What Type of Products Should I Sell? What are the Current Trends?
 
By Tiffany Anthony - April, 2005

When deciding to start a wholesale or retail business, it is important to analyze the various consumer markets and selling outlets to determine what type of product to sell and by what method to sell it.

As much as the finances of an industry are important, it is also important to get involved in a market segment where you have a passion, or at least an interest. If you are a racing fan, you may want to sell licensed apparel, hats, sporting goods, or automotive products. If you are a movie-lover, your interest may be in starting a video/DVD business. Whatever you choose, be sure it's something you won't lose interest in, as a business is a long-term commitment and will require much work and time from you.

When looking at the financial aspect of a market, be sure to read various reports and forecasts to learn about current consumer trends and spending habits. You'll also want to read census reports to understand if your market can afford your products and who your main target should be. If you will be wholesaling, these reports will also help you understand the retail value of a product, and set a price-point for your dealer customers - as they will need to make a profit as well.

According to the "Annual Benchmark Report for Retail Trade and Food Services" published in March 2005 by the US Census Bureau, the retail industry sold nearly 4 trillion dollars in merchandise in 2004.

"Trends in Retailing 2005 – An Outlook for the Food, Fashion and Footwear Sectors," forecasts the following:

• The number of impulse purchases has remained constant at around 50%.
• Price is the primary buying factor in a purchase.
• The ratio of men to women will remain almost constant.
• The number of seniors (60 years and above) will continue to increase, while the number of young people continues to decrease.
• Household spending for consumable goods continues to rise.
• Expenditure on rent, energy, and health and personal care is increasing, while expenditure on food is declining.
• The number of single vs. partner/family households is increasing.
• The number of long-term unemployed is rising.
• The influence of children in purchases is increasing.

Says Carrie A. Johnson of Forrester Research, "With the mainstreaming of the Web comes the reality that online sales now mirror offline sales. Based on the ups and downs of the offline retail sales environment over the past few years, that's not a good thing."

What can these trends and forecasts tell us?

1. Automotive and Building Supplies were big sellers in 2004.
2. Priority should be given to retaining females, seniors, and customers with children.
3. Your pricing should beat or match your competitors.
4. Impulse buying can work to your advantage if you have the right product(s) and market them properly.
5. Having a brick & mortar store is effective, but it may be equally effective to have an online presence as well. Offering both options to consumers is important.

Key Markets & What Consumers Are Looking For

OVERALL
"Brag about your use of local ingredients and materials, traditional and artisanal methods, or environmentally and socially responsible practices. If you do it right, your customers will then preen to friends about how authentic they are for patronizing your authentic business," says Laura Tiffany of Entrepreneur Magazine in her November 2004 article titled, 'Hot Trends for 2005.'

APPAREL, CLOTHING & FASHION
Thanks to their spending habits and considerable influence over peers and adult consumers, tween- and teen-aged shoppers are becoming ever more important to fashion retailers. A few key trends: wearing "innerwear" as outerwear, urban wear, faux and real fur. Authentic designer apparel is desired over replicas and consumers are willing to spend for their favorite designers' originals.

PLUS SIZES
Plus sizes are much desired, as the national obesity epidemic rises - and even teens and tweens are developing larger waistlines. "...more than 60 percent of women and teens wear plus-size clothing, and the kids plus-size apparel market is growing. A burgeoning industry is the manufacture and sale of larger everyday products-fanny packs, airline seat belt extenders, bath towels, tape measures, socks, desk chairs, even caskets-for obese customers." says Laura Tiffany.

FOOD/GROCERY
Authentic, local, homemade, and organic foods and beverages are the current trend. With the fears of antibiotics, pesticides, and chemical biproducts in everything from tomatoes to pop tarts, consumers are reaching for items that aren't mass-produced, biogenetically engineered, or enhanced in any way.

ELECTRONICS
Hand-held devices continue to dominate the electronics market for 2005. Consumers are looking to their electronic purchases to provide portability, customization, and multi-functionality.

Consumer Electronics Association, Jim Barry calls it the year of the "Electronic Swiss Army knife...By that I mean companies are putting out a product that's a cellphone with an MP3 player, PDA, video-on-demand capabilities and so much more all rolled into one."

With no apparent end to their domination, Apple's iPod continues to be the most sought item. Multi-functional cell-phones and PDAs also continue their draw.

"Besides televisions, digital music and video players, cameras and cellphones, industry analysts expect gaming to be a standout category in 2005," says Parija Bhatnagar, a CNN/Money staff writer.

"New data from The NPD Group shows first-quarter videogame industry sales up an impressive 23 percent over Q1 last year -- at more than $2.2 billion. Total unit sales were also up, increasing 18 percent over 2004's first quarter. Looking at specific categories, console hardware and software were the slowest to climb, gaining eight and seven percent, respectively. Still, console software saw revenues of $1 billion -- the highest of all categories. With the Nintendo DS and Sony PSP both thundering through the market, it's no surprise that portable game hardware showed the highest growth, with sales of over $293 million, or 162 percent higher than last year. Portable software sales rose 72 percent, which is only modest next to such strong hardware performance. Only months ago, some analysts feared an industry slump in the final year before the next wave of consoles, though Sony's PSP was seen as arriving just in time to bolster the industry. The NPD's sales data confirms that story, but also reveals that the console market, especially console software, is still healthy. It looks like the old boxes have plenty of spunk left before their next-gen followers take over." -- David Adams,  IGN Entertainment

GIFTS
In 2005, gift consumers seek unique, personalized gifts from a retailer giving them special personal attention. Jewelry items continue to draw buyers, especially if handmade. As with food this year, authentic and local creations are the trend.

"What's Hot? Anything that has to do with healthy living. Although the low-carb craze is slowing down consumers are continuing to strive for a healthy lifestyle. Organic food and products are still a hot commodity, as well as spa and pamper products. Gift basket retailers can continue to look forward to brisk sales in these categories. Simplicity plays a big part in marketing to this group. Simple designs with clean lines, lots of color, and luxurious products are sure to win the hearts of your customers," says Jowoanna Williams of Suite101.com.

AUTOMOTIVE
Pocketbikes, Pit Bikes, and Scooters continue to draw consumers, though not as heavily as last year.

"The Chinese manufacturers... are producing 50cc minibikes for children. The cosmetics they incorporated make these pocketbikes look like shrunken road racers," says John Wyckoff in a February 2005 article for Small Business Trends.

In other articles, Wyckoff also makes mention of the increase of female buyers in the motorcycle industry, as well as the new high-speed scooters available.

"Now the Japanese companies have raised the bar by producing large displacement (up to 650cc) scooters that can cruise at well over the Interstate speed limit all day. They made these units capable of carrying a large quantity of 'stuff' in well-designed storage areas."

There are many new products coming out in many different markets, and wholesalers and retailers will need to watch closely. Keeping up-to-date on financial news and press releases is a great way to stay ahead of the competition and have the "up and coming" products before others.

Online Business

For online businesses, it is important to understand how much the Internet has changed, and how web surfers are reacting and adapting to such changes.

"Gone are the days of wealthy early adopters shopping online," says Johnson. "Today, 52% of online shoppers are women, and the average Web shopper is less likely to have a college degree than in the past...The mainstreaming of the Web has three major ramifications for online retailers. First, these shoppers overwhelmingly prefer to shop offline — 82% prefer to shop in stores. Second, these shoppers aren't likely to have heard of pure plays like bluenile.com and are most loyal to retailers like Wal-Mart, Costco, and Target. Third, as they incorporate more technology into their lives... their attention spans shrink to that of a tsetse fly, skipping ads and ignoring marketers' carefully crafted messages.

...In 2005, we expect online sales to grow by 21% over 2004, to $175.3 billion, impressive growth but nowhere near the 96% CAGR of the prior six years. What's going on? Saturation in many categories — there are only so many books that online shoppers can buy — plus fewer new households shopping online every year. We expect only 600,000 new households to shop online in 2005, as fewer PC hardware purchases and a shaky economy keep growth at bay.

...Online retailers could once drive sales through competitive advantages, with claims like first-mover advantage, superior customer experience, or smarter-than-average marketing programs. Not so anymore. Most have already come a long way in developing their customer experience and marketing programs, leaving little differentiation among sites."

What this means to retailers, whether on or off-line, is that they must grab attention quickly without any need for the consumer to read or think. Use of color may be the tool of marketing in 2005. Standing out above a competitor is a difficult task and will rely more on "who can catch them best," than what products or services are being offered.

One advantage to online retailers, is the growth of the Broadband population. Consumers want everything "Now!" Browsing an online catalog filled with detailed photographs is now an easy and less tiresome experience. "...more than half of online households will have broadband by the end of 2005 — allowing retailers to invest in broadband applications that dramatically improve the shopping experience," says Johnson.

The wholesale and retail industries offer an enormous opportunity for you. Whatever market you decide to participate in, be sure to stay well-informed, keep in close contact with your buyers, and be patient. As important as building your product offering, is building a client-base and retaining them.

Notes:

* Non-store retailers are those who reach customers and market merchandise with methods, such as the broadcasting of “infomercials,” the broadcasting and publishing of direct-response advertising, the publishing of paper and electronic catalogs, door-to-door solicitation, in-home demonstration, selling from portable stalls (street vendors, except food), and distribution through vending machines. Establishments engaged in the direct sale (nonstore) of products, such as home heating oil dealers and home delivery newspaper routes are included here.

Sources: NPD Research, JupiterMedia, Forrester, Fashion-Era.com, Entrepreneur.com, CNN/Money, IGN Entertainment, Suite101.com, Small Business Trends.

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