1. Q&A: The impact of recession on
consumers
Euromonitor International
11 March 2009

2. Bling is out and guilt is in. Consumers are reacting to recession by toning down, searching for value for money and
reassessing what's important to them. With the recession looking likely to stretch well into 2010 in some major
markets, harnessing changes in consumption trends is vital.
• What's happening in the global economy?
• How are consumers reacting?
• What are the key trends that are emerging?
• Who are the winners
• And the losers?
• What's the outlook?
What's happening in the global economy?
We're in the midst of a severe financial crisis – the worst since the Depression. Businesses and consumers around the
world are suffering from a lack of credit. In many countries this has been combined with a bursting housing bubble.
How are consumers reacting?
Consumers around the world are feeling the pinch and as a result have approached the New Year with trepidation.
• Consumers are getting thrifty. There has been a return to a “make do and mend mentality”. Linked to this is the
rise of “Voucheristas” as tens of thousands of people are downloading money-saving vouchers and coupons;
• The recession is making us greener – frugal living means less consumption and many consumers are dressing up
their enforced frugality as being green;
• Cocooning – our homes are becoming more enticing. Even before the crunch, consumers were seeking security
and comfort in their homes against a harsh and impersonal world. And this has been magnified;
• Finally the online world is increasing its appeal. Consumers besieged by money problems are researching their
purchases online. According to shop.org, 15% of Americans go online every day to research products before
they buy them.
What are the key trends that are emerging?
• Small indulgences: Basically this “lipstick effect” is the rise of small self-treating on make-up and gadgets
when consumers forego more extravagant purchases;
• Nostalgia: seeking reassurance through familiar brands;
• Softer consumerism: Bling is out, guilt is in. Even those that can afford to splash out are reining in their
spending. Expect to see more “investment shopping” rather than “indulgence shopping”;
• “No-frills chic”: toning down glamour in favour of a more natural style;
• Functional luxury – consumers will spend on a luxury if they can justify it to themselves as a need. Who are the
winners?
• Private label is expected to be a winner for obvious reasons;
• Convenience foods – as people stay in with a ready meal rather than eating out;
• Comparison websites – more and more of us are comparing prices, trying to save money on bills to free up more
cash;
• Health and wellbeing looks set to be a resilient consumer concern as a result of the general feeling of
uncertainty, and the interest in self-treating as a way of saving money.
And who are the losers?
Anybody operating in the consumer durables industry – particularly in industries related to the housing market – is
going to have a tough year. Two tactics that manufacturers and retailers could employ are:
• Capitalising on the trend for “functional luxury” on big ticket items (allowing consumers to sell the product to
themselves as a need);

3. • Utilising “austerity chic”. Promoting low cost items that will improve the look of the home – as we're staying in
more, we'll want to do it in comfort and style! Companies that can't compete on price with discounters, online
retailers, or with companies that can afford to offer big discounts will struggle. Again, there are tactics that can
be employed:
• Concentrate on offering great customer service to ensure the shopping experience is as comfortable and easy as
possible and exciting. As consumers will be cutting back on leisure spending, creating theatre around the
shopping experience will be a big draw;
• Avoid price competition by creating compelling and engaging products that stand out from the competition;
products that can't be replicated easily elsewhere with a strong brand identity that consumers will still want to
splash out on.
What's the outlook?
Commentators, journalists and bloggers are signalling 2009 as a year of fear, anxiety and uncertainty for consumers.
Economies are predicted to move out of recession at different times but as unemployment lags behind economic
recession, spending may well last into 2010 and even 2011 in some markets.
Nevertheless, there is already evidence of some consumers experiencing recession fatigue. Some, particularly those
less directly affected such as the boomers, those in secure occupations and those with little or no debt, are already
fed-up with the words “recession” and “financial crisis”. These consumers are looking for an escape route to
transcend the doom and gloom of their everyday existence. This will be expressed in small indulgences that make
them feel good although price will still be key. These consumers will look to quality goods that offer value for
money; these needn't necessarily be low-cost but will be items that they perceive as adding value to their lives and
that make them feel safe and secure.