While Consumer Spending Retreats in Developed World, Chinese and Indians Plan to Splurge

Despite talk of a recovery, consumers feel more apprehensive about the future than they did before the downturn, according to a new report published by The Boston Consulting Group (BCG).

 

In the U.S., 57 percent of respondents said they have been personally affected by the downturn—up 8 percentage points from last year. Europe saw a 6 percentage point increase.

 

BCG’s 2011 global report on consumer sentiment, "Navigating the New Consumer Realities," finds that anxiety is on the rise everywhere, but confidence is closely tied to the economy of specific countries. Nearly 70 percent of Italians say they feel anxious about the future, whereas Germany is the only country with a significant decline in anxiety.

 

These emotional responses are directly affecting spending behavior. “Consumers are trading down and purchasing more private-label products because they feel it’s important to get a good deal—not necessarily because they can’t afford the price,” notes Catherine Roche, a Toronto-based partner and coauthor of the report. “Trading up has shifted from conspicuous to ‘conscientious’ consumption,” adds Patrick Ducasse, a Paris-based partner and another coauthor.

 

But attitudes toward spending are different in emerging markets, where many consumers plan to spend more this year: 36 percent of Chinese respondents and 19 percent of Indians said that they plan to increase spending. “This reflects a widening gap between the developed and emerging economies and underscores the importance of companies de-averaging their markets,” notes Carol Liao, a Hong Kong-based partner and report coauthor.

 

New Trends in Consumption

 

Although natural disasters and political turbulence have taken a toll on consumer confidence this year, they aren’t the only factors bringing about change in consumers’ spending habits.

 

For the past three to five years, BCG has been tracking four of the most important developments in the consumer industry: the increasing relevance of new markets, changing shopper demographics, the rise of new shopping channels, and the shift in values associated with spending.

 

Much of the global growth in consumption will come from emerging markets over the near term, finds that study. But companies need to understand that consumers can differ significantly across emerging-market nations and even within a single country.

 

The surge in the number of seniors, urban dwellers, and women in charge of family spending is transforming the entire value chain, from product and service innovation to marketing and sales. This year, we found that women feel particularly underserved by financial services.In most developed countries, more and more consumers are accessing the Internet on their phones. In the U.S., more than half of our respondents said they use the Internet to find information on travel services, computers, and financial services. Consumers are also relying on their own or other people’s experiences when they make purchase decisions. Nearly a quarter of respondents in the U.K. said that they use social media frequently for product recommendations, although offline word of mouth is the most trusted source of information for 72 percent.

 

Consumers are increasingly interested in green products that are healthy, safe, and good for the environment. Trading up is also alive and well in many markets, but for reasons that differ from those of the past. Consumers are becoming less attracted to brands as status symbols and more interested in getting value for their money in the form of affordable emotional or functional benefits.

 

By focusing their business strategies on these shifting dynamics, retailers and consumer product makers can equip themselves to navigate the uncertain seas of consumer spending in the months ahead, says BCG.

 

 

MORE ARTICLES ON CONSUMER SPENDING

Suggested Articles

Some of you might have already been aware of the news that Questex—with the aim to focus on event business—will shut down permanently all media brands in Asia…

Some advice for transitioning into an advisory role

Global risks are intensifying but the collective will to tackle them appears to be lacking. Check out this report for areas of concern