Consumers becoming more conscious of spending habits, report finds
NEW YORK Shoppers are expected to be more deliberate and purposeful in their spending going forward, as conspicuous consumption will give way to more conscious or practical consumerism, concluded a new report released Tuesday from PricewaterhouseCoopers and Retail Forward, a Kantar Retail company.
While the report suggested consumers will not be as apt to “trade-down” as the economy recovers, consumers who’ve discovered savings through private label are not expected to return to brands.
“The recession has tempered the rampant and excessive consumption, giving way to more mindful choices as shoppers increasingly seek out online and mobile coupons, comparison shopping sites, and loyalty and rewards programs,” stated Lisa Feigen Dugal, PricewaterhouseCoopers U.S. retail and consumer practice leader. “As consumers become more invested with using these tools in their shopping experience, retailers will need to adapt their strategies to appeal to this new generation of consumers.”
According to the report — titled "The New Consumer Behavior Paradigm: Permanent or Fleeting?" — retailers need to make promotion and savings-related information more easily accessible across all shopper touch points, especially as the explosion of online resources and new mobile phone shopping apps has made it easier for consumers to find a specific item.
As shoppers’ “wants” are steadily reintroduced into the equation, trading-down behavior related to the choice of retailer, product, or brand will lose some traction in the recovery, the report suggested. However, private-label brands will remain a significant factor due to their increasingly higher quality and low cost since retailers don’t have to advertise or promote them to the same degree as national brands.
Research findings included in "The New Consumer Behavior Paradigm" indicated that as many as 20% of consumers will continue to forgo buying items that seem too expensive, resulting in a contraction for the luxury and gourmet foods markets. The emergence of a more thoughtful approach to spending on luxury and non-discretionary goods means shoppers will place a premium on goods that have qualities of timeliness, usefulness and versatility.
“Although we’re starting to see signs of shoppers getting tired of trading down, they remain cognizant of today’s economic realities and need to balance that with personal desires to reward themselves,” stated Mary Brett Whitfield, SVP at Kantar Retail. “Retailers and suppliers can take advantage of this ‘frugal fatigue’ and offer affordable do-it-yourself alternatives to pricier products.”
In the past two recessions, Baby Boomers quickly led the recovery. However, this group has been hit hard by the recession at a point in life when their financial commitments loom large and retirement is on the horizon. Marketers will need to look to the smaller Gen X generation and large Gen Y population to fuel growth in the initial stages of the post-recession recovery. Among Gen X, one segment that will have a meaningful positive impact on spending is “up-market affluents” given their life stage needs and above-average spending potential.
A higher proportion of Gen Y’s income is discretionary as a result of fewer debts and a less-urgent need to accumulate wealth in the immediate term relative to older shoppers. Furthermore, as this generation is accustomed to instant gratification and demands the latest gadgets, spending on technology staples-like MP3 players and smart phones-will remain a priority and create unique opportunities for tech-oriented retailers.
Feigen Dugal added, “Retailers and suppliers must realize that there will not be a wholesale return to previous shopping patterns and behaviors. To succeed during the recovery, they will need to recognize that some shopper segments will still be in a ‘recession’ shopping mode. They must make sure consumer wants are aligned with the marketplace and turn more ‘need to have’ desires into the ‘must have’ needs of Gen X and Gen Y shoppers.”