Consumers scarred, new savings habits will stick despite lower gas prices

Articles
November 07, 2008

Consumers scarred, new savings habits will stick despite lower gas prices

Gasoline prices fell back to the mid-$2 range per gallon after a $4-plus summer put a major crimp in shopping patterns. Shoppers began to consolidate trips, make fewer store visits, plan their purchases more carefully, and implement numerous other savings strategies. While some media reports suggest U.S. consumers will quickly revert to their gas-guzzling, freer-spending ways once they believe fuel prices will stay at current levels or even recede further, Supermarket Guru believes otherwise. The collective shock to consumer confidence drove that measure down to the lowest levels in decades, retailing was horrendous in the third quarter, and scar tissue formed on the buying part of the consumer brain. Like our elders who are able to recall their tough times vividly, people won’t soon forget the economic turbulence of 2008. Especially with winter heating costs upon us, and some early snows already falling, people in the short term will find warmth in the cold cash in their wallets, and long term will appreciate the security that savings bring.

Gasoline prices fell back to the mid-$2 range per gallon after a $4-plus summer put a major crimp in shopping patterns. Shoppers began to consolidate trips, make fewer store visits, plan their purchases more carefully, and implement numerous other savings strategies.

While some media reports suggest U.S. consumers will quickly revert to their gas-guzzling, freer-spending ways once they believe fuel prices will stay at current levels or even recede further, Supermarket Guru believes otherwise. The collective shock to consumer confidence drove that measure down to the lowest levels in decades, retailing was horrendous in the third quarter, and scar tissue formed on the buying part of the consumer brain.

Like our elders who are able to recall their tough times vividly, people won’t soon forget the economic turbulence of 2008.  Especially with winter heating costs upon us, and some early snows already falling, people in the short term will find warmth in the cold cash in their wallets, and long term will appreciate the security that savings bring.

U.S. consumers quickly adapted to buying less. Once they got to know what savings felt like, they set expectations to trade down in the holidays and shorten their gift lists. Credit is harder to come by, and jobs seem less solid. Few are taking their household standing for granted in this economy.

Although eating out is also down and supermarkets benefit from that trend, CPG brands and their categories would do better still if they were less vulnerable to today’s negative buying mindset.  A recent Supermarket Guru/Readers’ Digest survey showed that brand name was only the #5 reason people selected a particular food in the store. It was named by fewer than half of respondents (46%), and it significantly trailed taste (88%), nutritional information (79%), ingredients (75%) and health attributes (65%).

This finding suggests that consumers will freely substitute in their purchase decisions to save—and brands will need the right product development and messages going forward to persuade these more scrutinizing audiences.