Trading Up and Down Is Alive and Well Despite an Uncertain Economy, Says Report by The Boston Consulting Group

BOSTON, MA--(Marketwire - September 16, 2008) - Trading up and trading down continue to thrive in both developed and developing countries, but there is considerable regional variation in the segments of consumers who are doing one or the other, the reasons they cite, the categories they choose, and the benefits they seek. Consumers in emerging markets are eager to trade up, whereas consumers in mature markets are focusing (but not stopping) their trading-up spending.

These findings and others from the first global survey of the trend are described in "Trading Up and Down Around the World," a new report based on quantitative research from The Boston Consulting Group (BCG).

"Consumers everywhere have started to adopt a new buying model -- one in which they turn to discount stores to fill their pantries, as they strive to watch every dollar, yuan, or euro. But they will also invest in a few significant categories that provide emotional gratification," according to coauthor Michael Silverstein, a senior partner in BCG's Chicago office. "So it's not all doom and gloom -- rather, it's a good time for suppliers to provide new value, increase innovation, and create goods that consumers can't do without."

Instead of trading up in four or five categories, consumers are choosing one or two categories in which to splurge. At the same time, financial pressures are causing them to rethink their budgets, search out promotions and sales, and shop for bargains that provide the best value. Meanwhile, undifferentiated middle-market products remain under pressure everywhere. Although the middle market in the developed world is far from dead, it has become highly competitive as discounters and specialty retailers offer precisely targeted promotions to attract channel-shifting consumers.

The recent collapse of the subprime-loan industry and its effect on property values and consumer confidence (along with rising energy and food prices) have indeed altered trading-up and trading-down patterns. For example:

- As U.S. housing prices plunged during the first half of 2008, consumers reported that they were spending considerably less than they did in 2007

- More than 60 percent of respondents in Europe and Japan and 44 percent of respondents in Russia reported being worried about significant decreases in their purchasing power because of rising food and gas prices

"The art of trading down -- of searching out good value at low prices -- is likely to become even more important for consumers coping with rising prices and eroding property values," notes coauthor Catherine Roche, a partner in BCG's Düsseldorf office. "Consumers may make more of an effort to spend carefully and wisely, but they will continue to trade up and down everywhere in the world."

The survey covered Brazil, China, India, and Russia, as well as Japan, the United States, and ten European countries (Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Spain, Sweden, and the United Kingdom). Some 21,000 consumers were questioned on a total of 117 categories representing 19 product groups (grocery and nongrocery). BCG asked about consumers' attitudes toward spending and their feelings about environmental issues, housing and energy prices, and life in general. Consumers were also asked about their reasons for trading up and down and the emotional benefits they were seeking. The report provides profiles of four survey respondents (from China, Germany, Russia, and the United States) who describe their lives and shopping habits in their own words.

Michael Silverstein, who has been writing about trading up and down since the beginning of this decade, is coauthor of "Trading Up: Why Consumers Want New Luxury Goods -- and How Companies Create Them" (New York: Portfolio, 2003, 2005; paperback, 2008) and author of "Treasure Hunt: Inside the Mind of the New Consumer" (New York: Portfolio, 2006). He is currently working on a third book called "The Female Economy: What Women Want."

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 gregoire.eric@bcg.com.

About The Boston Consulting Group

The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 66 offices in 38 countries. For more information, please visit www.bcg.com.