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Retailers must adjust to new consumer mentality

by Jason Hahn
Feb 03, 2009


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Jason Hahn/MEDILL From data provided by Leo J. Shapiro and Associates LLC


According to results of a national poll conducted in January by Chicago-based Leo J. Shapiro and Associates LLC and released in conjunction with Schafer Condon Carter Inc., more than half of the nation’s consumers say they have cut back on their standard of living.

For retailers this may present an opportunity to establish themselves as high-value brands to consumers who are price conscious, according to Owen Shapiro, vice president of Leo J. Shapiro, a market research firm.

"It’s a very difficult retail environment in general," Shapiro said.

The January report, "Buckling down for a tough year ahead," indicated that 59 percent of the 450 U.S. households polled said they feared being laid off or losing earnings in the coming months, a sizable increase from 43 percent who expressed the same concern in January 2008.

Thirty-eight percent of respondents said they had been affected in some way by layoffs during the past year.

Shapiro noted that times of "dislocation" allow some companies to excel and capitalize on the opportunities available, adding that "several of the major retailers today were actually started during recessions" by finding a significant niche.

"An increased focus on pricing helped Staples start in the recession in the 1980s," he pointed out.

Tim Condon, partner at Schafer Condon Carter, a marketing agency based in Chicago that focuses on consumer insights, said companies "can’t abandon marketing efforts, but what they have to do is react in proportion to the problem.”

"They have to use their money more wisely; they have to recognize that we have a consumer’s mentality now – that excess is on the way out," he said. “Sensible luxury” is going to be the watchword, Condon added.

However, he warned against retailers blindly dropping their prices to appeal to consumers.

"I think that everyone has to understand that low price does not equal value."

Joe Robles, a brokerage firm employee who was shopping at Books-A-Million in Chicago, wants to see retailers "either lower their prices or make less costly products."

Robles has cut back on some of his spending by buying generic products, especially foods. He said his standard of living has not been affected because he "always lived under my means, which helps now."

He expressed little sympathy for American consumers who "have lived beyond their means" and are suffering the consequences now.

Respondents to the poll expressed dramatic concern about the recent wave of layoffs, but not many actually experienced its effects, according to Shapiro.

"Right now there’s sort of a drop-off between the real bite of the recession and people’s responses," Shapiro said.

Condon agreed with this sentiment, saying that the general population was responding to the bad economic news whether they have been affected or not, "and that has a compounding effect."

In terms of income, 33 percent of survey respondents said they had seen year-over-year increases, while 33 percent said there was no change and 34 percent said their income had decreased. This compared to 50 percent, 30 percent and 20 percent, respectively, in January 2008.

Fifty-one percent of respondents said they had reined in their standard of living spending in January, compared to 43 percent during the same month last year.

Meanwhile, 67 percent of respondents said they had cut back on their clothing purchases, compared to 55 percent a year ago; Fifty-nine percent said they had cut back their spending on food, compared to 52 percent in January 2008; And 57 percent said they had decreased their driving in January to save money on gas, a sharp decline from 63 percent a year ago.

Robles said that despite the bad economy, "we’re still better off than many in the world… Live below your means and be grateful."

Shapiro said his family had "revisited some of our vacation plans" in light of the worrisome economy.

"I’m a pretty thrifty guy to begin with," Condon said.

His green lifestyle "comes with a certain level of thrift – less disposable, more sustainable," he said. "That right there knocks down your general costs of living."

Still, Condon said he tries to take the train more and is attempting to eat more responsibly.

"I think this is going to make America healthier and instill a bit of wisdom with respect to savings," he said.