SOURCE: The Boston Consulting Group

The Boston Consulting Group

April 30, 2009 00:01 ET

Shopping No Longer Offers Retail Therapy as Consumers Get Serious Amid Fears That the Global Economy Is Set to Worsen, Says a New Report by The Boston Consulting Group

But the Survey of More Than 21,000 Consumers Around the World Shows That China, India, and Young Singletons Offer a Glimmer of Hope to Major Consumer-Facing Companies

NEW YORK, NY--(Marketwire - April 30, 2009) - A massive slump in the confidence of consumers in the United States, Europe, and Japan is sparking a new type of constrained, self-conscious spending that is poised to have a transformational impact on high streets and main streets, according to a new report published today by The Boston Consulting Group (BCG).

In "Winning Consumers Through the Downturn: 2009 BCG Global Report on Consumer Sentiment," which features a survey of 21,800 consumers around the world, BCG found that the proportion of U.S. consumers who said the economy would get worse over the next 12 months more than doubled in the period between October 2008 and March 2009 -- from 24 percent to 56 percent. An even higher proportion of European consumers -- some 60 percent -- said they feared the economy would worsen over the next 12 months.

The follow-on effect of this plummeting confidence -- which by some measures has reached historic lows in the United States, Spain, and Japan -- is a discernible change in consumer behavior: the frivolous impulse purchase is out, belt-tightening frugality is in. "Shopping has become an exercise in homework, focus, patience, and legwork," said Michael J. Silverstein, a Chicago-based senior partner and coauthor of the report. "Consumers are cutting back on spending by deferring nonessential purchases, buying products at promotional prices, and shopping around to find the best prices."

The home is the new place to go, and the mall is the last place to be seen. "What is being called 'cocooning' -- the tendency to seek comfort and safety by staying close to home -- is a natural inclination in stressful times," said Catherine Roche, a Duesseldorf-based partner and another coauthor. "It happened in the U.S. after 9/11, and it is happening now as family finances come under pressure."

Instead of going shopping, consumers are rediscovering self-sufficiency: instead of buying things, they are making things; and instead of paying others to do things, they are doing it themselves. This home centric trend is seen in the rise of so-called staycations: consumers are spending their vacation time at home, taking day trips to nearby attractions or just puttering in the garden.

But this trend is influencing the behavior not only of people whose finances are under growing strain. Even wealthy consumers are embracing it, with most agreeing that "spending more doesn't feel like the right thing to do right now."

It is not all doom and gloom, however. In China and India, consumers remain relatively buoyant. Only 23 percent of Chinese consumers said they think the economy will worsen over the next 12 months. Also, there are certain groups of consumers in the traditionally high-spending Western markets who are still showing a willingness to spend: young singletons, especially men; dual-income couples without kids, or "DINKs"; and empty nesters -- people with secure incomes whose children have grown up and left home. As Munich-based project leader and coauthor Natalia Charpilo said, "The truth is that some consumer segments are still spending and willing to trade up in the categories they value most -- including luxury apparel, fashion accessories, and out-of-home entertainment."

Winning Consumers Through the Downturn: BCG's Action Plan

BCG has identified a number of best practices to help companies fight back against sluggish sales and win consumers through the downturn, including the following.

Think value, value, value. Understand how consumers are feeling today and how your brands can give them what they really want (and are willing to pay for). They are becoming more discerning and increasingly intolerant of nonessential add-on features. Hyundai, the South Korea-based automaker, plans to promise U.S. customers that it will cover three months of new-car payments if they lose their job -- a strategy known as "altruism marketing."

Leverage brand strength. Brands are assets, and they can be anchors in a chaotic world. Consider refreshing an iconic brand. Wal-Mart, the U.S. retailer, is relaunching its already successful Great Value private-label in a bid to help customers save money and live better.

Promote products' technical, functional, and emotional benefits. Consumers will still find room in their budgets for "spirit lifters." But they need reassurance that their purchases are smart choices and that they still have "permission" to spend on inexpensive luxuries.

De-average to find pockets of opportunity. There are still bright spots of demand: seek them out.

Continue to innovate. It is tempting to stop developing new products until the recession is over. But if you do not continue to invest in product development, you risk missing opportunities when the economy recovers.


The BCG Consumer Sentiment Survey that underpins this report took place between October 2008 and February 2009. The countries surveyed were Brazil, China, India, Japan, Mexico, Russia, the United States, and five countries in Western Europe -- France, Germany, Italy, Spain, and the United Kingdom. For global comparison, all data were income adjusted on the basis of country-specific real-income distribution. After income adjustments, approximately 13,800 consumers were surveyed. In March 2009, the BCG Consumer Sentiment Barometer surveyed approximately 8,000 additional consumers in Canada, Japan, the United States, and the five European countries. Consumers were asked about a total of 19 product groups covering more than 150 product categories.

To receive a copy of the report or arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or

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