Americans are continuing to trade down in greater numbers in the wake of the economic downturn, even as consumers in other developed markets begin to lose their taste for bargain hunting.
These are among the findings of a study released today, called “A New World Order of Consumption,” by The Boston Consulting Group.
“Our 2010 survey results show that trading down is still going strong in most markets, but it has fallen from the overall peak level we found in late 2008,” BCG said. “However, trading down continues to gain strength in the United States, where it is up 5 percentage points over 2008 levels, making U.S. respondents among the most avid about trading down of all the consumers we surveyed in mature markets.”
In the last study two years ago, 48 percent of Americans indicated they were trading down, up from 41 percent in 2007 and 33 percent in 2002. This year, 53 percent checked off the “trading down” box, while 18 percent said they were trading up and 29 percent said they weren’t changing their spending mentality. In the 2008 report, 20 percent indicated they were in the up” category versus 32 percent who weren’t shifting in either direction.
By contrast, 51 percent of European respondents indicated they were trading down this year, off from 56 percent in 2008 but still higher than the 47 percent who indicated as much in 2007. The percentage trading up was unchanged — and below the comparable U.S. figures — at 13 percent. Thirty-six percent of Europeans said they weren’t changing their spending attitudes this year, versus 31 percent in 2008.
The BCG study zeroed in on spending attitudes by category, with 56 percent of U.S. respondents indicating they were trading down on their own apparel purchases, versus 19 percent who were trading up. In the beauty realm, 52 percent were trading down on facial skin care and cosmetics, versus 21 percent who were trading up.
“The ‘middle ground’ between trading up and trading down, which had been under pressure recently in many categories in the United States and Europe, may benefit in this environment,” said the report. “Companies may try to attract consumers who want to step down from trading-up brands — but not as far down as private label and value brands.”
The survey, involving interviews with 12,000 consumers in 14 different markets between March and May, highlighted some fundamental shifts in values as economic turmoil swept across the globe over the last two years. Exactly half of Americans said they consider luxury less important than they did two years ago, versus 44 percent of Europeans, 46 percent of Japanese and 45 percent of Chinese. However, 62 percent of Americans ranked savings as more important than they did in 2008, higher than in Japan (58 percent), Europe (43 percent) or China (40 percent). When asked if they’d increased or decreased their spending on private label products in the past year, 61 percent of Americans indicated they’d moved toward store brands, higher than in Japan (49 percent) or Europe (45 percent). However, when asked if they’d continue to buy more private label merchandise into the recovery, the affirmative response among both Americans and Europeans was 42 percent, with Japan coming in a single percentage point lower.
Among the recommendations advanced in the BCG study were an emphasis on product innovation, in-store presentation and sales force effectiveness.