Consumers are still cautious, but they will splurge and spend more if they feel like they’re getting a good value.
A new report from McKinsey & Co. surveyed more than 22,000 consumers around the globe and found that more than half are worried that someone in the family will lose their job. This fear is leading them to delay purchases and clip coupons.
Americans are the least concerned about job loss, while those in Mexico and South America worry the most. While there has been a great deal of discussion about the Chinese economy, 57 percent of those consumers said they were secure in their employment.
Regardless of the financial picture, shoppers are looking for savings. McKinsey found that in the past, shoppers might have only engaged in 1 or 2 frugal behaviors like comparing prices or using coupons. Now they go out of their way to seek out sales, use loyalty cards and shop at several stores to find a deal or buy products in bulk. Whatever it takes to get a bargain.
Brand loyalty remains strong, as long as the price is right. Fifty-eight percent said they have changed their buying patterns when it comes to their favorite products. They won’t necessarily drop their favorites, but they will shop around in order to buy it cheaper. They will wait until it is on sale or postpone the purchase until they have a coupon.
When the customer does decide to abandon the favored product and trade down, they tend to opt for a private-label brand. It’s critical for the retailers to hold onto the customer because 69 percent say that once they trade down, most are satisfied with the less expensive option. In other words, they don’t go back.
Retailers shouldn’t despair because there are still some splurgers out there and cosmetics tend to reap the benefits. 11 percent of consumers upgrade their purchases in certain categories, but they will even it out with cutting back in an area where they don’t have a specific favorite. Cosmetics had some of the highest trade-up rates.
McKinsey found that shoppers overall want value for money. They will spend more money if the benefits of the product are well-defined. One example that was given was salon-quality hair products. Even though these products may be twice as expensive as, say, regular shampoo, customers are willing to spend more since they feel they are getting a benefit from using the product — i.e. salon-quality hair.
McKinsey said that retailers need to be extremely clear about who their target audience is and not try to appeal to a generic broad based consumer. They also suggested that retailers offer options in both directions on the price scale. They should provide a low price for down traders and a premium offering for an uptrader.