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Have Americans Changed Their Spending Habits?

by: Michael Panzner August 08, 2008 | about stocks: IPD / IPS / PEZ    
Michael Panzner

Michael Panzner

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In some of my earlier posts (e.g., "Another Industry that Is Not Recession-Proof" and "Recession-Proof?"), I pooh-poohed the popular notion that certain sectors will somehow be unaffected by the powerful recessionary winds sweeping across America.

Record high debt levels, ultra-low personal savings rates, and a U.S. - and world - economy that has been overly dependent on a free-spending American consumer virtually ensure that the fallout from economic contraction will be widely felt.

Even the consumer staples sector, which has been seen as something of a safe haven, is unlikely to come through the troubles ahead unscathed as competition increases and spending habits change.

It seems to me, for instance, that personal and household product companies have in recent years focused their attentions on "aspirational" shoppers, many of whom have tended to spend more than they could afford. In future, consumers like that will be few and far between.

Many major-brand makers also seem to have lost touch with how pricey their goods have become as a result of the numerous price increases that they were able to push through during better times.

Indeed, I've often wondered whether people will keep paying twice as much for Proctor & Gamble's (PG) Tide detergent, for instance, as for other brands. Based on my own experience doing laundry (I'm no slouch, by the way), rival - and cheaper - products seem to do as good a job cleaning clothes as P&G's iconic offering.

Well, it looks like growing numbers of Americans, either out of choice or necessity, are starting to reevaluate their habits as far as spending on "necessities" is concerned. In a post at MSN Money's Top Stocks blog, "Pinching Pennies: Consumers Switch Brands," Anthony Mirhaydari details what could be a potentially far-reaching shift in behavior.

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This article has 5 comments:

  •  
    Aug 08 12:12 PM
    I'm talking to more and more people who've come to realize that our "culture of consumption" is not terribly satisfying.

    That said, it remains to be seen if they'll make permanent changes in their buying habits.
    Reply
  •  
    Aug 08 12:24 PM
    [Indeed, I've often wondered whether people will keep paying twice as much for Proctor & Gamble's (PG) Tide detergent]

    It appears to me that the predominant thinking for the last decade or more has been to find ways to raise prices without adding value... "sunsetting" software that worked perfectly well, etc.

    A return to old-fashioned principles would be welcome change. I think companies are going to have to do more than smoke, mirrors and BS to charge premium prices.

    [rival - and cheaper - products seem to do as good a job cleaning clothes as P&G's iconic offering.]

    You mean that bright, vibrant orange bottle doesn't get clothes cleaner?
    Reply
  •  
    Aug 08 06:09 PM
    Good points RM. The term 'value proposition' doesn't seem to be heard as much these days. Cheaper is not always better but in Tide's case cheaper is better. We should make TV commercials together, LOL
    Reply
  •  
    Aug 09 10:08 AM
    Indeed. We are surrounded by products that survive on nothing more than marketing. Consumer product marketing over the past 10-15 years has been driven more by a "hit" culture, meaning making a marketing splash around a huge margin lower quality merchandise, than it has been around building sustainable businesses....all a result of the topping of a supercycle and the attendant almost hourly scramble to make even higher earnings against a turning tide.

    This has been fueled by the late 20th century convergence of mass manufactuing (superpowered by CAD/CAM efficiencies), mass media (superpowered by TV ), and mass marketing to the mass affluent. Even lower socio-economic groups participate now through mass retailing (Walmart and the arrival of big box retailing).

    I doubt most of the people reading this have seen life today at a Walmart in Flint Michigan. Lots of America at the start of the new century not looking very nice.
    Reply
  •  
    Aug 10 03:31 PM
    I don't think most Americans have yet changed their spending habits and will not do so willingly. They have exhausted their home equities and are now maxing out their credit card limits. Next they will use up their IRAs and 401Ks and then, finally, the consumer based lifestyle party will be over. The difference between Tide and the store brand will be meaningless when you don't have a washing machine or electricity to run one.
    Reply
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