The FINANCIAL — June 2014 marks five years since the official end of the recession, and a lot can change in five years, especially when it comes to consumer behavior.
The FINANCIAL — June 2014 marks five years since the official end of the recession, and a lot can change in five years, especially when it comes to consumer behavior. When we compare the U.S. landscape of today with how it looked when the Great Recession ended in June 2009, we see an interesting dichotomy of consumer behavior. That’s because many of the people who have bounced back are fundamentally changed as a result, while countless others have yet to actually regain their footing.
Economically, the U.S. is in a better place than it was in mid-2009, but not everyone is benefitting—and the country isn’t out of the woods just yet. While Nielsen’s Consumer Confidence Index showed a six-point rise in the U.S. in the first quarter, bringing the country’s consumer sentiment to the optimism baseline of 100, Bloomberg recently reported that GDP fell during that same quarter for the first time since 2011. Economists have attributed the dip to the fact that businesses cut back on investments and inventories—a trend many believe can’t last. That’s because, despite trepidations, many consumers are spending again, as discretionary spending increased 2 percentage points in the first quarter.
That’s not to say consumers aren’t saving and preparing, however. Americans are complementing their out-of-pocket expenditures on clothes, tech, entertainment and home improvement by increasing their savings as well (44% said they were saving in Q1 2014, up from from 39% in Q4 2013). So if consumers are spending and saving more, where’s the rub? According to recent Nielsen surveys, Americans say they’re adjusting their behaviors by paying off less debt than they were five years ago. Many also report having more money to play with, as only 20 percent of Americans say they currently have no discretionary income, down from 25 percent in 2009.
THE RECESSION LINGERS FOR MANY
The biggest change is that significantly fewer people feel like they’re still in a recession. In first-quarter 2009, that figure stood at 95 percent. As of first-quarter 2014, it had dropped to 63 percent. But the past five years have also jaded many consumers. In fact, more people today think they’ll still be in a recession in a year than those who thought that way in 2009 (61% vs. 54%).
The reality is that the environment five years ago flipped many Americans into very unfamiliar and unpleasant realities. And recovery is a longer road than a mere five years. Against that backdrop, it’s no surprise that, despite the positive momentum, the economy, jobs and debt remain Americans’ top concerns today. The upside, however, is that the concentration of people with these biting concerns has diminished significantly.
Even with a fair amount of skepticism in the air, U.S. consumers’ hopes are growing stronger with every month that passes. Forty-two percent of Americans felt either excellent or good about their job prospects in the first quarter of this year, more than double the 20 percent at the start of 2009. People feel better about their money, too—59 percent of Americans now say they feel excellent or good about their personal finances, up from 47 percent five years ago.
CONSUMERS (AND MARKETERS) PICK UP THE PACE
Consumers live at a different pace than they did five years ago. Perhaps they have less time to shop, or perhaps they just like the convenience of being able to take care of their regular shopping needs from any of their various devices. So when we consider that 87 percent of smartphone and tablet users in the U.S. use their devices for shopping activities, it’s almost surprising that e-commerce doesn’t account for more of total retail sales. Today, e-commerce represents 6.2 percent, up from 3.8 percent in 2009. But don’t be fooled by the percentages: the increase in e-commerce over the period added more than $37 billion in sales.
Given the upswell in online activity, it’s not surprising that the retail landscape is much more fragmented than it was when the recession ended. Customers used to face a simple set of decisions when they got to the shelf, fueled by a few media touch points before they arrived. And an outgrowth of the fragmentation and choices is loyalty—or more often—disloyalty. In the U.S., the average brand loyalty level, across a subset of categories, is 22 percent, meaning 78 percent of consumers are not loyal to a specific brand.
The upside in this scenario is that technology can be just as good for brands and marketers as it is for consumers. More technology means marketers are able to reach across the multitude of platforms available to consumers. In a recent Nielsen/ANA cross-platform survey, when asked about the importance of integrated multiscreen campaigns in effectively delivering marketing messages, double the percentage of respondents expect them to be “very important” by 2016.
RECENT TRENDS AND FORECASTS PAINT AN OPTIMISTIC PICTURE
There’s no way to predict tomorrow, and it’s likely that the consumer landscape five years from now will look much different from today. There is something to be said for recent trends, however: Even though dollar and unit sales among consumer packaged goods have been sluggish lately, U.S. jobless claims are on a downward trajectory, pending sales of existing homes were up just before the spring selling season, and fewer Americans than predicted filed for unemployment in mid-May.
Consumers are spending, but they’re doing so with caution. At the same time, they’re exploring an increasingly fragmented landscape, and that’s likely to continue regardless of the economic scenario. In the end, it all comes down to choice and consumer needs, and today’s “needs” are different than they used to be. For example, lower-income consumers exhibit a bigger appetite for media than high-income consumers. In fact, they log almost 25 more hours per month consuming media than higher-income consumers. So regardless of what’s going on at any given time, companies, brands and retailers have no greater challenge than getting to know their customers and how best to connect with them. If they don’t engage with them, learn their priorities, and deliver in meaningful ways that create lasting value—beyond just the price tag—they’re likely to fade away while those that do win out.
Discussion about this post