disney — is correct, trying to tune this stuff out is about to get a whole lot harder.

Lindstrom is a practitioner of neuromarketing research, in which consumers are exposed to ads while hooked up to machines that monitor brain activity, pupil dilation, sweat responses and flickers in facial muscles, all of which are markers of emotion. According to his studies, 83% of all forms of advertising principally engage only one of our senses: sight. Hearing, however, can be just as powerful, though advertisers have taken only limited advantage of it. Historically, ads have relied on jingles and slogans to catch our ear, largely ignoring everyday sounds — a steak sizzling, a baby laughing and other noises our bodies can't help paying attention to. Weave this stuff into an ad campaign, and we may be powerless to resist it.

To figure out what most appeals to our ear, Lindstrom wired up his volunteers, then played them recordings of dozens of familiar sounds, from McDonald's ubiquitous "I'm Lovin' It" jingle to birds chirping and cigarettes being lit. The sound that blew the doors off all the rest — both in terms of interest and positive feelings — was a baby giggling. The other high-ranking sounds were less primal but still powerful. The hum of a vibrating cell phone was Lindstrom's second-place finisher. Others that followed were an ATM dispensing cash, a steak sizzling on a grill and a soda being popped and poured.

In all of these cases, it didn't take a Mad Man to invent the sounds, infuse them with meaning and then play them over and over until the subjects internalized them. Rather, the sounds already had meaning and thus triggered a cascade of reactions: hunger, thirst, happy anticipation.

"Cultural messages that get into your nervous system are very common and make you behave certain ways," says neuroscientist Read Montague of Baylor College of Medicine. Advertisers who fail to understand that pay a price. Lindstrom admits to being mystified by TV ads that give viewers close-up food-porn shots of meat on a grill but accompany that with generic jangly guitar music. One of his earlier brain studies showed that numerous regions, including the insula and orbital frontal cortex, jump into action when such discordance occurs, trying to make sense of it.

TV advertisers aren't the only ones who may start putting sound to greater use. Retailers are also catching on. The 0101 department store in Japan, for example, has been designed as a series of soundscapes, playing different sound effects such as children at play, birdsongs and lapping water in the sportswear, fragrance and formal-wear sections. Lindstrom is consulting with clients about employing a similar strategy in European supermarkets, piping the sound of percolating coffee or fizzing soda into the beverage department or that of a baby cooing into the baby-food aisle.

None of this means that advertisers just have to turn the audio dials and consumers will come running. Indeed, sometimes they flee. In the early years of mainstream cell-phone use, the Nokia ringtone was recognized by 42% of people in the U.K. — and soon became widely loathed. That, Lindstrom says, was partly because so few users practiced cell-phone etiquette and the blasted things kept going off in movie theaters. The Microsoft start-up sound has taken on similarly negative associations, because people so often hear it when they're rebooting after their computer has crashed. In these cases, manufacturers themselves must reboot by changing the offending sound slightly or replacing it entirely.

If history is any indication, marketers will keep getting more manipulative, and the storm of commercial noise will become more focused. Even then, there may be hope: Lindstrom's testing shows that people respond to a sound better when it's subtler. If nothing else, smart marketers may at least keep the volume low.