How Consumers Shop Differently Today

  • Share
  • Read Later
Chuck Savage / Corbis

The American shopper is dazed and confused. What do I really want, versus what do I really need? Sure, I can afford the plasma television now, but should I save that $2,000, in case I get laid off tomorrow? Can I really tell my snobby friends that I now shop at — egads — Walmart? To gauge the mindset of the American consumer, and the state of shopping during this recession, TIME checked in with respected retail expert Paco Underhill, the CEO of Envirosell, a consulting firm, and author of Why We Buy: The Science of Shopping.

Give us a snapshot of the American consumer landscape.
We can divide the American consumer into thirds. There are a third of us who are in immediate danger of being downwardly mobile. And this stretches across all classes. It's the hedge fund manager who lost his job, and was making a healthy seven figures. It's the GM retiree whose middle class benefits are being cut. So it's a spectrum of people who have basically slammed their wallets shut. And that effect is not only on luxury, it's on basics, it's on everything.

There's a second group that isn't in danger themselves but knows somebody that is. They feel reasonably secure, but they have slammed their wallets shut out of choice. And they are spending money much more carefully than they ever have. This results from the fact that there are lots of American who don't really know how much disposable income they have. They've just been spending it. And all of a sudden they've woken up and found, 'I have $20,000 in credit card debt. All of a sudden I need to face consequences that are acute.' It's fundamentally healthy over the long term, but it's painful over the short term.

Then there's a third group, stretching across all classes, and they have very real piles of money. They range from hedge fund people who have stored it away, to trust fund babies, to a generation of Americans that have paid off their mortgages, and don't owe anybody any money. This group has learned that conspicuous consumption is bad manners. Also, there's an entangling of consumption and morality. I just heard a story about somebody saying, 'I can afford a new car, but I'm not going to get one, because I just had to lay a bunch of people off.' It's an interesting issue, just in the same way that green was political issue, and then it became a moral issue. There's the fundamental realization that Americans have woken up. Their bellies are too big, their cars are too big, their homes are too big, their debts are too big, and they have to go on some kind of a diet. The era of "bling" is over. (See pictures of expensive things that money can buy.)

What's going on inside the psyche of the American consumer?
People are choosing not to go to the mall at all. Why invite temptation? The second thing we're seeing here, which is really curious, is that as people shop in store, they are putting things in their basket as they move through the store, and then taking them out when they get to checkout. 'I put that cute blouse that I saw in Target into my basket, and I'm going... 'nah, maybe not.' Someone picks something up from their basket, takes it to another section, and then discards it. So the stores are just messier. And a basic rule of retailing is that you have to have a clean store.

Another key thing we are finding is that there are people in the parking lot of Trader Joe's and ALDI, and Goodwill and the dollar stores, that were never there three years ago. The demographic profile of people willing to shop down is expanding.

Also, the amount of label reading is going up. There is a basic concern with health issues. It used to be that label reading was linked to income and education. The more likely you were to have a degree from Princeton, the more likely you would be to read labels in a store. And now that's linked to literacy. Everyone is doing it. (See what businesses are doing well despite the recession.)

Is consumerism forever changed?
First, I think there is a certain access to consumer information. Particularly as I shop durable goods, I can go down the aisle of a consumer electronics store and check the prices on my web enabled phone. So the whole pricing issue here is going to have to get much more transparent because consumers have much more access to information than they ever used to have. And that information isn't something that they need to get at home. They can get it on the fly. This is both exciting and frightening for the merchant.

One of the things I've seen over the last couple of years is the rising popularity of the vintage clothing store. This relates to the changing concept of secondary markets — whether its EBay, whether it's goodwill industries, whether it's selling a previously owned Mercedes Benz — the perception is changing. There's a willingness buy used, rather than necessarily buy new. You'll never sell used underwear or used socks. But the number of things that people are considering buying used, or buying previously owned, is considerable.

Read "How To Know When The Economy is Turning Up."

See pictures of retailers which have gone out of business.

  1. Previous
  2. 1
  3. 2