As soon as the recession is over, we'll stop brown-bagging lunch, but we'll keep cooking supermarket-brand food at home. In other words: Most of this talk about frugality being the new normal, retailers say, is just talk.
A survey of retail professionals finds that Americans will go back to their free-spending ways once they think the recession is over, except in those areas where they were already trimming back during the good times. The recession sped up some psychological changes for shoppers that were already under way, such as a new love for store brands and discount shopping, according to the survey, conducted by Dechert-Hampe & Co., a consulting firm for consumer goods manufacturers and retailers.
But behavior changes that were just a reaction to the recession, such as cutting back on shopping trips and dining out, will fade away as soon as consumers feel good about the economy again, said the study's authors, discussing the findings in a panel sponosred by online-industry forum RetailWire. "The American consumer in particular is not good at doing with less of anything, " said Ray Jones, Dechert-Hampe's managing director. "We're not very good at being frugal, like the Greatest Generation."
Retailers, manufacturers, and vendors said overwhelmingly that not all changes they've seen in shopping behavior this recession will endure. More than half thought that sticking to a budget would be a passing fad, while just under half think it's a longterm consumer trend. But most lifestyle adjustments seem more likely to be short-term fads; more than two thirds thought Americans would start dining out more, buying more new clothes, vacationing further from home, and buying American-made products. The findings, Jones said, echo the group's earlier consumer surveys.
A majority of respondents also said that money-saving adjustments made by consumers during the recession will turn out to be fads: buying smaller packages, bringing lunch to work, and trading down to cheaper brands. But some behavioral changes accelerated during the recession, like using store-loyalty cards, buying in-house brands, and using shopping lists. "In two years, we maybe moved five years down that path," said Jones.
The particularly strong growth of store brands during this recession has changed the shoppers' view of value, said Ben Ball, senior vice president of Dechert-Hampe. "This is one of the areas where the recession has definitely bent the curve," he said.
And store brands' staying power jibes with the fading popularity of trading down to cheaper brands, which is "more related to circumstances," said D'Anna Hawthorne, strategy director of Atlanta-based strategic retail-consulting firm MillerZell. "Buying store brands today ... is more of a matter of choice."
Many stores have put in great effort, improving their store brands to compete with name-brand products, said Hawthorne, who singled out Publix Super Markets (PUSH) and Macy's Inc. (M). Ball named Trader Joe's supermarkets and Gap Inc.'s (GPS) Old Navy division as two strong private-label players.
But when will the brown-bagging and scrimping stop? That's where the merchants and the shoppers split. Most respondents in the Dechert-Hampe survey say the recession is easing; 65.8 percent think it will end in the next 12 months, while 2.9 percent think it's already over. They're far more optimistic than consumers, said Jones, noting the latest reading of Michigan Consumer Confidence Index was down.
So we should anticipate more recession-chic marketing and budget-friendly advertising for a while, said Hawthorne.
"I guess it will still be relevant six months from now," she said. "We have always talked about how to get the better deal. I think it will continue to be part of the dialogue."
Merchants will have to take a very careful read on shoppers to navigate their way out of this recession, Ball said: "Watch your traffic and, more importantly, watch your transaction size. When your transaction size starts growing, that's when people are feeling better again."
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