With Uncertain Economic Climate, Consumers Make Changes

Adrienne Radtke plans to keep riding her bike to work even if gas prices drop. Steve Pizzini got rid of his Cadillac Escalade in favor of a 16-year-old Acura and doesn’t expect to have another gas-guzzler.“I had a paradigm shift,” Mr. Pizzini, a financial analyst, said. “I spent the money on a nice car. But to me, it’s not worth it. I don’t think I will go that route again.”Every economic downturn changes shoppers in some way. But this time, experts say the new behavior — fueled by higher gas and food prices, tightening credit, and a slumping housing market — are the most dramatic and widespread that they have seen since the mid-1970s.So retailers, marketers, and investors are all trying to figure out which habits shoppers will keep and which they will drop when the economy recovers. Will the people who switched to store-brand ice cream go back to Breyers or Edy’s? Will shoppers return to department stores or keep looking for labels at T.J. Maxx?“We are looking at stuff that reminds me of the 1970s,” Patricia Edwards of investment manager Wentworth Hauser and Violich said. “Americans have seen a huge amount of their balance sheet evaporate. The effects will be more lingering.”The president of WSL Strategic Retail, Wendy Liebmann, says people’s new spending patterns are forcing companies to change the kinds of products they sell and tweak their marketing to appeal to cost-conscious shoppers. She points to the last big recession of the early 1990s that helped trigger a fundamental shift in retailing as affluent shoppers started buying at discounters as well as upscale stores.Ms. Radtke, 31, who holds down two jobs — at a veterinarian’s office and at a flower shop — recently picked up shoe glue to fix the soles of her worn sneakers. She’s buying store-label soups and crackers and bought a bike for her commute after not having ridden one for five years.“We weren’t big spenders, but now we are watching our money more,” Ms. Radtke, of Manitowoc, Wis., said. “Even if I fell into a pile of money, I still wouldn’t be spending a lot.”According to a survey released Thursday by market research company Nielsen Co., which tracks consumer habits, about 2/3, or 63%, of consumers are cutting spending due to rising gas prices, up 18 percentage points from a year ago.According to the study, which queried nearly 50,000 consumers by e-mail during the first week of June, 78% of them are combining shopping trips and 52% are eating out less often. Consumers are also cutting more coupons, doing more of their shopping at supercenters and buying less expensive brands, the survey found.A rebounding economy may let some consumers revert to their old ways — like people who switched to smaller cars when times were hard in the 1970s but flocked to sport utility vehicles when gas got cheap again. But with more economists believing that the current woes will last well into next year, many think the underlying frugality will linger. Some Americans say their parents or grandparents affected by the Great Depression are still hoarding buttons and squeezing out several soup meals from ham bones.“I shop cautiously,” an 88-year-old resident from Berkeley Heights, N.J., Edna Sott said. “I would say that is a hangover” from the Depression.The chief marketing officer for public relations agency Porter Novelli, Marian Salzman, cites a “Depression mentality” that’s making people “rethink their optimism in the economy.”The widening gap between discounters and mall-based apparel sellers was evident in monthly retail sales figures released last week. The International Council of Shopping Centers-UBS tally of 38 stores found that same-store sales at discounters rose 5.1% in June and 9% at wholesale clubs. Discount giant Wal-Mart Stores Inc. posted a robust 5.8%, its best June performance since 2002.At department stores, though, same-store sales — or those at stores opened at least a year — dropped 4.1%.“People are spending money on food and the products they need to sustain life,” a senior vice president at Nielsen, Todd Hale, said.He noted sharp declines in visits to clothing, office supply, and hardware stores. He also pointed out that sales of store-brand products in grocery items are up 9.1% for the year ended April 19, while sales of branded products rose a more modest 3.9%. More than half the sales growth from store label grocery items is now from dairy like milk and cheese, an area that has seen soaring inflation.

With Uncertain Economic Climate, Consumers Make Changes

With Uncertain Economic Climate, Consumers Make Changes

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