Thursday, 19 February 2009

The Shopper Of Tomorrow- Trading Down

(click on title to read) While the article is very provocatively titled, it does debate the issue with multiple perspectives.

The note poses a couple of interesting questions:

-Given the strength of the recession in Western markets, will the shopper of tomorrow really trade down?
- How do you define "tomorrow"? The next 6 months...the 2 years following a recovery?

Our stand on the debate is this:

Consumer buying habits, we believe, are established by the time he (she) is 18.
By that age, prpensity to shop/ save/ take risks are pretty well established. Only deep and sever (long term) shocks can then impact or change habits. We describe long term as not less than 5-6 years. This is our judgement.

Consumers in Western Europe and America have lived through a number of boom-bust cycles. No one in a boom cycle holds back expecting a recession. And pretty soon after a recovery, people return to their "natural state".

For example (and we pick this from the article) air travel and consumer spending pretty much rebounded after the dot com bust and the shock post 9/11.

Most people we have spoken to have decided to "postpone" purchase of the watch/ home or car they were planning. No one has yet spoken of downtrading to a motor cycle yet.

We believe marketers that plan for an economy to downtrade will be rather unprepared for the upswing.

On the other hand, and this should be interesting to observe, young people of the age of 12-16 in the US and Europe today will possibly behave very differenetly as consumers through their lifetimes.

"Marketers", notes the article, "do not ignite consumerism, but respond to the urge that comes from within. That comes from the interplay of society and the values and norms of the culture."

The great depression was long enough and severe enough for several generations to be impacted and be conscious of keep savings and consuming habits in balance.

In the absence of such a deep depression, we do not see tectonic shifts in consumer behavior.

Ritu and Venkat

A parallel note of interest: (Financial decisions are influenced by early experiences)

No comments: