One thing I never understood was the assumption among some marketing mavens I know, that certain types of consumer expenditures were simply never going to be cut. Confidence was particularly high regarding how women spent money. “Oh, lipstick always does well in recessions, it’s a cheap pick-me-up.” “Women don’t cut back on hair color” (meaning not just having their hair colored, and not just going to a salon, but remaining loyal to the particular salon/colorist they were patronizing).
Um, what about “downturn” don’t you understand? The unspoken assumption may have been that past recessions hit blue collar workers harder than the brand-obsessed classes. This one is administering pain to all income strata, and one of the side effects is trading down to cheaper products and cutting back on services.
From the Wall Street Journal:
When Summer Mills visited her local CVS drugstore recently, to save a few dollars she bought the store-brand facial scrub rather than the Olay version she normally uses.
“I thought I’d be able to tell the difference, but I couldn’t — I looked at the ingredients and they seemed almost the same,” says 30-year-old Ms. Mills, a stay-at-home mother of two in Ardmore, Okla. On her next shopping trip, “I’m going to buy the store-brand moisturizer and cleanser — it’s less money.”
Yves here. Moisturizers are one of the many ripoffs foisted on the fairer sex to keep them broke and dependent on male support. Any dermatologist will tell you (unless they are pushing their own product line, of course) that all it does is seal water into your skin, not add “moisture”. The trick is putting something on the skin that will keep the water in after you wash your face. I was told that one derm at a national conference recommended Crisco (clearly to express her dim view of marketing hype). Back to the story:
Many Americans are changing their everyday purchases and abandoning brand loyalty, prompted by the persistent financial pressure of rising food, gasoline and electricity prices. Over the past 24 months, consumer prices have risen 7.8% according to the U.S. Bureau of Labor Statistics. From coloring hair at home instead of at the salon to trying cheaper laundry detergents, new evidence indicates that Americans are modifying even minor household habits to save money.
Kimberly-Clark Corp. CEO Thomas Falk noted that sales of the company’s potty-training pants, once one of the biggest sales-growth products in the baby aisle, have fallen off in recent months. “You’re seeing consumers leaving children in diapers longer…the diaper is less expensive per piece than a training pant,” he said in a recent conference call in which he announced a 9% decline in third-quarter earnings.
Shoppers are even buying toilet paper differently. “When they get to the end of the month, and they’re out of paycheck, they may buy a smaller-count pack,” Mr. Falk said. “You’re seeing that shift in consumer behavior during a pay-period cycle more than we maybe have in the past.”….
…,about 40% of primary household shoppers said they started buying store-brand paper products because “they are cheaper than national brands,” according to a September report by market-research company Mintel International, which interviewed 3,000 consumers. Nearly 25% of respondents reported that it is “really hard to tell the difference” between national brands and store brands of paper products. Store brands on average cost 46% less than name-brand versions, Mintel found….
Though low-income consumers have been cutting back for the past several months, now upper-income shoppers — those with household incomes of $100,000 or more — also are making significant changes, according to a new survey by IRI.
The report, titled “Shopper in Crisis,” found that 41% of upper-income consumers reduced spending on nonessential groceries, and a fourth of these consumers said they gave up favorite brands over six months in 2008. Nearly one-third of high-income shoppers said they bought more private-label products during the second quarter, up from about 20% in the first quarter of this year.
“This isn’t belt-tightening, it’s belt-notching,” says Thom Blischok, president of consulting and innovation for IRI. “These ritual changes are much deeper and happening much faster than we expected.”