According to a new report from PricewaterhouseCoopers LLP and Retail Forward, consumer spending in the months ahead will be shaped by the values of tech-loving Gen Y, and to a lesser degree, affluent members of Gen X.
Unlike recovery periods in previous decades, Boomers will not lead the way in consumer spending. "Boomers have lost the most in terms of retirement and savings, and they have very different spending parameters today," Lisa Feigen Dugal, PricewaterhouseCoopers U.S. retail and consumer practice leader, tells Marketing Daily. "Gen Y, and to a degree, Gen X, have disposable income in a way Boomers don't. And they spend very differently. They are still trading down, but are using many different ways to seek out bargains."
The new report, "The New Consumer Behavior Paradigm: Permanent or Fleeting?," finds that while the frantic frugalism of the early recession has faded away, it has been replaced by "practical consumerism," a more pervasive series of behavioral changes. Shoppers are habitually much more methodical in the ways they save — using coupons, mobile apps, comparison-shopping sites, and rewards programs. "Retailers need to adapt their strategies to appeal to this new generation of consumers," Dugal says.
Among all age groups, while there is evidence of "frugal fatigue," the report says one-fifth of consumers continue to say no to items that seem too expensive, a third will only buy things they truly need and about one-fourth buy fewer things and shop less often. There's increasing evidence that DIY products — such as spa treatments or restaurant-style meals that can be prepared at home — are increasingly viewed as "good enough." And consumers continue to be open to private-label brands.
But there are considerable generational differences. Among Gen Y consumers, between 18 and 27 for this report, just 25% say the economy has significantly changed their shopping behavior. Among Gen X, it's 36%, and among Boomers, 37%.
That puts marketers in uncharted territory. "In the early 1990s, the Baby Boomers were at a life stage characterized by high spending, and their appetite for material goods seemed insatiable. During the post-dot.com bust at the start of this decade, many Baby Boomers were in prime earning years and able to resume pre-recession spending behaviors relatively quickly after that less severe downturn," the report says.
Now, the median household wealth of Boomer households has shriveled, falling from $315,000 in 2004 to $160,000 in 2009 among 55- to-64-year-olds, and from $172,000 to $94,000 among 45- to-54-year-olds. "Without the Boomers leading us out," Dugal says, "we don't have history to rely on. So now marketers are going to have to look to Gen Y and Gen X, groups that are smaller and behave differently."
"The New Consumer Behavior Paradigm: Permanent or Fleeting?," conducted by Pricewaterhouse Coopers LLP and Retail Forward, Marketing Daily. Web. 9 Mar. 2010.