3 March 2009

Consumers in a downturn: a new spending habit? (part 1)

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Grant McCracken
The business channel of The Atlantic Online published this weekend the first of two articles by Grant McCracken on the implications of the recession on consumer habits.

This article just deals with three variations of a mere quantitative change. The qualitative change — where consumption patterns might change in kind and not just in quantity — will be addressed in a second piece.

What will the current downturn might mean to consumers? Will their habits change in lasting ways? Could we return from the downturn to discover that consumers are a very different animal, that our economy runs on new principles. David Brooks wondered recently whether we might someday look like abstemious Amsterdam. There is a scarier prospect: that we might go the way of Japan. […]

Consumers scales back existing consumption habits. They buy the same things, roughly speaking, but they shift from expensive to cheaper versions, from big quantities to small quantities. This suggests a shift from European luxury cars to Japanese sedans, from luxury goods to something more generic, from national brands to store brands, from eating out to eating in, from steak to hamburger.

The logic is a simple diminution, a quantitative change that produces no qualitative change. The world of consumer demand remains what it always was, scaled back for the moment in a managed retreat. When trust, job confidence, credit and prosperity are restored, the consumer will come charging back. All is forgiven. All is forgotten. We will party like it’s 1999.

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