How the Recession Is Changing Consumer Spending

Shoppers Are Using Cash Instead of Credit and Cutting Back Across Categories

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With the recession taking a big bite out of consumer spending, Ad Age takes a look at who is fighting back and doing so effectively.
NEW YORK ( -- This new environment is shaping spending patterns in ways we've never seen before. Cash, not credit, is the new currency. A trip to the local cobbler is replacing one to the shoe store. And nail polish from the drug store is supplanting the spa manicure. Shoppers are finding there is plenty they can live without, and few things once considered untouchable are safe. So what's a marketer to do? Get to know the recession shopper.

Where are the consumers?
A Euro RSCG Discovery shopper survey found that shoppers are gravitating toward online retailers, while cutting back on restaurants and bricks-and-mortar shops compared with a year ago. Where they shop:
  • Online retailers: 29% more often
  • Discount stores: 9% less often
  • National chains: 13% less often
  • Fast-food restaurants: 31% less often
  • Department stores: 33% less often
  • Boutiques: 39% less often
  • Sit-down restaurants: 41% less often

How are they feeling?
  • Self-conscious: Half of upper-middle- and middle-class shoppers say they feel uncomfortable when shopping, according to the Euro survey.
  • Cynical: A Better Business Bureau/Gallup poll found consumers are less trustful of auto dealers, department stores, furniture stores, home-improvement stores and pharmacies, among other businesses, compared with a year ago.
  • Industrious: According to a Doner study, 54% of consumers are doing more of their own research; 39% rely on the internet, while 38% are reading more news articles.

How are they paying?
Use of cash and debit cards is up, as consumers become more careful about their spending, according to the Euro survey.
  • Debit card: 24% more often
  • Cash: 18% more often
  • Major credit card: 23% less often
  • Retailer credit card: 27% less often

What are they spending money on?
Turns out consumers say they can live without quite a bit -- everything from text messaging to movie tickets, according to Bigresearch and the National Retail Federation. Here's a look at some things in five categories that consumers consider expendable, as well as a few they consider untouchable:

When faced with a cash crunch, consumers are willing to bypass beauty treatments, and a majority are even willing to give up haircuts and hair-coloring treatments. What consumers consider expendable:
  • High-end cosmetics: 91%
  • Facials: 90%
  • Manicures/pedicures: 88%
  • Haircut/color: 60%

Electronics and media
Consumers are surprisingly unattached to premium cable channels and magazines, and they're willing to live without fancy cellphones and texting services. What consumers consider expendable:
  • Satellite radio: 91%
  • Upgraded cellphone: 88%
  • Magazine subscriptions: 86%
  • Cellphone service (text, picture, video): 77%
  • Cable/satellite TV (premium): 75%

Still, this is one category in which a majority of consumers draw the line, saying they can't live without basic internet and cable services. What consumers consider untouchable:

  • Internet service: 81%
  • Cellphone service (basic): 64%
  • Cable/satellite TV (basic): 61%

Consumers are willing to bypass updates to their wardrobes that were once considered essential. What they consider expendable:
  • Luxury handbags: 92%
  • New jeans: 80%
  • New shoes: 76%

Food and dining
A majority of consumers said specialty foods and restaurant experiences could be trimmed. What they consider expendable:
  • Fine dining: 89%
  • Organic food: 85%
  • Gourmet coffee: 83%
  • Fast-casual dining (e.g., Panera): 75%
  • Casual dining (e.g., Olive Garden): 68%
  • Fast food: 63%

In these austere times, most consumers are willing to cut out leisure activities and cancel vacations. What consumers consider expendable:
  • Club/social memberships: 87%
  • Gym memberships: 86%
  • Movie/theater tickets: 82%
  • Vacations: 70%

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