Introducing... the Post-Crunch Customer

Last Updated Apr 7, 2010 9:50 AM EDT

As they emerge from the recession retailers, hoteliers, bookmakers and other consumer-led organisations will be expecting to see an uplift in trading. But, once the spectre of economic disaster has been banished, will consumers resume the spending they got used to in the ten years before the end of the last decade? Will they stop watching their pennies and spend with the same wild abandon ever again?

The bad news is they probably won't, but any B2C business that was around before the last economic boom will probably be familiar with the sort of shopper that emerges from the ashes of consumerism.

Talking with Gary Edwards, Vice President of Client Services at CEM specialist Empathica, here's a perspective on how consumer behaviour has been permanently altered by the economic downturn:

  • UK consumers have suffered serious cutbacks in discretionary spend. This will continue even after the fear of losing your job has lifted. Even consumers that have been gainfully employed throughout the recession have developed a leaner spending habit.
  • Even though consumers are spending less, expectations haven't changed about what they want from retailers when they are in store. They still expect to be pampered.
  • The fact shoppers are visiting the high street with less frequency means that expectations on service have actually risen. With less shopping trips to recall, even one bad experience is remembered all the more vividly.
  • Less footfall and higher expectations to be fulfilled means retailers have to take more care on inventory levels. Being out of stock disappoints the customer. Overstocking means unsold inventory and mark-down sales.
  • Although consumers appear to be spending on premium goods, the decreased volumes mean high end retailers can expect a dramatic decline in sales. There has been a flight to discounted propositions and it's likely shoppers will not return to premium retailers. Quick serve diners will continue to thrive while upmarket restaurants will suffer.
  • This shift to value isn't merely a practical reaction to having less money, consumers are proud to shave off the prices. There is a definite shift to conspicuous value, where consumers will be eager to tell their friends how little they paid for something.
  • Segmentation is gone and the individual is king when the best way to deliver your message to your market is through personal referral. The amount of choice to the consumer, coupled with the erosion of retail segmentation (Sainsbury's sells bed linen, Tesco sells mobile phone services) means the most trusted recommendation of where to shop and what to buy comes from a friend or relative.
  • The coming General Election means there will be some chance of tax hikes. After two years of uncertainty about how much money they have to play with, and more likely to come, consumers have learned it's smart to be cautious.
So, the upshot of the recession appears to be that persuading consumers to spend will be a more difficult task for retailers in the future. What we can expect is a return to the sort of consumer behaviour that was normal before credit was cheap and it was viewed by shoppers as normal to spend big on luxury goods.

(Pic: eek the cat cc2.0)