Housing holds the keys

Dr. Charles HallFor some time now, the housing market has been showing signs of stabilization. But the real question now is how the decline in the value of housing has affected consumer willingness to spend.

It is on that point that most economists are mixed. Two separate studies were referred to in the Wall Street Journal (in the same week) with one indicating that “further de-leveraging of the household sector will likely keep a lid on any rebound in consumption. In other words, the future of consumption and house prices are closely linked” and the other study concluding that “…while consumer spending may be sluggish in the near future for other reasons, it is doubtful that recent declines in home values will be a major contributor to this problem.”

So which study is true? I think they both are – it just depends on which sector of the economy you’re discussing. Obviously, in the green industry, we have historically found a strong correlation between the demand for our goods and services with housing. Consumers are, in general, saving more and spending less.

Of course, this is being reflected in the home improvement market as well, as reflected in their declining sales.  The Home Depot reported sales for the second quarter at $19.1 billion, down 9.1 percent from the prior year period. Lowe’s reported net income of $759 million for the second quarter was a 19.1 percent drop from a year ago.

In order to analyze how the economic downturn is affecting consumers differently, Nielsen recently created a segmentation that divided households into groups based on their behavior and reaction to the decline.

The value proposition for landscape contractors in the future must focus on the unique ways in which quality of life is improved for our customer base.

I cannot overemphasize the importance of this quality of life message, particularly in focusing our differentiation strategies in the future. That because of whether you are a Baby Boomer or from Generation X or Generation Y, quality of life is a higher-order need that is important to you.

All of these generational attitudes come down to one thing – enhancing the quality of their lives. Our industry research shows that there’s no better way to do this than through the daily use and/or enjoyment of flowers, plants and trees. All we have to do now is convince consumers of this in a manner that they view our products and services as necessities instead of luxuries.