Sober outlook on spending trends
Retailers issued a stream of upbeat Christmas trading statements this week. Storehouse, The Body Shop and Argos – which reported a 17 per cent improvement on sales compared with the same period last year – all did better than expected.
SBHD: Retailers issued a stream of upbeat Christmas trading statements this week. Storehouse, The Body Shop and Argos – which reported a 17 per cent improvement on sales compared with the same period last year – all did better than expected.
But despite the orgy of festive spending consumers still have a bleak view of the economy and claim that they will continue to be cautious about their spending in 1995. Value for money is their biggest consideration when making a purchase, according to a consumer survey from NOP commissioned by advertising agency Edwards Martin Thornton.
NOP’s telephone Omnibus questioned 1,000 consumers about their Christmas spending, as well as prospects for the economy, employment and respondents’ spending power in 1995. Despite despondency about their financial prospects, 36 per cent of respondents said they spent more this Christmas than last. Twenty-four per cent say they spent less, but the gap has narrowed since 1993 when 38 per cent claimed they spent more; 21 per cent said they spent less. The young are the most bullish – 49 per cent say they spent more.
However, having spent more this Christmas, the emphasis for 1995 will be on saving. This year 42 per cent of respondents say they will be saving more; 30 per cent say they will save less.
However, not much of this increased enthusiasm for saving will be directed towards life insurance. Whether it’s down to stories of excessive commissions, or merely greater choice of savings products, only 14 per cent think they will spend more on life insurance this year. Some 47 per cent say they will spend less.
There is also bad news for all those in the Government, banks and building societies hoping for a recovery in the housing market.
In 1993 46 per cent felt they were less likely to move house that year. In 1994 this figure rose to 55 per cent – a significant increase, and over three times as many people as those predicting the possibility of a move.
There are reduced options too on overseas holidays, where 39 per cent of respondents feel they are less likely to splash out this year (but 35 per cent say they are more likely to take a holiday this year). This is a reversal of last year’s pattern when consumers were more optimistic and felt that they were more likely to take a holiday.
In other areas of capital outlay consumers are equally reticent. Another sign of hesitancy and lack of the much vaunted “feelgood” factor is the fact that two-and-a-half times as many people feel they are less likely to buy a new car in 1995 than are likely to (55 per cent compared with 21 per cent).
Along with car manufacturers Rupert Murdoch may find the going tough. Only 11 per cent of those questioned claim to be more likely to start receiving satellite or cable TV this year than last year.
If you thought all this negativity would drive everyone to drink you would be wrong. Of those questioned 29 per cent predict that they will drink less in 1995 than in 1994. Only 11 per cent predict that they will drink more.
The most marked trend in this year’s survey is that consumers are searching for quality and value. Across every age and social economic group, respondents claim that they are shopping more for the cheapest items. However, it goes beyond price. Half the sample – 500 people – say they are looking more for the best quality items at fair prices. Interestingly, in the 15 to 24 age group, 60 per cent of respondents make this claim.
Own-label brands are increasingly popular. Forty-three per cent claim that they have bought more own-label goods in 1994 than previously. Four times as many ABs claim they are buying more own-label as are buying less. Curiously, this ratio drops to 2:1 among DEs – 20 per cent of this group say they are buying less own-label. As has been stated often by Kwik Save, C2s and Ds need low prices and ABs love them.
There is a marginal bias towards those who claim to be buying more of what they need at sales. The figures are highest among 15 to 24-year-olds, suggesting that even when the brand-conscious young are buying clothes and CDs, for example, they frequently time their spending to get a bargain.
This survey suggests that many marketers are dealing with a target audience that, prompted initially by the recession, has made some permanent changes to the way it consumes goods and uses services.
The general trends indicate continued movement towards value-for-money solutions and a caution in undertaking major financial commitments, such as moving house and buying cars. Home owners still burdened with large mortgages are unlikely to mention the phrase “safe as houses” again. And maybe some car owners have discovered that keeping a car for a third or fourth year is actually a pretty sound idea.
Marketers operating in and around these sectors could well find themselves competing with other sectors such as financial services, short-haul holidays and white goods as consumers continue to tightly control credit exposure and put off buying decisions.
Perhaps companies with most to fear are those trying to re-invigorate flagging brands which have found it difficult to prove to consumers that the premium demanded is justified by the superiority of the product. Without an old-fashioned reason why, these consumers are going to take some persuading.
Bob Edwards is managing director of advertising agency Edwards Martin Thornton.
George Pitcher, page 23