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Ready to Spend Again?

June 15, 2009
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Respondents to a poll conducted in April by The Nielsen Co., New York, indicated they would continue to practice fiscal responsibility even after the economy improves, but would begin to allow themselves "some small indulgences."


With an economic recovery expected to begin by year's end, a new report from The Nielsen Co. provides the first hints about how consumers will behave post-recession.

Respondents to a poll conducted by the New York-based market research company in April indicated they would continue to practice fiscal responsibility even after the economy improves, but would begin to allow themselves "some small indulgences," reported James Russo, Nielsen's vice president of global consumer insights.

"A whole new value system has emerged, one [characterized by] casual restraint," he explained. "There is a focus on fiscal responsibility and budgeting, but that doesn't mean there's isn't a market for indulgences. I don't mean diamond jewelry," he added. "Moderation will be key, but you may see consumers begin to trade up and move back to mainstream retailers."

According to the report, respondents said they expected to resume moderate spending in seven areas in which they had cut back on or put off purchases over the past six months, including replacement of major household items, annual vacations, holidays/short breaks, at-home entertainment, upgrading technology, out-of-home entertainment and new clothes.

However, consumers said they were likely to continue to cut back on telephone-related expenses, to seek out better deals on loans and insurance, to cut down on smoking and to look for ways to save on gas and electricity.

Respondents were mixed with respect to certain other post-recession spending behaviors, including the switch to cheaper grocery brands. According to Nielsen, 41 percent of consumers polled in April reported that they had, indeed, switched to less-expensive brands, including store brands, in an effort to save money. But only 21 percent said they expected to continue using such products after the economy improves, suggesting a slowdown in private label growth in the coming months.

Although store brand unit sales grew an average 5.7 percent across formats over the last six four-week periods versus a 3.1 percent loss for national brands, "We are likely to see some shoppers revert back to national brands post-recession," admitted Todd Hale, Nielsen's senior vice president of consumer and shopper insights. But thanks to continued retailer investment in private label, the shift might not be as profound as the numbers suggest.

"I expect store brands to enjoy continued success post-recession - not just because of rising consumer interest, but because of increased retailer focus as well," Hale told PL Buyer. "Many retailers have really stepped up their game with regard to private label quality, packaging and marketing initiatives. They've also replaced mid-tier brands with store brands and limited their assortments in some categories."

He also citef the growth of private label programs at chains such as Walmart, Costco and even 7-Eleven, as well as continued expansion by limited assortment stores such as ALDI, where store brands represent upwards of 80 percent of available merchandise.

"A lot of consumers discovered in this economy that private labels are an acceptable alternative to national brands," Hale concluded. "But I think store brand growth post-recession will also be driven be retailers who look at it as a margin play."

For more information or to read the NielsenWire report in its entirety, go to http://blog.nielsen.com/nielsenwire/consumer/consumers-cautiously-ready-to-spend-again

- Denise Leathers

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