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Will frugal lovers spoil Valentine's Day for retailers?

February 6, 2014

Retail industry analysts keep waiting for that turning point; the one selling season when they can finally declare that the good old times are back again. Sales for the recent Christmas season were an improvement over previous years, but bargain hunters kept a lid on revenues and profits. Now the question becomes, will consumers stick to their budget-minded ways as Valentine's Day draws near?

According to the National Retail Federation's 2014 Valentine's Day spending survey conducted by Prosper Insights and Analytics, the answer is, "Yes." Fifty-four percent of Americans plan to celebrate with loved ones this year, down from 60 percent in 2013. On the positive side, the average person celebrating the holiday will spend $133.91 on candy, cards, dinner and gifts, up from $130.97 last year.

Men will spend roughly twice as much on their Valentine's as women this year (no surprise there). Just under 49 percent will buy candy, 37.3 percent will give flowers and 51.2 percent cards. Thirty-seven percent will celebrate the holiday with a night out while 19 percent will bring out the bling.

As in their daily shopper behavior, many consumers will go online to research or make purchases. According to the survey's findings, 26.1 percent plan to shop online. Twenty-four percent will research products or compare prices on their smartphones, while 32.2 percent will do the same using tablet devices.

"Valentine's Day will continue to be a popular gift-giving event, even when consumers are frugal with their budgets. This is the one day of the year when millions find a way to show their loved ones they care," said NRF President and CEO Matthew Shay. "Consumers can expect Cupid's holiday to resemble the promotional holiday season we saw just a few months ago, as retailers recognize that their customers are still looking for the biggest bang for their buck."

Discussion Questions:

Are frugal shoppers going to be a fact of life for retailers from this point forward, or is that turning point coming? How can retailers stay price competitive while meeting profitability goals under these conditions?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Will Valentine's Day be more or less profitable for retailers this year versus last?

Comments:

Yes, frugality and the desire for convenience are with us to stay. This does not mean people will forego spending. It requires product and a retail experience that is differentiated and meaningful. Commodities will be retailed more and more in a fast, easy, value driven environment. Luxury, aspirational, and experiential products still have significant opportunity for differentiated and higher margin retailing.

So that box of chocolates can be of the grocery store variety (low margin, undifferentiated), or it can be luxe, premium, extraordinary.

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Mike Osorio, Senior VP Organizational Change Management, DFS Group

Nothing is more powerful than "AMORE" ...

Consumers make purchases via two sides of their brain: the rational, and the emotional. There is nothing more emotional than giving gifts and experiences to that special someone you love.

There is different psychology of buying for Valentine's Day period. The consumer is typically focused on buying specialties Valentine gift for just one or a few, versus many people and gifts in the holiday period.

In the time starved world after the holidays heading into the new year, one prediction is clear ... consumers will increasingly turn online for both ideas, and convenience.

The local retailers that do well will increasingly have to focus on the "experience" and personalizing it. For Valentine's Day, personalizing the experience is just as important for the "giftee" as the giver.

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Chris Petersen, PhD, President, Integrated Marketing Solutions

It is frugal from here to eternity, as bargains rule the world. The changes in just the last 5 years are dramatic, and we have to get used to it. Everyone is hustling you to buy buy buy, but if there is no money in their pockets, it makes it tough to upsell to the average consumer. There is always going to be the husband who puts a red ribbon on a new Lexus for his bride (great commercial). But the rest of us may have a dinner away from our kids, and call it a night.
Either you keep the prices hot or mark them down after Valentine's Day and take even more losses.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

Today, more Valentines are single than ever before. In 1960 60% of adults 18 - 29 were married. Today that number is only 20%. Brands and retailers need to offer products and services that cater to non-romantic gift-giving, self-gifting and group events, like parties.

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Liz Crawford, VP, Strategy & Insights, Match Drive

I don't think the mood in America has changed since Christmas. The stock market is down and economic growth is just getting buy. Valentine spending will be better than last year, but not by much. Except for jewelry, the bargain hunting will be down as the price points for flowers and cards are much lower. Retailers will not be able to claim the good times are back.

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W. Frank Dell II, CMC, President, Dellmart & Company

In the ultimate "mother-in-law research" department, my own Valentine, who dearly loves her flowers and bling, volunteered out of the blue this week that we "shouldn't spend money on Valentine's gifts." She also suggested a "cooking together at home evening" versus the traditional restaurant meal. I have no idea where that came from, but it seems that, as usual, she is "on trend."

Expanding into the broader business context, I'm guessing our experience this year is a microcosm of the macro impact of the great recession. Namely, casting just a little bit of a jaundiced eye on frivolous consumption. Just a LITTLE bit.

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Ben Ball, Senior Vice President, Dechert-Hampe

There are cheap people in the world who would just as soon shop at CVS as anywhere for "some dumb little thing" as SNL parodied so well last week...

I don't see DeBears or Tiffany falling for frugal customers and the best brands won't. Know your market, your customer and aim higher. It's the sweet stuff of great retailing.

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Bob Phibbs, President/CEO, The Retail Doctor

Until the stock market froths over and homes become once more a personal ATM machine, we will remain entrenched in a frugal shopper outlook.

The only exception area is "Amore" as Chris mentioned above, with its singular focus (usually), and with men more willing to spend the cash than women. So retailers can focus on the male segment and make it EASY for them to shop with bundles of product and services.

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Mohamed Amer, Vice President, Global Consumer Industries, SAP

The 2008 recession taught shoppers to be more budget conscious. A new shopper was created - the smart shopper - who takes pride in saving money and getting a good deal.

Valentine's day is a bit unique in that more men will be purchasing gifts. Merchandising, creating Valentine's Day zones, and cross-promotion (both in-store and online) should be a technique that retailers leverage year round to achieve margin goals.

Michelle Marian, Retail Vertical Lead, Motorola Solutions

I don't agree that Americans have adopted a permanent frugality. What I see is a rational populace reacting to economic realities and retailers caught in the middle.

The active US workforce now stands at about 144 million people, compared with about 146 million that had been employed in 2008, aka: the spendthrift days. Our workforce bottomed out somewhere around 138 million. So these unemployed individuals (around 6 million at the peak), are a bit economically gun-shy.

Add to this about 10 million currently unemployed people, 7.8 million involuntary part-time workers, and about 3 million discouraged or marginally attached workers and you negatively affect a lot of people's ability and desire to purchase goods.

Lump that together with the Boomers who continue to move out of the workforce and into retirement, a time of expected frugality, and you have even fewer people shopping and spending at retail. Hooray, rationality!

My point is that this is just part of the cycle and should be expected. As a higher percentage of the US population gains meaningful employment those halcyon days of yore will return, people will spend at wildly unsustainable rates, crass consumerism will rule, etc...and the cycle will begin anew. Happy Days (will be) here again; Rinse and repeat -- the cycle goes on.

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Larry Negrich, Vice President, Marketing, nGage Labs

I think the (focus of the) question answers itself: that we're looking to Valentine's Day to be a turning point shows just how lackluster things are...I'm waiting for the "will fireworks sales be the takeoff point for spending?" topic in 5 months. Any port in a storm, or any holiday (or quasi-holiday) in a slow economy, I guess.

'notcom'

It's Valentine's Day. Just try coming home to your wife empty handed. That boat is not going to float. Maybe we will not spend as much, but you can be sure we are going to spend something.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

Am I a bad guy because my perfect wife accepts flowers and a card costing much less than $130? Wow. I have a hard time getting past that statistic, before I can even comment on the questions posed. I guess I'm a REALLY frugal shopper.

Times are still tough for most so shoppers are looking for value everywhere. I don't see that changing anytime soon.

Merchants can look at every element of their supply networks, and manufacturing if applicable, to extract costs and drive margins higher. That's nothing new. The good news is that technologies exist today that didn't in the recent past that can help extract those costs effectively.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

As Valentine's Day coincides with a scary ride in the stock market, you can expect lovers to hold tight to their wallets and purse-strings!

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Jerry Gelsomino, Principal, FutureBest

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