ACNielsen has released a new study saying that as the global cost of living increases faster than incomes, people are choosing to tighten their belts in the area of out-of-home entertainment, new clothes and at-home technology upgrades. In the United States, however, consumers say that their favorite method of cost-cutting is the reduction of take-out meals, followed by entertainment and reduction in gas and electric expenses.
Interestingly, US residents seem to be seeing the need for cost cutting less pressingly than in other parts of the world. "In the US," ACNielsen says, "while the economy remains fairly robust and unemployment is low but median wages are flat, consumers seem not to be employing cost-saving strategies to a large degree, or if they are, are spending the saved funds almost immediately. In fact, earlier this year, the U.S. Commerce Department reported that American consumers spent more than they earned in 2005 for the first time since the Great Depression."
"To a degree, belt-tightening strategies are a reflection of lifestyles in each region, and the potential for where the biggest saving can be made," noted Tom Markert, Chief Marketing Officer, ACNielsen. "It also reflects priorities - where consumers will look first to cut back, and also where they are not prepared to make concessions. In the US, the enormous amount of take-out food we consume, the billions we spend on out-of-home entertainment and as the world's largest user of energy, these three areas may be the big budget numbers that can be reduced without too much lifestyle compromise. Based on the country's negative national savings rate, however, any money saved by US consumers is probably simply spent in other areas."
There also are clear implications for companies that manufacture and sell consumer packaged goods. "For retailers and manufacturers involved in the marketing of consumer packaged goods to the US consumer, there are two survey points of particular interest," ACNielsen reports. "First, when asked if they would switch to cheaper grocery brands, 42% identified it as a cost saving strategy. Not surprisingly with the rising power of hard-discount retailers in Europe, European consumers scored the highest in this area (France 57%, Portugal 52%, Austria & the Netherlands 51%), but the US only just missed cracking the top 10 and was well above the global average of 35%. Second, the US was the clear leader in identifying the use of coupons as a cost saving strategy at 46%, far ahead of the global average of 19%."
Interestingly, US residents seem to be seeing the need for cost cutting less pressingly than in other parts of the world. "In the US," ACNielsen says, "while the economy remains fairly robust and unemployment is low but median wages are flat, consumers seem not to be employing cost-saving strategies to a large degree, or if they are, are spending the saved funds almost immediately. In fact, earlier this year, the U.S. Commerce Department reported that American consumers spent more than they earned in 2005 for the first time since the Great Depression."
"To a degree, belt-tightening strategies are a reflection of lifestyles in each region, and the potential for where the biggest saving can be made," noted Tom Markert, Chief Marketing Officer, ACNielsen. "It also reflects priorities - where consumers will look first to cut back, and also where they are not prepared to make concessions. In the US, the enormous amount of take-out food we consume, the billions we spend on out-of-home entertainment and as the world's largest user of energy, these three areas may be the big budget numbers that can be reduced without too much lifestyle compromise. Based on the country's negative national savings rate, however, any money saved by US consumers is probably simply spent in other areas."
There also are clear implications for companies that manufacture and sell consumer packaged goods. "For retailers and manufacturers involved in the marketing of consumer packaged goods to the US consumer, there are two survey points of particular interest," ACNielsen reports. "First, when asked if they would switch to cheaper grocery brands, 42% identified it as a cost saving strategy. Not surprisingly with the rising power of hard-discount retailers in Europe, European consumers scored the highest in this area (France 57%, Portugal 52%, Austria & the Netherlands 51%), but the US only just missed cracking the top 10 and was well above the global average of 35%. Second, the US was the clear leader in identifying the use of coupons as a cost saving strategy at 46%, far ahead of the global average of 19%."
- KC's View:
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We think the US especially is in for a world of hurt as spring becomes summer and gas prices continue to rise. Belt-tightening will become far more common – except, of course, for oil company executives will be using large bills to grill filet mignon in their backyard barbecues just because they can. (We suspect Albertsons' Larry Johnston won’t have to tighten his belt, either. But that's another story.)
Trying to limit gas spending – whether by cooking at home, making fewer but larger trips to the supermarket, and avoiding quick runs to the local fast food joint – will become a top priority for many of us. Not all of us, but many of us. And as we suggested yesterday in this space, online retailing also will become even more appealing.
Retailers and manufacturers need to tailor their marketing and merchandising approaches to these changing needs and desires.
