You are here
A new survey from Boston-based L.E.K. Consulting shows that despite optimism expressed by many economists and some media figures about the economy, U.S. consumers are actually more pessimistic currently than they were when a similar survey was conducted in October 2008.
Of the demographically representative set of over 3,000 consumers surveyed:
--About 75 percent to 80 percent said they were concerned about either losing their job or someone in their immediate family losing a job
--About 50 percent think the economy won’t improve for at least two years
--Consumers estimated that their overall decline in spending was 8.8 percent vs. a year ago -- about twice as much as they reported last October;
--About 60 percent said they plan to spend less over the next six months
The study found that consumer spending has decreased across all categories over the past 12 months, including such staples as groceries, which were stable in the October survey.
Views toward personal finances have also become more negative. While the recent jump in household savings rates to 4.2 percent has been widely reported as an indicator of recovery, it’s still well below the 7 percent average over the past 60 years. In fact, one-fifth of the consumers surveyed said they plan to save “a lot more” than they have historically after the end of a recession.
“One key finding of the study is that there are indications of seismic shifts occurring in how U.S. consumers plan to behave in both the near-term and long-term,” said Andrew Rees, VP and head of L.E.K.’s Retail Practice.
According to the study, 45 percent of consumers are now actively trading down to less expensive brands, and an additional 30 percent said that they’re mixing in less expensive brands with their usual purchases. This means that 75 percent of consumers are purchasing cheaper brands.
Fifty percent of consumers are buying items at the same price, but buying fewer of them. Half said they’re buying lower-priced items this year vs. last, and of this group, about 70 percent said that when they buy, they also buy fewer items.
Further, about 40 percent of consumers said that they’re actively shopping at less expensive stores, and an additional 25 percent said they’ve been mixing in some shopping at less expensive stores with their regular stores. The fact that about two-thirds of consumers have switched to less expensive stores is a significant shopper shift from traditional to discount channels.
The finding that should most concern retailers and CPG companies in the long term, however, is that 40 percent of respondents said they would keep spending less even when the economy improves.
“Retailers and consumer goods manufacturers would do well to look beyond the recent fluctuations in consumer sentiment (which still remains at historic lows) and recognize that not only have consumers made fundamental changes in their buying behaviors, but that many of these changes could be much more long-lasting than they’d hoped,” said Dan McKone, VP and co-author of the study.