Boston, June 28, 2010—A profound evolution in how consumers feel about spending is under way throughout the world, but especially in mature markets, according to a new report published today by The Boston Consulting Group (BCG). Yes, the recovery seems to have finally arrived in some markets, but no, that doesn’t mean shoppers are returning to precrisis behavior. In a backlash against overspending, shoppers are seeking bargains even when they don’t have to, and they are putting home and family above ostentatious luxury.
BCG’s 2010 report on global consumer sentiment, A New World Order of Consumption: Consumers in a Turbulent Recovery, finds that pessimism is down from peak levels in early 2009, but anxiety continues to be higher than before the downturn in many markets and extremely high in Spain and Mexico. “Still, the anxiety that consumers feel far outweighs their sense of personal hurt from the downturn,” notes Patrick Ducasse, a Paris-based senior partner and a coauthor of the report. “Reactions to the crisis were, for many, driven more by anticipation of personal economic hardship than the actual experience of it.”
Differences Among Countries, Categories, and Consumers Should Be Noted
Looking at averages across markets can be misleading. Although expectations of a sluggish recovery are rising in mature markets, consumers in China, India, and Brazil—which experienced a slowdown rather than a full-blown recession—are much more optimistic and willing to spend. “Companies face a new world order of consumption as they head into a multispeed recovery,” said Catherine Roche, a Düsseldorf-based partner and also a coauthor. “It will require them to rethink their growth expectations and develop a highly de-averaged approach.”
The United States continues to struggle with personal debt, and anxiety levels in Russia are high. Although most Europeans have yet to feel the brunt of the downturn, anxiety in Germany was up considerably in the past six months with mounting disappointment in the local government and concern over Greece’s unfolding insolvency.
Spending also differs by category and demographics. “Products for the home, and even some luxury categories, are seeing a resurgence,” notes Emmanuel Huet, leader of BCG’s Center for Consumer Insight. “Among consumer segments, companies can look to women, young singles, and couples without kids as groups with the most buoyant attitudes for continued spending.”
The authors, who have been tracking spending trends for the past several years, describe eight powerful shifts in attitudes and shopping patterns. Some were present before the economy weakened, but they have intensified during the downturn and are clearly lasting into the recovery:
• Values are shifting as consumers rank home, stability, and the environment considerably higher than luxury and status.
• A bargain-hunting mindset remains in full force—consumers are somewhat less likely to defer nonessential purchases but they remain more committed than ever to shopping around for the best deals.
• Green products are still popular, but they need to demonstrate that they have economic as well as altruistic value.
• Consumers willing to spend still need a good excuse.
• Consumers remain more open to trying private labels and alternative channels (especially the Internet), and they are sticking with them.
• Cocooning—staying home—is still going strong.
• Trust in institutions, especially banks, remains bruised with the news of big bonuses on the heel of bailouts.
• U.S. consumers, in particular, are continuing to avoid big credit-card balances and heavy debt.
Winning in the New World Order: An Action Plan
BCG has identified six best practices that companies can employ to attract postdownturn consumers:
Accelerate product innovation for the recovery. Feature quality and craftsmanship, especially in categories of health and wellness, home furnishings and appliances, and affordable luxuries.
Upgrade consumer insight capabilities. Pinpoint opportunities for differentiation and growth in an uneven recovery. There are still pockets of opportunity everywhere.
De-average the go-to-market playbook to capitalize on robust areas of demand. Where price pressure remains strongest, reduce “perceived” price differences. Closely monitor the price spread between manufacturer brands and private labels.
Focus on the “last three feet.” Improve in-store presentations and sales-force effectiveness to capture consumers in the crucial space in which they make their final purchase decisions.
Replenish the war chest with aggressive action on cash and costs. Continue to reduce complexity, eliminate underperforming SKUs, divest noncore assets, and simplify processes.
Rethink the business model and develop new scenarios for a turbulent future. Anticipate the capabilities that will be needed in a much more uncertain economy, such as supply chain management, pricing, talent cultivation, and political lobbying skills.
Methodology
The eighth annual BCG Consumer Sentiment Survey that underpins this report took place between March and May 2010. The countries surveyed were Brazil, Canada, China, India, Japan, Mexico, Russia, the United States, and six countries in Western Europe—France, Germany, Italy, Spain, Switzerland, and the United Kingdom. Approximately 12,000 consumers were surveyed on approximately 70 product categories.
To receive a copy of the report or arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or gregoire.eric@bcg.com.