Market Snapshot

DIY Projects and Profits on the Rise

  CrystalCare headlight restoration kit
 Creative Material Technologies displayed their CrystalCare headlight restoration kit, a product that do-it-yourselfers might be attracted to at the 2009 SEMA Show.

It turns out that headlights, spark plugs and plant seed have something in common: sales actually have the potential to go up during a recession.

Companies looking to make their businesses recession-proof might find success by working with the crisis rather than fighting it. Some consumer goods are booming, and if they act as market indicators, they might shed light on solutions for the specialty-equipment industry.

Chocolate, gardening seed and lipstick are flying off the shelf. Consumer spending has a predictable and cyclical shift when recessions loom, and the same reactions to previous economic downturns are happening again. They usually do. Some products fall under a comedic, yet very real economic theory of consumer behavior known as the "lipstick effect."

First coined after the Great Depression, economic analysts noticed the inverse correlation between economic growth and cosmetic sales. In other words, as people began to lose discretionary income, their spending on smaller luxuries or "feel-good" indulgences skyrocketed. Consumers begin cutting back on big-ticket items and purchasing low-cost items for instant satisfaction.

Sales of comfort foods loosely fall under the same principles. USAToday highlights some of 2009's early winners. For the first part of the year, profits for Hershey rose 20%, Kraft Foods earned double-digit growth in macaroni and cheese sales and Hormel saw a 6% increase due in part to their Spam brand and chili.

Some of the cause is financial, but the impetus for change is also psychological. These are small victories in the minds of consumers and play a significant role in emotional security.

Household repairs are echoing the sentiment. Home-repair giant Lowe's recently reported growth in items aimed at assertive do-it-yourselfers (DIY), mainly gardening, paint and plumbing products. Robert Nilbock, the company's CEO, outlined the situation to reporters in a conference call.

"Through the late '90s and in the first half of this decade we experienced significant growth of the DIFM or "Do It for Me" segment of our business. Consumers had the cash, but not the time nor the inclination to take on many projects around the house. Throughout this downturn, they've increasingly become more disciplined in their spending."

Do-it-yourself projects are on the rise as people spend more time at home. Lowe's surveyed homeowners and found that saving money was only part of the reason for the shift. Their results revealed that "32% of DIY-ers cite 'pleasure' as the reason they're planning a project, while 35% say it's to save on total project costs," according to MSN Money.

This effect is also permeating the automotive industry. Advanced Auto Parts has reported continued annual growth with the do-it-yourself crowd, even disclosing a 13% increase in first-quarter profits for 2009, according to the Roanoke Times.

Company executives site the current economic crisis as being a chief catalyst and a market driver for the DIY swell. Vehicle owners remain hesitant to purchase newer models and are spending more on maintenance and repairs, meaning opportunities for specialty-equipment manufacturers and retailers to not only sell parts associated with these repairs, but also to up-sell into high-performance products and accessories.

The latent behavior of consumers can be a hidden gem of the economic crisis. Consumers are reactive to financial pressures and many would enjoy a hands-on approach if given the opportunity or knowledge of how to participate. As more consumers take control of their vehicle maintenance, it can be an opportunity to expose them to the automotive hobby and take them beyond simple repairs into more advanced modifications.

By learning how easy and quick some parts can be to exchange, vehicle owners might become more familiar with their vehicle's performance. When the economy turns around, they’ll be more willing and prepared to engage higher-end modifications. In the interim, manufacturers and retailers can establish this culture by creating more installation guides and workshops, clear and easy-to-read how-to manuals, video tutorials and other techniques for resolving the uncertainty and confusion that many motorists now feel.

Fuel pumps, alternators, headlights, wiper blades and spark plugs could be the gateway parts for future sales and a larger enthusiast base. — SEMA Research & Information Center