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Rob Feldmann

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Why Consumers Will Stay 'Savvy' Beyond the Recession

Posted: 03/10/2012 19:27

When a country is out of recession, history has shown that consumers quickly revert to their old spending habits, however, evidence suggests that consumers will continue to be cautious with their spending long after the current recession ends.

In my opinion, the reasons for this are that not only has this been one of the longest recessions in history but also one of its worst casualties has been the retail sector. The downturn has caused the retail landscape to change dramatically and is likely to both permanently affect how the consumer spends and how retailers attract customers.

According to the Financial Times this August, consumer spending is currently at an all time low, with the consumer having to adapt its spending habits to suit the economic climate. But it is the length of time of this recession, five years and counting, that seems to be having a significant effect on consumer habits.

On average, previous recessions have lasted between a few months and a year, meaning that consumers had a short burst of tightening the purse strings before returning to a normal level of spending. But with the economic downturn nearing the five year mark‚ consumers are very used to curbing their spending and seeking out the best bargains. We also have a generation of young people who are in their mid-twenties that were bought into the working world with rising debts and spending cuts. I believe that this 'new generation' of spenders have therefore been programmed to 'shop savvy', and as a result it will be hard for retailers to convert them to the spending habits of pre-2007.

As expected‚ retailers have also developed their marketing strategies to help consumers spend savvier too. The supermarkets were the first to kick start this trend with clever marketing strategies and investment into their value brands. The supermarket price wars have always existed but the emphasis on value has been the main marketing device of all the big four for the last five years.

Whether it is ASDA's "Why Pay More" strapline launched in 2009 or Sainsbury's prosperous re-branding of its "Basics" range, they have all been focussed on selling the cost element to the consumer. Unfortunately, the clothing and footwear markets were slower to catch on and sales are still low. Mastercard warned in August that US retail sales are likely to slump this year and this trend is also predicted in the UK.

The slow down in the clothing market has resulted in a number of casualties on the British high street, with high profile administrations from retailers such as La Senza and Acquascutum.

These changes in the high street have established two distinct consumers. The first is a set of consumers focussed on value. They flock to the cheaper end of the market, buying only discount brands such as Primark and Pounland, both of whom have prospered in the recession. The second consumer is focussed on luxury brands and the higher-end of the high street.

They are still keen to buy their favourite luxury goods - but only if they are at the most affordable price. At BrandAlley, we specialise in offering luxury designer brands at up to 70% off. We have seen dramatic sales growth in the UK since we launched four years ago, and I believe that the change in consumers wanting 'affordable luxury' has helped our business grow.

Our sales were always pitched at the younger consumer and interestingly we are seeing the 50 plus age market shopping with us more. This is usually a 'hard to reach' demographic, as they have a high-level of disposable income and it's hard to change their shopping patterns, but they too are changing course in this recession. There is also evidence that the recession could be changing how we shop by moving us away from the high street and towards online. The latest ONS figures highlight that there has been a 14.2% increase in internet sales in last year and more than £500m is spent online each month. I realise that some of this can be down to change in lifestyles and technologies, but for shoppers eager to search out the best price, online shopping is the perfect way to conduct price comparison.

Unfortunately I cannot predict when we will be out of recession, but I am confident that when the economy does recover the retail sector will still have to focus on value. Whether it is the high street or the luxury brands, value will remain king, something that could become detrimental to some retailers. Those retailers that are able to change their offering will have to cater for a new breed of consumer - the savvy shopper - who is here to stay.

 
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