March 9, 2010
Booz & Co.’s consumer survey reveals a “new frugality may be an enduring feature of the post-recession economy,” which has consumers saving more and deferring consumption, weakening brand loyalty. This entrenched behavior is unlikely to change even as the general economy rebounds, according to the Booz survey of 2,000 U.S. consumers.
This new consumer spending report reveals a picture of pervasive retrenchment in consumer spending that spans a broad range of consumer product categories. The survey also suggests that increased frugality may have become learned behavior, making many Americans more cautious and discerning consumers. The study added that these behaviors are “sticky,” and unlikely to quickly change as the economy shows signs of improvement.
For example, in the next 12 months only 9 percent of consumers intend to spend at pre-recession levels on household products, 10 percent on mobile phone service, 11 percent on health and beauty products, and 18 percent on apparel, clothing, and shoes, according to the report. Moreover, nearly two-thirds of consumers said they’d shop at a different store with lower prices even if it were less convenient for them.
“Frugal behavior is now considered trendy by many shoppers, and will continue for years to come,” said Matt Egol, a Booz & Co. partner. “In this changed environment, marketers need to develop deeper insights into shopper attitudes and behaviors in order to better align their product, pricing, and marketing communications strategies.”
However, a February expenditure study by Credit Suisse as reported in the Wall Street Journal indicates consumers are “returning to big-name brands after fleeing to lower-cost, private labels in the past year.”
For the four weeks ended Feb. 20, store brand unit sales rose 3.2 percent, down from a 4 percent gain in January and a 6 percent gain in July (excluding dairy), according to a Credit Suisse report by analyst Robert Moskow.
In February “branded-food” unit sales rose 2.4 percent compared with a 0.2 percent drop for the four weeks ended Jan. 23. Moskow did note, however, that some of the gains could be due to shoppers stocking up before and during recent winter storms, as well as more aggressive pricing and promotions among CPG companies to better compete with store brands.
Meanwhile, the Booz study reveals consumer attitudes and behaviors are forever changed: