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TK's MORNING BUZZ: The Cocooning of America Is No Guarantee That Every 'Home' Retailer That Feathers the Nest Will Emerge a Winner

26 Nov, 2001 By: Thomas K. Arnold

It's hard to figure who's winning and who's losing in this current economic climate. While the post-September 11 "cocooning" is supposed to keep consumers in their homes and get them to spend more money on home decor and entertainment, what's happening in the real world -- in my opinion -- doesn't jibe quite as neatly as some pundits assert.

Sure, DVD players are the hot commodity, but it's my guess they would be selling like hotcakes even if the events of September 11 hadn't happened and the economy went into a tailspin. The same with DVD software.

Then you have the matter of the home stores. Chains like Michael's (home crafts), Stroud's (home linen and bedding), Home Depot (home improvement) and Best Buy (home electronics) report booming business, citing the "cocooning" factor as a boon to their businesses.

But consider the fate of California's House2Home, the transmogrified Home Base stores that entered the scene in force earlier this year amid very high hopes. Carrying practically everything for the home and garden, these superstores one-upped Stroud's, Bed Bath and Beyond and others like them and, in the opinion of more than one trend analyst, were supposed to revolutionizethe home decor business.

Today, House2Home is in the process of liquifying its stores, and according to an Associated Press story on the chain's bankruptcy filing earlier this month, the"cocooning" trend never made any impact here. Indeed, according to the AP, "William Langsdorf, House2Home's chief financial officer, blamed theterrorist attacks for creating an impossible market. 'The effect of September 11 on our sales was just dramatic,' he said. 'They dropped 25% to 30%.'"

So what gives? How can one home chain fail, while others succeed?

It's simple: there are no hard and fast rules. If Americans are, indeed,"cocooning," that's well and good -- but it's by no means a guarantee that every business that caters to making the home more habitable (from homeimprovement stores to home entertainment stores) will emerge a winner.

Much still depends on being a good retailer. "Home" retailing may beexperiencing a wave of success, but you still have to be strong enough to getup and hitch a ride on that wave. Otherwise, you'll be swept away.

Comments? Contact TK directly at:TKArnold@aol.com

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