Recession-based spending patterns may stick
July 26, 2009 | By David Bohan
There's a new frugality brewing.
In addition to the 5.7 million jobs lost since the start of the recession, a recent Hewitt Associates survey revealed that another 16 percent of American workers are living with reduced pay.
Changes in consumer spending patterns are an inevitable byproduct of the downturn.
The latest victims are recent college graduates.
In addition to coming into the work force at one of the worst times for job creation in memory, spending for graduation gifts is down 11 percent from last year.
The National Retail Federation reports that spending will drop to $45.33 per graduate.
Since almost 60 percent of gifts are cash, Hallmark might need to consider adding a coin slot for next year's graduation card offerings.
Even with the recent rise in consumer confidence, many experts predict this newfound frugality will remain long after the economy recovers.
The New England Consulting Group reports that people who are buying store brands don't plan to trade up when economic conditions improve.
Recession-based shopping patterns will continue.
Mary Beth Whitfield, senior vice president of Retail Forward, a consulting company that works with retailers and consumer goods companies, says consumers are "already thinking about consuming less or becoming more conscious when they do consume."
Retail Forward's monthly tracking surveys predict that between one-third and one-half of consumers will continue using various money-saving strategies after the recession ends.
"The new generation coming into rising adulthood, this millennial generation, is much more oriented to planning, looking ahead, and taking a more sober and conventional approach," says another examiner of American behavior, Neil Howe, author of the 13th Gen and Millennials Rising.
Michelle Singletary, personal finance columnist at The Washington Post, agrees.
"Clearly the recession has caused some people to hit the reset button on what they really need," she wrote, but the definition of "need" is changing.
Singletary reported on a Pew Research report that noted almost one-half of us consider our cell phones a necessity.
So what does this new consumption look like?
Baysie Wightman and Tina Bronkhorst, account planners for digital advertising agency Digitas, have studied this question and report that mothers, who function as most families' chief financial officers, have changed their stripes in these ways:
- Shopping smarter. Not necessarily less, but prioritizing and making use of the Internet to compare and find discounts.
- Nesting. From brown bag lunches to at-home meal preparation, households are doing things for themselves.
- Practical greening. Adjusting thermostats helps the environment and the pocketbook; homegrown vegetables are making a comeback.
- Old-fashioned entertainment. Board games and movie rentals at home are popular, and local festivals and events provide close-to-home family time.
- Making it last. Hanging on to the family car for another year or keeping the wardrobe for another season are becoming a habit.
- Focus on the family. All decisions are being based on what is best for the kids and family.
The future is looking surprisingly like consumer behavior of the 1950s and 1960s when Nat Vines of Advertising Age says the mantra was: "We'll borrow only when we must. We'll pay bills and debts immediately. We'll save up before we buy big things."
I'd say we are living through a time where "everything old is new again," or as Yogi Berra supposedly said, "It's like déjà vu all over again."