A shift in psychology for shoppers, retailers

“Gimme!” is a common plea of youngsters, particularly when they are on a shopping expedition. Older people have mimicked that, but probably in a less emphatic manner.

The same attitude has persisted throughout much of the previous decade, but of course in a more refined manner. The exclamation mark in the “Gimme!” tagline perhaps should have been a question mark instead.

Asked whether or not they want more “stuff,” our consumers now are responding with an emphatic “No.” The speed with which retail sales have plummeted has caught retailers and manufacturers by surprise. Yet they should have realized the close correlation between changes in retail sales and variations in disposable personal income, the amount available for spending after taxes. Over an extended period, a change of 10 per cent in real income was associated on average with a change of about 10 per cent in real purchases.

For some years, there has been a reallocation of personal consumption expenditures. The trend has been toward spending increasingly larger amounts of personal disposable income for services, and a declining percentage of the total for goods.

In light of those trends, in general, retailers have been hurt, even before the business recession hit consumers’ wallets. In response companies tried desperately to prop up revenues with a variety of promotions, advertising and other marketing ploys to no avail. As they battle with those problems, marketers also are pondering what longer-term changes in consumer behaviour have been triggered by the recession.

It is tempting to conclude that, once economies rebound, consumers will start spending as they did previously. Still there are good reasons to think there is a profound shift in shoppers’ psychology.

The recession’s damage to consumers’ incomes and wealth will linger.

That has led to a tightening of purse strings by shoppers. Retailers also detect a distinct change in people’s behaviour. Until the downturn, many had come to assume that “affluence” was the norm, even if they had to go deeply in debt to pay for gadgets and baubles. Now, many people no longer seem obsessed by the desire to consume; instead, they are planning to live within their means, and there has been a backlash against their former patterns and also a wave of anti-business sentiment.

So, for years to come, many households will be focusing on savings, splashing out occasionally. Some firms recently revived a savings plan used many years ago, known as a layaway program, under which a consumer can make a down payment on an item that is held for a fixed period while the rest of the cash is generated to buy it.

Suspicion and wariness with business will be a continuing feature of people’s attitude toward business and retailers specifically. Integrity and service will be essential to lure customers back into a buying mood.


Bruce Whitestone