The consumer has pulled back their spending reins especially in the automotive sector. The US big three automakers are on the edge of a cliff on their way to falling off....unless Congress bails them out.

To reach those consumers who might still be in the market for a new car, Toyota, now the most successful auto brand in the world, has been running a TV ad in the US that is both extremely effective and physically painful to watch for many.

The campaign called "Saved by Zero" promotes that fact that Toyota is offering zero percent financing for well qualified car buyers. That in itself isn't the big deal. It is the ad itself which repeats the "saved by zero" phrase so often and so annoyingly that blogs and websites have surfaced to generate negative consumer feedback to Toyota by calling for a boycott of the brand and an end to the ads airing on TV, mostly during sporting events. To make matters worse, Toyota saturates a given TV show with this ad literally making some viewers "go out of their minds" listening to this mantra which is delivered not by a cute jingle but by an insipid repetition with some music background of the phrase.

Toyota spokespeople are enjoying the free PR and consumer uproar because the campaign has been very effective generating new floor traffic in dealerships leading to prospective sales. The value of the extra PR and media attention is worth millions and makes the ad campaign's impression that much more intrusive and extensive.

This is one of the cases where an annoying ad campaign actually does its job too well. Will it alienate consumers in the long run? Unlikely as consumers will forget this ad within a few weeks after it stops running which will be sometime in December. You can take your earplugs out very soon.

Watching out for you everyday.

Eli

The company had just announced it would close 20% of its stores and significantly reduce payroll by laying off employees system wide.

The Circuit City problem has been a long standing one. This electronics retail brand lost major ground to its primary competitor Best Buy a few years back when Best Buy positioned itself as the more personal, trustable and friendly electronics retailer. They made employees salaried instead of on commission, spruced up the stores, made it easier to find items and created a more "we are interested in your business" attitude.

Although Circuit City also moved to salaried employees vs. commission, it didn't deliver the news well or in a meaningful way to consumers. The stores were perceived to still be staffed by commissioned sales personnel and environment seemed more traditional electronics retailer---shark like---than a happy easy place to shop.

Although both retailers still promoted price and value, consumers sensed that price was a given and the other brand elements became more important.

Personally, I felt better at Best Buy. I felt more welcomed and the merchandise was better displayed and I was able to find decent sales help and information more easily.  Most Best Buy stores had friendly greeters (who also served as security checkers for shoppers leaving the store) who seemed to know where to direct you for what you were looking for...and in some cases would actually summons help when you needed it.

Circuit City remained the Avis of electronics but they didn't seem to be trying harder just surviving and pretending to be improving their stores.

So no surprise that Circuit City is on its way out of business, despite the recessionary economy this would have happened anyway in my opinion.

The only issue now is will Best Buy start raising prices given their main national competitor is no more?

Watching out for you everyday.

Eli

Although they can still buy super luxury brands like Prada, Gucci, Bulgari, Louis Vuitton, Hermes among others and shop at Neiman-Marcus and Saks, affluent consumers have started to express that it is "shameful" and no longer cool to splurge. Cheap is now "in".

A recent story in the Wall Street Journal chronicled the shopping experience of a very well-to-do woman who is accustomed to spending sprees without thinking about them. However, after spending over $3000 on a few pair of shoes, the woman returned to store minutes later to return everything saying, "I just can't do this anymore".

Affluent consumers are spending time searching for bargains online and at thrift and consignment stores...saving money and having great fun. Costco, the huge discount warehouse retailer is seeing more wealthy consumers come through their doors not only to buy necessities but also to buy clothing, furniture and household decor items.

Ebay is also experiencing a huge increase in business as consumers search for high-end brands at auction unwilling to totally give up their "need" for status brand products.

To survive this radical change in spending behavior some luxury brands like Polo Ralph Lauren are having private sales for their customers offering 50% off and more even on the newest items. Look for more activities like this as we move closer to Thanksgiving and the Christmas season.

Watching out for you everyday.

Eli

Both luxury retailers were one of a kind stores blocks from each other in mid-town Manhattan. They represented some of the most exclusive fashion designers and presented some of the most desirable and expensive accessories to consumers from all over the world.

In 1985 Henri Bendel's was purchased by The Limited Brands best known for Victoria Secret, The Limited and at that time Lane Bryant and Abercrombie and Fitch.

The strategy was to take the Bendel's luxury brand and expand it all over the country like Bloomingdale's. They planned for 40 stores but the chain was deemed a failure just after 8 stores were launched. They were all closed except the main New York store.

Fast forward to 2008 and The Limited Brands has decided to try this expansion once again despite the recession economy. They are launching mini stores that feature only Bendel branded items mostly accessories and home decor. They have opened a store in Boca Raton, FL and plan one additional one in the Miami area and in San Diego. They also have a test store in the corporate HQ's city of Columbus, Ohio which has been re-designed for this new strategy.

Will free-standing Bendel's branded stores work this time? I think there remains a problem with this strategy given that outside of New York very few people have ever heard of Henri Bendel's or even seen/purchased or received as a gift something from their own branded line. If the Henri Bendel name doesn't have wide recognition or appeal outside of New York then it is unlikely the brand will be relevant or meaningful to consumers in cities beyond those frequented by New Yorkers.

The Limited's management feels this is a good time to launch a new luxury branded retailer because given the weak economy the concept's brand positioning will have to be strong for the retailer to succeed versus a more prosperous time when it might succeed because consumers were more aggressively buying luxury products. I think that is weak spin to rationalize a concept that was already in the hopper before the major influences of a recession started taking hold.

Watching out for you everyday.

Eli

Waterford's cut crystal had become a part of nearly every upscale bride's wish list and for some time was the top selling luxury crystal brand in the world leading other notables such as Baccarat, Lalique and Orrefors.

Increasing demands from labor unions in Ireland and reduced interest in "old-world" crystal among generations X and Y have contributed to the shutdown along with a weak dollar.

The company will continue to keep a "tourist" glass making operation in Ireland which attracts over 300,000 visitors per year but will produce the vast majority of its product oversees. The company has not officially announced where oversees but likely Slovenia and Brazil. They are being careful with the issuance of this news for fear of alienating Irish Americans who are very brand loyal to Waterford.

This production shift is likely to undermine the brand and its heritage. Waterford has actively in the past promoted its Irish based production by sending glass artisans to the US for demonstrations. They also prominently showed "made in Ireland" on each product. It is very possible that the brand's identity could be permanently damaged by this production shift reducing the brand's prestige and dominance world-wide. It could even lead to the end of the Waterford brand.

Increasingly some of the most beautiful and value oriented crystal has been coming out of Eastern Europe at prices nearly half of what Waterford charges in the US market for comparable pieces and styles. Lack of unions and other lower production costs in Eastern Europe have helped shift crystal production to this part of the world. China has also become a major producer of crystal but the quality is significantly lower than product produced in Europe.

Watching out for you everyday.

Eli