The markets for luxury and "cocooning" goods in the U.S. seems to only have intensified since September 11, according to entrepreneurs in businesses as far apart as upscale desserts and jewelry for single women.
The panel discussion on consumer market trends, moderated by HBS professor Nancy Koehn, was held at the 2004 Entrepreneurship Conference at Harvard Business School on March 4-5.
Consumer markets are incredibly huge, Koehn said, noting that spending last year for food was $900 billion, for clothing, more than $500 billion, and for beauty products, $250 billion. And since September 11, she said, there has been a hunger for products related to improving the home and family, making our lives more secure, and that give us a sense of control over our lives.
Even before September 11, freelance writer Ruta Fox was thinking up a new career for herself. She hit on the fact that there are some 43 million single women in the U.S. and decided to create a product for them. The Ah ring (A for available, H for happy) was born, an inexpensive diamond ring that women could bestow on themselves. After a full-page plug in the magazine Oprah, Fox did $1 million worth of business in the first year.
Fox said she thinks there are plenty of similarly untapped markets for entrepreneurs to investigate over the next ten years, citing work by futurist Faith Popcorn. Those markets include the obese, blended families, the mass affluent, Hispanics, seniors, new retirees, and "torn boomers"those caring for both their children and their parents.
Consumers are lost not just in products, but in life. |
Eva Jeanbart-Lorenzotti |
The mass affluent is one of Eva Jeanbart-Lorenzotti's targets. She is founder and CEO of Vivre, a direct marketer of luxury brands. More and more consumers are turning to upscale brands, she said, not only because they can afford them but also because they believe they deserve the best. This search for value and quality of life is booming, she said; "It's changing the face of consumer goods."
Another trend, Jeanbart-Lorenzotti continued, is what she calls "Yoda-ism": the search for someone or something that can guide you through the overwhelming consumer choices available today. "Consumers are lost not just in products, but in life," she said.
So the need is for consumer products and services with a strong point of view providing advice and that give people back their time. Specialized service providers such as dieticians, for example, and personalities such as the aforementioned Oprah Winfrey, who are willing to lead you by the hand through the confusion, are called for.
Interactive and customized retail is a big trend, said Dan Levitan (HBS MBA '83), a venture capitalist who co-founded Maveron, which has $400 million under management and looks to back strong consumer brands. Starbucks is one example, where the consumer interacts with the barista to create a customized beverage. The American Girl doll store sells high-priced dolls and accessories, but can get away with high-end price tags because of the emotional bond that is created between parent and child at the store.
An emotional connection with the customer is also something that Paul Conforti is after at Finale Dessert Company, which wants to create a brand for upscale desserts like Starbucks has created for upscale coffee.
Conforti (HBS MBA '97) said people are passionate about desserts, and happily pass along word of a great dessert to friends and family.
Improving technology on the Internet and elsewhere is allowing businesses to offer customized products like never before, panelists agreed.
Koehn asked panelists to share their biggest business blunder and a pearl of wisdom with the audience.
Conforti said his business went through a pair of executive pastry chefs in just a few weeks' time, a result of choosing people who were not suited to the rough and tumble of a start-up. For potential new hires, "dig deep into their mental makeup and see if they will thrive in an entrepreneurial environment," he said.
Adam Krim, co-founder of Progressive Beverages, which distributes premium distilled spirits from Asia, said his mistake was to leave a high-paying job as he was starting Progressive in 2002. Having more financial resources behind you as you start a new business is a good thing. As to advice, Krim said bring in an industry veteran early on, someone who can show you the ropes as well as leverage industry contacts to open doors.
Levitar recalled backing a leading candle maker, which then promptly lost touch with its customer base and ignored warning signs as sales sagged. "We had our head in the sand," Levitar said. His advice: Don't confuse smarts with luck and always maintain hard work and an objective point of view.
Fox had the most intriguing answer, saying she had never really made a major mistake. And she thanked her psychic, whom Fox has consulted with before making important decisions.
"She's really good," Fox said.