On Management

Dec. 21, 2004
When consumers lose interest in 'stuff.'

Has America had its fill of the material things that used to make people happy? For the last few Christmases, retailers have experienced "ho-hum" seasons instead of "ho-ho-ho" ones. But why should that be true? It is easier than ever to shop -- with TV shopping, mail order, the Internet, specialty shops of all kinds, and mega-superstores in abundance. Management Horizons in Columbus studies such trends, and the firm's chief economist Carl Steidtmann reinforced my suspicions. "Society as a whole is becoming much more experientially oriented instead of materialistically oriented -- and that's affecting retailers at Christmas," he says. Roger Blackwell of Ohio State University, a consumer-behavior expert and the author of From Mind to Market (1997, HarperBusiness), echoes the feeling: "Christmas is just not as important a consumer retail event as it once was." More and more, gifts are taking the form of trips to the spa, health-club memberships, vacations, and the like -- instead of "stuff." Cruise lines are doing great business and the ships keep getting bigger and more luxurious. Theme parks have evolved into total-family entertainment destinations, not just a place to take the kiddies. The blend of real or virtual vacations, video games, the Internet, chat groups, interactive video, Web TV, etc., opens up endless possibilities for "experiences." Where does this all lead? I'm not sure. But one thing is certain: Manufacturers must think differently about markets and what they will be selling. They must also question how their businesses are configured -- the shapes they'll take in order to provide value. Maybe the key message is that there has to be more to the product than just the product itself. People are living longer. There are more older people, with more wealth, careening toward retirement -- often helped along by wave after wave of downsizing. Retirement is not what it used to be, either. Playing golf, eating out, and playing cards can go only so far in occupying the mental and physical energies of a generation that is healthier and more active at advanced ages than any in history. They want to do new things that are fun and exciting (but not too dangerous or strenuous). Older people are concerned about the quality of life, not just the quantity of it -- and they have plenty of stuff overflowing their new, smaller condos. At the other end of the spectrum, the Generation Xers already have decided that there is more to life than work -- it may not be a BMW, either -- and the Net Generation kids have the world at their fingertips via the Internet. Stuff is not as exciting to these groups as it was to earlier generations. The largest companies at the turn of the last century were involved predominantly in natural resources or basic industrial materials -- oil, metals, and the other things that are used to make stuff. Companies that made durable goods thrived in the post-war period and continued to do well until recently. Then stuff started to lose some of its appeal. Consider how the list of large companies will look at the end of this century. How many of the companies will be involved in entertainment, communications, transportation, software, retailing, health care -- all essentially activities, rather than stuff? (Consider Microsoft's advertising line: "Where do you want to go today?" It's not: "What do you want to own today?") Most executives manage based on the past -- yesterday's skills, yesterday's situations, yesterday's rate of change -- because that is when they gained the experience that made them successful. But what happened yesterday cannot be extrapolated to reveal what tomorrow will be like. If the current sales and price declines in durable goods are symptomatic of America being bored with stuff, then it's time to figure out how to reconfigure companies that make stuff -- and include a richer shape of value. If the age of products and services is giving way to an age of experiences and feelings, the companies that get there first will carve out some profitable markets. Perhaps your next new product shouldn't be a product at all. John Mariotti, a former manufacturing CEO, is president of The Enterprise Group, a consulting business. He lives in Knoxville. His e-mail address is [email protected].

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