Where once-spendthrift consumers couldn't wait to show off their latest designer purchases and home improvements, they now clamor to prove their credit-crisis credentials. They are trading savings tips, telling tales of discount supermarkets and frequenting charity shops in a game of "one-downmanship."
|Down a notch|
How marketers can appeal to the newly frugal middle class
Even for people whose jobs are not under threat, the credit crunch has brought on a shift in behavior that marketers are battling to tap into. Food and fuel prices may be going up, but inflation, running at about 5.2%, looks to have stabilized. Interest rates for mortgages are about 4.5% and coming down, so disposable income remains largely unaffected. It's the attitude that's changed.
Business has boomed at supermarkets such as German-owned chains Aldi and Lidl as the middle classes flock to the "no-frills" shopping environments to nab bargains.
The relatively upmarket Sainsbury's chain posted a market-share decline to 15.8% from 16% in the 12 weeks ended Sept. 7. Meanwhile, hard discounter Aldi's share rose to 2.9% from 2.6% during the same period, according to TNS Worldpanel.
No more Marks
Website discussion pages are full of the chattering classes swapping tips about which of Lidl and Aldi's products offer good quality at such low prices. Apparently Lidl's frozen lobster is to die for, while the free-range chickens, chorizo and high-quality chocolate are gracing dinner parties across the land. Previously these commenters would have been serving premium, organic, free-range ready meals from Marks & Spencer.
The same people -- mostly women -- are passing around discount coupons from retail chains such as Gap, as well as more upscale brands. A Gap shop assistant confirmed that take-up of these vouchers has gone through the roof in the past few weeks. "We get a lot of professional women in here with vouchers who are very excited about getting 30% off," she said.
According to online-shopping specialist Hitwise, there has been a 130% increase in traffic to specialist coupon websites, and visits to comparison sites are up 20% in the past year after two consecutive years of decline.
A recent report by market-research group Mintel found that two-thirds of U.K. shoppers are looking out for promotions, and one-third are spending more time in shops -- particularly supermarkets -- to compare prices.
And so the more expensive supermarkets are battling discounters by trying to beat them at their own game as they attempt to retain valuable customers. For example, Waitrose, the U.K.'s most upscale supermarket chain, is making a "Tesco-price-match" promise on 10,000 items but essentially sticking with its premium positions.
Cheapness vs. value
"In the current climate, cheapness has become confused with value in food retail," said Mark Price, Waitrose's managing director. "True value is always going to be a balance between quality and price, and our new campaign [from Miles Calcraft Briginshaw Duffy] reminds customers that Waitrose doesn't cut corners on quality."
Meanwhile, the U.K.'s biggest supermarket chain, Tesco, until recently viewed as a low-price alternative for the middle classes, is having to prove its credentials by introducing a range, Market Value, and advertising itself as "Britain's biggest discounter." Asda, owned by Wal-Mart Stores, was also regarded as a compromise option before the crunch but is now slashing the prices in its Smart Price product line an attempt to compete with Lidl and Aldi.
The clothing sector is also facing a difficult year. According to the Office for National Statistics, retail sales fell 0.4% in September, with sales of clothes and shoes down 2.3%. Competitive thrift has pushed the middle classes to resurrect old favorites and look to thrift shops or eBay, because trading down to cheaper fashion is not as palatable.
Middle-class consumers are willing to trade down from organic food to more ordinarily sourced products, but they are less likely to buy cheap clothes. The fad of "fast fashion" is over, as consumers recoil from rumors of exploitative labor and balk at clothes' disposability.