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Need versus want.
The view of American consumers about what they require, compared with what they desire, is undergoing a fundamental shift. The staying power of that change is a core issue facing retailers and manufacturers trying to see around the post-recession curve and measure the mind-set of the buying public.
This story first appeared in the June 10, 2009 issue of WWD. Subscribe Today.
A study by the Pew Research Center’s Social and Demographic Trends project showed people are trending back to basics. They are willing to live with less.
The April survey of 1,003 adults aged 18 or over, “Luxury or Necessity? The Public Makes a U-Turn,” found that about half acknowledged they don’t really need items they once considered essential.
“Yesterday’s necessities have become today’s luxuries, with the hard times forcing many Americans to change their minds about which goods and services they now consider essential and which they could live without,” researchers said.
Fifty-seven percent of the respondents said they were shopping more at discounters — 63 percent of women and 51 percent of men said they were buying cheaper brands or have increased shopping at discount stores.
After a decade in which household gadgets of all kinds rose in popularity and use, the study found just 52 percent of those polled said television was a necessity, down 12 percentage points from 2006 — and the lowest level since 1973; microwave oven, 47 percent, a drop of 21 percentage points in the last three years; home air conditioner, 54 percent, a decrease of 16 percentage points, and clothes dryer, 66 percent, a decrease of 17 percentage points since 2006.
While those familiar items took a hit, the car held its own, with 88 percent viewing it as a necessity, a drop of 3 percent.
In the throes of the instant information era, technology was the category showing the most relative strength. Forty-nine percent of those polled rated a cell phone a necessity, flat with 2006, possibly because consumers increasingly replace land-line phones with cell phones, said Rich Morin, senior writer at Pew Research Center. Most telling for the future: 60 percent of the adults under 30 years old said a cell phone was a necessity compared with 38 percent of those 65 or older.
Overall, 50 percent said a home computer was essential, a 1 percent slide, and 31 percent said they couldn’t do without high-speed Internet, a rise of 2 percent.
The recession is redefining what people truly value after an era dating from the end of World War II in which product advertising bombarded consumers and blurred the line between necessities and luxuries, said Bud Konheim, chief executive officer of Nicole Miller.
“A feeling was created that the more you spend and buy, the better people will feel about you,” he said.
The cold reality of economic hardship is changing that sensibility.
“What really is a necessity today? You have to pay your rent, you have to buy things to eat,” Konheim said. The downturn is “readjusting our mentalities to the point that people realize luxury may just be having a nice weekend with their family.”
However, Christine Chen, specialty retail and apparel analyst for Needham & Co., does not foresee a permanent change in spending habits.
“Americans have an aspirational ‘keeping up with the Joneses’ culture,’” she said. “It may not be in vogue now, but I really doubt luxury is going to go away.”
Milton Pedraza, ceo of the Luxury Institute, agreed with Chen, citing members of a recent focus group who said they still seek unique design, quality, craftsmanship and service, and will pay for it “when their wallets are fat again.”
Under current circumstances, however, the Pew survey found that eight in 10 adults have moved to economize in specific ways. Almost three in 10 said they have cut spending on liquor or cigarettes and one in four have cut back on cable or satellite television service or cancelled it.
One in five said they have begun to mow their own lawns or do home repairs instead of paying others to do it. And, following the lead of First Lady Michelle Obama, about one in five said they plan to save money on groceries by planting a vegetable garden.
David Lipman, chairman of New York-based Lipman Advertising, didn’t put a time stamp on the possible duration of consumer frugality but observed that the spending decline isn’t over.
“Shoppers are free-falling and they won’t start buying again until they hit the ground,” he said, adding that purchases will be based on a product’s creativity and value, not brand name. “I don’t think we’ll see another era of logo mania again in the next decade.”
James Burroughs, associate professor of commerce at the University of Virginia, who researches consumer behavior, agreed the recession has taught shoppers they can do without certain things, and they are not likely to soon go back to purchasing them the same way they did.
“People are asking if it is all worth it — starting to realize the cost benefit was not what they believed, and are not willing to work 80 to 90 hours a week anymore,” he said.
The Pew survey revealed more about how people behave rather than how they perceive things, said Robert Thompson, professor of television and popular culture at Syracuse University.
“Ask the average person on the street, especially in these bad economic times, if they think air conditioning is a luxury or necessity and they will say luxury,” he said. “But a lot of people would find themselves put out and really miss it if it was taken away.”
Consumers often give answers to surveys they feel are expected, he added. “Most people surveyed would say there’s too much sex on TV, yet at the same time they’re checking the survey box they’re flipping though the dial looking for the sexiest show they can find.”
In the Pew study, new perceptions about what is necessary cut across all income groups, with individuals who have suffered most in the recession naturally being those who have done the most cost-cutting. This may indicate that consumer reaction to the weak economy is being propelled by a wide-ranging “new creed of thrift” among people who have and have not experienced personal economic difficulties, researchers said.
One in four of those surveyed said they or a household member had lost jobs in the past year; almost half said they or a household member had lost more than 20 percent in retirement or investment accounts, and one in five said they or household members had problems making mortgage or rent payments.
“There’s nothing like economic bad times to focus the minds of Americans on what is important and isn’t important,” Pew’s Morin said.