Consumer Return to the Cocoon Could Help Retailers

(MoneyWatch)  Cocooning is back, and could help weaker retailers survive the recession.

Consumers were supposed to be done with cocooning, a term that emerged in the late 1980s used to describe a focus on home life and entertainment that helped spur sales of everything from home theater systems to iron skillets.

Then about six years ago, consultants declared that consumers were emerging from their cocoons to spend money on travel, restaurants and cars. Retailers and consumer product companies that serviced cocooners suffered. A new generation of single-serve coffee makers, for example, launched with much fanfare just as the cocoon burst. They offered new style brewing and fancy grounds, and were supposed to challenge Starbucks. But consumers didn't rush out buy them, and an early proponent, Applica, was losing money on its system only about a year after launching it in 2004. Around the same time, retailers that had made gains selling to cocooners, including Lechters, Waccamaw and Linens 'N Thing, began to go bust.

Things have changed recently, said Peter Goldman, an analyst with NPD Group, a market-research firm. A range of home and home entertainment products has performed better than expected recently, suggesting the consumers are once again returning to the domicile as a secure place to spend their leisure time.

In this holiday season, single-serve brewers are driving the coffee maker sales, with fancier systems from Keurig doing particularly well, Goldman says. Notably, coffee makers usually aren't big gift items ?€" their sales don't swing much with the holidays ?€" but they've emerged as such this year. Of some benefit to hard-pressed retailers, cocooners "with the wherewithal" have proved willing to spend on big-ticket items they expect to last for a long time, he said, such as feature laden refrigerators, the sort that dispense ice cubes and water from the door.

Housewares isn't the only sector where cocooning looks to be in. Despite a general trend toward smaller and less expensive TV sets, said LG director of new product development Tim Alessi, consumers haven't bid prices down as much as feared in the holiday season. Sales of top-of-the-line sets, while a smaller proportion of the market this year, have been doing all right, again suggesting that consumers of both limited and more expansive means will spend to make their homes a little more hospitable.

A return to cocooning isn't going to jump start a recessionary economy, and it may not have come in time to save Pier 1, which reported that losses more than tripled in its latest quarter on a 20 percent decline in revenues. Still, it does suggest that some dollars are going to shift from other sectors into retailing. That could sustain companies such as Sears Holding, which has been investing in its home departments, that otherwise might have trouble surviving a long recession.