As we recover from the deepest recession since the Second World War will the consumer behaviour changes we have seen last or will we slowly return to pre-recession habits?
To understand the long lasting effects on consumer behaviour though we first need to understand how behaviour has changed through the teeth of the recession.
Saving rather than spending
In 2008 consumers were borrowing 62p for every £1 they saved and by the end of 2009 this was down to 13p per £1.
Banks were no longer lending and consumers were changing from spending to saving.
Consumers are now half as likely to have unsecured debt as they were two years ago and only a tiny fraction now owe money on store cards.
A demand for simplicity
The recession has driven a desire for simplicity. Buying less, but better quality. Going out less, but eating out at better restaurants. Drinking at home, but buying better quality wine.
We used to rejoice in spending. Excessive consumption rather than keep and make do. Throw away clothes, yearly updates of electrical goods and cars with regular house moves based on rocketing equity.
This has given way to buying smart (not cheap, but smart – looking for value and shopping around), an emphasis on lasting quality and improving our existing homes.
So, how many of these newfound habits are here to stay? As the UK economy grows faster than any of our European counterparts and our housing market booms once again how can we be sure that we won’t descend back into a boom culture of consumerism, borrowing and greed?
The findings of a joint report by the government backed pension scheme NEST and research house ‘Futures Company’ suggest that frugality is here to stay.
Their research has found that 58% of people in the UK agree that this recession has changed global consumer culture forever, more than half of British consumers state they’ll never spend as freely as they did before when making even the smallest purchases and consumers are half as likely to have unsecured debt as two years ago.
Consumers today keep track of exactly how much money they spend, regularly use comparison websites to make the most of their money and spend a lot of time shopping around for the best deal.
Long term financial security has also gone up people’s priority lists. Fewer people are confident about what they have set aside for retirement compared to two years ago and a large majority are worried they won’t have enough. If they received a sudden windfall, most people would invest it for the future rather than spend it today.
Of more than 1.4m people who have been enrolled in the automatic pension enrollment scheme during the first year, just 9 per cent have opted out.
Of those who have stayed in, just over half say they’ve done so because it’s ‘time to start saving for retirement’ and 48 per cent say it ‘makes financial sense because the employer contributes’.
And the continued growth of the discounters suggests that our eye for a bargain has not diminished now the recession is ending.
According to a recent survey of 2,000 shoppers by Rowan, a specialist discount wholesaler, 55% of people changed their shopping habits during the recession – and pound shops are where the majority (63%) say they are now heading, spending nearly £20 on average per visit. What’s more, the survey found many of these shoppers are now from the middle classes, with a significant 42% of respondents with a household income of more than £80,000 and above claiming to shop at pound shops.
“Despite the improving economy, many consumers have got used to spending less for their standard shopping and are now converts,” says Interactive Investor spokesperson Rebecca O’Keeffe.
“There is no longer a class divide when it comes to pound shops,” agrees KPMG David McCorquodale, spokesperson for KPMG. Poundland stores can now be found in very affluent locations and 22% of Poundland’s customers now come from the wealthiest socio-economic demographic.
Add to this the fact that Aldi is on course to become bigger than Waitrose (the 6th largest supermarket in the UK) with a sales increase of 30% in 2013 as new industry figures claim as many as 50.1% of British households have shopped at a discounter since September.
In December 2013 Aldi boasted a 4% share of the UK grocery market having increased share in every 12-week period since the end of 2010.
Lidl, another major discounter, maintained its 3.1% share.
It would seem that the habits we have learned in the teeth of a recession are informing consumer behavior even as we recover.
We are saving more, shopping more smartly, going out less but looking for a higher quality experience. The recession has created a generation of discerning, smart consumers demanding value and service levels higher than ever before.
– Jamie Ferguson, email@example.com