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The holidays bring with it extra expenditures that can be difficult to manage especially in light of the current economic situation. The Bureau of Labor Statistics reports that, over the past 24 months, consumer prices have risen 7.8%, making it increasingly difficult for consumers to keep up with the essentials.
Information Resources, Inc., an independent market-data firm, recently conducted a survey of how consumers’ shopping and spending habits have changed in recent months. The results, while not surprising, are quite interesting. They report that the majority of consumers earning less than $100k per year feel they are worse off financially than they were a year ago. And it is clear that consumer shopping attitudes and behaviors are shifting rapidly in the face of economic uncertainty.
In a growing trend, IRI reports that private label or ‘store brands’ secured a higher share of consumer dollars over the past several quarters as price increases took hold. Although overall sales of name-brand goods are still higher than those of store brands, primary household shoppers say they are starting to buy store brands because they are significantly less expensive. In fact, private label products cost, on average, about 30% less than their brand name counterpart. That discount varies by product type with the biggest discounts being found with beauty and personal care items (63.7%) and healthcare items (47.2%).
Increasingly, consumers find rising food and energy costs are leading to an inability to afford items they have purchased in the past. They are now forced to focus on how to afford "essential" products. Affordability is becoming a requirement to make it onto the list of consumer ‘must-haves". IRI reports that consumers are being more frugal on some of the basics as the following chart indicates:
Percent of Respondents
Go to spas/hair salons less often
Do more at-home beauty treatments
Try to make cleaning products last longer
Try to make personal care products last longer
Share more products across household members (e.g. shampoo, toothpaste)
Buy fewer prepared meals at grocery store
Eat out less often
Buy few convenience foods / eat more from scratch
Sources: IRI Economic Trend Database ™; IRI Attitude Link ™ Survey of 1,000 Consumers, August 2008
As more consumers avoid the additional expense of dining out and eating prepared/convenience foods, there has been a return to the "family dinner". Home-cooked meals made from fresh ingredients and increased spending on "home luxuries" such as wine to accompany dinner are becoming more popular. IRI reports that wine sales at all price points have risen significantly in the past 12 months The growth is highest in the $15-19.99 per bottle segment at 19.3 percent, but even at the $20+ per bottle range, sales have grown by 8.6 percent.
Unlike with recessions of the past where shopping patterns return to normal after a 12 – 18 month period, economists predict that it is highly unlikely that these new consumer trends will change any time soon. Spending habits acquired during this economic crisis are likely to be much longer term.