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US Businesses Concerned by 'Cocooning' - 2001-11-17

Prices for cars, airline tickets and other items have been slashed in the United States since the September terror attacks in New York and Washington, in many cases, prices are half what they were a few months ago.

The bargain rates are an attempt to halt a pattern that market researchers call "cocooning." (Cocoons are protective coverings insects build around themselves as they pass from one stage of development to another.)

Market researchers says U.S. consumers have been seeking refuge in a cocoon-like lifestyle since the September 11 attacks, preferring to stay home with family and friends, and avoid travel or shopping.

"Cocooning" may be reassuring to consumers, says Jim Lustenader of the marketing research firm DVC, but it is a nightmare to those trying to sell things. "They want to see people get back into their routines and then eventually they will be able to get the sales revenues up," he says. "So there's a tremendous amount of incentive in the market place right now, retailers offering zero financing on major purchases or not having to pay anything until the middle of 2002."

Those incentives have created mixed results. Sales skyrocketed during October, but profits suffered from the price cuts.

And the "cocooning" pattern was evident, with record numbers of shoppers buying from catalogues or the Internet rather than venturing out to stores.

Dennis Lombardi of the marketing firm Technomic says this "cocooning" has dealt the travel industry a terrible blow. "Some of the fine dine restaurants that were heavily dependent upon business travelers saw buying declines of 50 to 70 percent, just like many of the hotels saw 50, 60, 70, 80 percent occupancy drops," he says.

Such declines could have dire national economic consequences, American Restaurant Association president Steven Anderson says. "There are 844,000 restaurants and food service outlets around the country employing 11 point three million people. The restaurant industry is the largest private sector employer in the country," he says.

But while expensive restaurants are having problems, Dennis Lombardi says fast food chains are not. "Having meals prepared by someone other than a family member has become a way of life," he says. "A large number of meals are prepared foods that people take home from a fast food operation."

Fortunately for the food industry, Mr. Lombardi says, today's time strapped U.S. family, which often has both parents working, does not have time to cook, and "cocooning" has not altered that trend.