Could 'assurance'-type program stimulate sales?
Jay McIntosh, News editor -- Furniture Today, January 18, 2010
As with any set of statistics, the economic forecast numbers we presented last week can be interpreted in more than one way.
In general, I think they look fairly positive for the industry. Most forecasters believe U.S. gross domestic product will grow this year after shrinking last year. Home sales (new and existing) are expected to rebound to 6.2 million from 5.5 million last year. And personal disposable income is expected to grow a little.
But one number that remains very unsettling is the unemployment rate. It averaged 9.2% last year and is expected to grow to 10% this year.
If you look at the Jan. 18 issue of Bloomberg Business Week, the employment trend looks even starker. In a series of graphs, the magazine shows how in the downturns since 1981, it has taken the economy longer and longer to rebound to the pre-recession employment peak. And this slump's change in employment, down more than 5% from the 2007 peak, is more than two percentage points worse than in any recession since 1970.
And for everyone who is unemployed or underemployed, there are others worried they'll wind up in the same boat.
In the face of that, how can we sell more big-ticket items?
One company that came up with an answer a year ago is the automaker Hyundai. The Korea-based company's American division told buyers that if they lost their jobs in the next year, Hyundai would take back their cars.
In a recent interview on NPR, John Krafcik, president and CEO of Hyundai Motor America, said the company sold 435,064 cars last year. (It was a good year for the automaker and its Kia subsidiary, whose U.S. sales were up 7.1% last year while overall industry sales were down 21.1%, according to the Detroit News.)
And out of all those sales, how many cars did Hyundai take back? Fewer than 100.
Krafcik told the radio interviewer it wasn't possible to measure the effect that the return guarantee, called Hyundai Assurance, had on buyers. But it must have had some, and at a lower cost than the company expected. Hyundai is continuing the program for 2010.
One danger is that in offering such a guarantee, you're saying that people's jobs might be at risk. This is one reason the bedding industry hasn't embraced mattress flame resistance as a marketing tool, since to do so might suggest that we are in danger of burning to death as we sleep.
Could a Hyundai Assurance-type program work in furniture? Probably, although as an industry, we hate the thought of returns.
Still, to a public already spooked about jobs, it could offer some peace of mind with your sofa or bedroom set.
-
'10 view: Slow growth
Jan 11, 2010
VIEW ALL GALLERIES
