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With new shopping behavior data and demographic trends heralding a lasting shift in the wake of the recent recession, retailers and suppliers will have to adapt to consumers’ new shopping patterns to thrive in the marketplace currently and during the post-recession recovery, according to a report from PricewaterhouseCoopers, LLP (PwC) and Retail Forward, a company of global retail insights and consulting business Kantar Retail.
“The New Consumer Behavior Paradigm: Permanent or Fleeting?” found that shoppers will be more deliberate and purposeful in their spending, since conspicuous consumption is being replaced by more conscious or practical consumerism. Deal-seeking at any cost will yield to more purchase selectivity and the use of shopping techniques and tools implemented during the economic downturn. Further, the affluent segment of Generation X and the young Generation Y will lead spending as the economy recover.
“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,” noted Lisa Feigen Dugal, U.S. retail and consumer practice leader at New York-based PwC. “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.”
The report further found that retailers should make promotion and savings-related information more easily accessible across all shopper touch points. Additionally, the widespread availability of online resources and mobile phone shopping apps has made it easier than ever for consumers to locate specific items, necessitating optimized retail and manufacturer search engines and paid-search vehicle activities.
In its assessment of the new shopping environment, the report stresses that although shoppers will hold on to some of their recession-inspired behaviors, the post-recession shopper will be more purposeful than panicked. The consumer will engage in a more reasoned and rational trading down, retaining such deal-seeking behaviors as coupon use and comparison shopping.
As shoppers’ wants are gradually added back into the equation, trading-down behavior connected with the choice of retailer, product or brand will fall off somewhat, but private label will remain a considerable contender because of their ever-higher quality and low cost —retailers don’t have to advertise or promote them to the same extent as national brands.
Research findings included in the report suggest that one-fifth of consumers will continue not to buy items they deem too expensive, leading to contracted luxury and gourmet foods markets. A more reasoned approach to spending on luxury and non-discretionary goods means that shoppers will place a premium on goods they consider timely, useful and versatile.
“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,” observed Mary Brett Whitfield, SVP at London-based Kantar Retail, part of the Kantar Group of WPP. “Retailers and suppliers can take advantage of this ‘frugal fatigue’ and offer affordable do-it-yourself alternatives to pricier products. For example, an at-home substitute to an expensive spa treatment or restaurant-quality meal takeout options that replace dining out will resonate with consumers during the post-recession.”
In the past two recessions, baby boomers quickly fueled the recovery, but this time around, the demographic has been badly affected by the recession at a life stage when financial commitments are pressing and retirement is nigh. Therefore, marketers must look to the smaller Gen X generation and large Gen Y groups to drive growth in the early stages of the post-recession recovery. Among Gen Xers, one segment pegged to have a significant positive impact on spending is “up-market affluents,” due to their life stage needs and higher-than-average spending potential.
A higher proportion of Gen Y’s income is discretionary because of fewer debts and a less-urgent need to amass wealth in the present, compared with older shoppers. Additionally, since this generation is used to instant gratification and demands the latest gadgets, spending on technology items like MP3 players and smart phones will stay a priority and create unique opportunities for tech-oriented retailers.
“Retailers and suppliers must realize that there will not be a wholesale return to previous shopping patterns and behaviors,” says PwC’s Dugal. “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.”
An electronic copy of “The New Consumer Behavior Paradigm: Permanent or Fleeting?” is available at www.pwc.com/us/retail or www.retailforward.com.