Tags
CPG, economy, layaway, Private label, recession, trade down, Walmart
In the heart of the recent recession, no one was surprised when consumers chose more lower priced alternatives, especially for basic purchases such as paper towels or laundry detergent. But most observers expected a return to previous habits once the economy rebounded.
We might still debate how far the economy has come back, but all indications are that customers have not changed their economical attitudes: They appear to have traded down for good. Now that they are accustomed to the lower cost options, consumers evidently see no reason to start paying more, when the basic version will get the job done.
Such trends are not unprecedented. Overall, customers shop according to their paycheck cycles: When paychecks arrive, shoppers feel flush and stock up on products. Near the end of the pay cycle though, reserve funds are low, and shoppers turn to smaller sizes to get by, until their next paycheck arrives. Accordingly, retailers have always made adjustments to their product availability and promotion schedules. In light of recent trends, many retailers are promoting their private-label options, noting their lower price points compared with national brand alternatives
Another retail tactic with a long history, though one that seemingly disappeared in the boom years of the American economy, is layaway. Although Walmart eliminated this option years ago, several other retailers, including Kmart, Sears, and Toys R Us, have reintroduced it. The method not only provides a means for cash-poor shoppers to get what they way, but it also encourages consumers to start thinking about starting their holiday shopping now, so they can have all the best toys paid off in time.
Target’s approach is a little different: It offers a credit card that provides 5 percent back to customers, so the overall prices are about the same or less than those of its competitors. Shoppers who hold the Target card spend 50 percent more than non-cardholders each visit. But Target also enjoys the enviable position of attracting shoppers whose average incomes are higher than those of Walmart shoppers. Thus its goal is a little different, and instead of focusing on frugality, Target has begun adding fresh grocery sections to its stores to encourage one-stop shopping.
Discussion Questions:
1. Why are consumers trading down for good?
Ann Zimmerman, “Frontier of Frugality,” The Wall Street Journal, October 4, 2011.
Grewal Levy Marketing News 
I think the relative uncertainty on the economy has caused consumer’s to realize the simple fact that “generic is just as good” in some cases. It is important for high-end brands to significantly invest in re-positioning their products to emphasize the value of paying the premium price for their product.
These value brands or store brands are often just as good if not better than the highly avertised branded products. I think customers are beginning to realize that they are often paying for product branding, which they are starting to value less and less. I really don’t think this trend will ever disappear.
The above points are valid, but I believe that the current uncertainty in the market, even as it recovers, has led to continued purchases of value brands. People’s expectation for the future of the economy are still grim, so they have not gone back to purchasing luxury brands. Eventually, as the market stabalizes, some people will revert back to their old spending habits. Luxury brands will always be associated with success, so they will tend to recover from tough times. Although I agree that they may never recover to the levels they were at before the recession because people are realizing the quality of value brands, they will most likely recover to a profitable level.
Consumers have come to realize that store brands are no different than labeled products. For the most part, daily necessities are bought at a lower, more reasonable price. Especially with the current economic situation, consumers are looking for good quality at a reasonable price. When the market starts to recover, customers have realized that they are able to get more for their money if they stick to the cheaper store brands that have worked just as well.
I think that consumers are trading down due to uncertainty. No longer is having fashionable or recognize laundry detergent, undershits or home items is justifiable. People save thier money on items that most people don’t see.
Consumers now do not need to perceive themselves as trendy, they feel more secure with themselves as frugal, out of debt, and cost concious.
A tide detergent commercial will feature a woman smiling with self confidence when she opens the cabinet to see the universallly know Tide detergent bottle. Whereas a woman with a Chanel purse smiles with confidence as she walks about and OTHERS see her with a stylish item.
Essentially, consumers are priortizing their trendy purchases to what others can see and know, whereas in their private lives, they do not prioritize the trendiness of what they have or use. Consumer desires are changing to be being publicly trendy, and privately price concious.
I think that the bursting of the real estate bubble has permanently changed the way that American’s will shop and look at money. The recession “knocked” us from our high horse, in a way. Americans enjoy the idea that every subsequent generation will earn more and live more lavishly than the last. An idea that was embedded in our culture ever since we opened our doors and provided opportunity for the world population.
This generation is the first that is expected to both make less money (comparatively) and live shorter lives. The recession caused a type of uncertainty that the majority of the country, or at least those that I speak with, is very uncomfortable with. Until Americans are reassured of the strength of the economy, we will have traded down for good. This requires companies to rethink how they appeal to the American middle class, as Walmart and Target have.
The economic crash has in many ways changed the way Americans operate. Consumers who never would have (or weren’t likely) to consider private label brands or substitute goods, realized that these products are not only cheaper, but they get the same job done as other more expensive brands. As the economy starts to improve, it is important for companies to position themselves in a way that reminds customers of the value they get for spending that extra buck. Otherwise, thousands of customers will be lost to the recession.
With the economy trying to escape the recession, many people’s income has certainly decreased. This decrease is visible in their shopping trends and turning to stores, including Target and Wal-Mart, for the cheaper products. This trend in the economy has shown that people are actually starting to realize that cheaper products get the job done compared to more expensive ones. I find it interesting that even when people’s paychecks are starting to increase they are still turning to lower price stores, including Target, because you would think that people would move back to their higher quality goods. However, it is important to realize that people are still in the recession fear stage, which is why they are tighter with their money.
Even though the economy is improving people are still cautious about spending their money because of the economic down turn people began to realize the importance of saving and living a little more within their means. So people are always looking for a good deal. For instance Target’s credit card is similar to the way Black Friday works because they are selling products at a cheaper price just by using the card. Lower quality goods are now being recognized as goods that are similar to higher quality goods. Some consumers that moved to lower quality brands may stay and never go back to higher quality brands because consumer may think they will still be paying high prices with the same quality as the low brand.