Is the Marie Kondo phenom an indicator of larger shifts in the retail market?
For the few of you unfamiliar, in 2014 Ms. Kondo published The Life-Changing Magic of Tidying Up, the premise of which is to remove those things in your life (clothing, books, memorabilia, etc.) that do not, as the author puts it, “spark joy.” The process includes asking each item if it produces joy in one’s life; if it does not, the owner is instructed to thank the item for its service and let it go.
I read the book in 2016 and, four less garbage bags of clothes later, forgot about it. Then I heard the buzz this winter, upon the release of the video series, “Have you seen the Marie Kondo Netflix series? It’s inspiring!” (Netflix was one of the things I let go of, so no I answered, I had not seen it.)
But it did get me curious – why such the craze? Why now? Is the general populace realizing we don’t need so much stuff? And germane to economic development, what larger implications might this have in the communities in which we work, so many of which struggle with empty storefronts and a lack of retail options? If people are spending less money on retail goods, what are they spending it on?
The research I conducted indicates that 1) Retail sales continue to grow, with certain sub-industries fueling that growth; but, 2) What’s growing faster is the experience market; and, 3) There are other trends showing a shift from stuff imbibing. Finally, I learned, drumroll please, 4) Netflix ain’t no dummies.
That’s what it feels like, even after the February release of retail sales numbers indicated a -0.2% drop in sales from the month prior. The US Census April 18th release of their Advance Monthly Retail Trade Report indicates a 1.6% bump from February to March. YoY (Year over Year), retail sales are up 3.6%.
The 1.6% increase in retail spending from February to March was driven by gasoline stations (up 3.5%), the corresponding category motor vehicle & parts dealers (up 3.1%), and clothing & clothing accessories (up 2.0%).
From March 2018, the biggest growth drivers have been non-store retailers (i.e. online sales - up 11.6%), health and personal care stores (up 4.4%), and food service & drinking places (up 4.3%). These YoY figures show evidence of shifting consumption patterns and is nothing new to anyone in retail; focus on health and increasing convenience of shopping and eating are significant retail themes. As such, adjusted e-commerce sales for the 2018 4th quarter made up 9.9% of all retail sales, up 14.2% from the previous year. For more retail intel, Camoin has covered retail’s transformation, trends, and successful components in previous posts.
While growth in retail sales is generally healthy, growth in experiential markets is outpacing retail - significantly. For this post, experiential spending includes those industry clusters where consumers spend money to do something versus have something, such as go see a movie or take a vacation. Consumers buy experiences as much as they buy products; those deep in retail sales phycology would say experiences are what consumers buy, sometimes with stuff attached.
To illustrate this shift, first let’s look at general trends by 2-digit NAICS codes for the retail trade industry and compare to the arts, entertainment, and recreation and accommodation and food services industries. The historic and projected change indicate the two later industry sectors have been and will continue to grow much faster than retail trade. Historically, retail trade has grown (by number of jobs) 7% from 2008-2018 whereas the comparison industries have grown by more than 30%. The projected increase for retail trade is less than half that of the comparison industries. However, with 6% of Gross Regional Product, the economic influence of the retail trade sector is stronger than the comparison industries – combined.
Digging deeper, I looked at some experiential spending retail clusters based on clusters from US Cluster Mapping. The graphic below indicates the historic and projected change in jobs, and percent Gross Regional Product (GRP) for each cluster. I also compared these clusters to the retail trade cluster as defined by the US Census. With the exception of the local media and entertainment industry, which includes many industries being replaced by online formats like book stores and newspaper publishers, the other clusters are on-par or exceeding growth of the retail cluster. The dramatic rise in jobs in local community & civic organizations, local hospitality establishments, and video production could very well be an indication of shifting trends, and how consumers are spending their time and money.
Spend like You Give a Damn
In conjunction with experiential-based cluster growth, other demographic and retail trends indicate a shift in consumer preferences. Foremost is an increasing shift to align spending with social and environmental values. A 2017 study by Cone Communications indicated 87% of consumers would buy based on values, and 76% will boycott based on values. And pertinent to our line of work, consumers ranked economic development at the top of the list when asked what one issue they would like companies to address (34% of all respondents).
Millennials prefer to do business with corporations and brands with sustainable manufacturing methods and ethical business standards. A 2015 Nielsen study which polled 30,000 consumers showed 66% of all individuals (and 73% of Millennials) are willing to pay more for sustainable goods. This is up from 55% (and 50% of Millennials) the year prior.
Spending more sustainably is not the only trend. In an age of coupon codes, flash sales, and endless marketing geared toward getting the best deal, stores like TJ Maxx and Marshall’s are continuing to flourish, whose marketing angle is to attract shoppers on the hunt for the best value. Buying second-hand is also on the up and up, and had a significant impact based on the Marie Kondo Netflix special. Donations were through the roof and will no doubt continue the rise of the second-hand market, worth $24 billion in the US in 2018.
These trends might not be a clear marker of spending less (given storage units and dollar stores are still on the rise) but they are certainly an indicator of spending differently., 
The Netflix Effect
It’s no coincidence the Marie Kondo special was released exactly on New Year’s, a holiday when American’s are hung over from a six-week consumerism binge and see an opportunity to start anew. Ultimately, this retail indicator illustrated the “Netflix Effect” in action. Watch the show, get inspired, share your freshly organized closets on the social feed, and watch it spread like wildfire.
So, while the Marie Kondo craze may be an indication of shifting patterns, it is not slowing the retail engine. I have to wonder though - what other consumer trends are tied up in Netflix programming?
 Cone Communications Corporate Social Responsibility Report, 2017
 From 2008-2018 there was a 20% increase in the number of jobs created by NAICS 531130 Lessors of Miniwarehouses and Self-Storage Units. A 15% increase is projected by 2028.