Consumers in a downturn: a new consumer habit

What will the current downturn might mean to consumers?  Will their habits change in lasting ways?  Could we return from the downturn to discover that consumers are a very different animal, that our economy runs on new principles.  David Brooks wondered recently whether we might someday look like abstemious Amsterdam.  There is a scarier prospect: that we might go the way of Japan.

Here’s a typology of possibilities.

1. a mere quantitative change

Consumers scales back existing consumption habits.  They buy the same things, roughly speaking, but they shift from expensive to cheaper versions, from big quantities to small quantities.  This suggests a shift from European luxury cars to Japanese sedans, from luxury goods to something more generic, from national brands to store brands, from eating out to eating in, from steak to hamburger.

The logic is a simple diminution, a quantitative change that produces no qualitative change.  The world of consumer demand remains what it always was, scaled back for the moment in a managed retreat.  When trust, job confidence, credit and prosperity are restored, the consumer will come charging back.  All is forgiven.  All is forgotten.  We will party like it’s 1999.

Variation 1.1

One variation on this scheme would be to scale back all categories except one.  This consumer would make cuts across the board, but would continue to eat out at the present level, or buy the same kind of car, or … you get the idea.  For instance, we can imagine that some men might make extraordinary sacrifices to protect their purchase of a Ford 150.  This is a violation of the Diderot effect, the one that keeps consumer purchases consistent across board, and it is the kind of thing that happens only when driven by a particular idea or objective.  We need to watch for these violations, and then identify the ideas or objective that drives them.  I am a little surprised to discover that none of the national brands is promoting itself as the Exception Brand.

Variation 1.2

Another variation comes from what Silverstein and Fiske call the “trading up” effect.  In this second departure from the Diderot effect, consumers scale consumption back and then engage in a balanced pattern of buying up and buying down.   Haagen-Dazs ice cream is purchased with CostCo savings.  In this case, we need to discover where and by what calculus these trade-offs are being made. Here too brands should be jockeying to become the “trade up” choice, or at least to avoid by the “trade down” alternative.

Variation 1.3 (the long term prospect)

The standing expectation is that consumers who scale down will scale back up when prosperity and credit return.  But it is possible that the new, more modest, positively Amsterdamian, consumption pattern will prove sticky.  This is what happened in Japan in the 1990s.  Consumers gave up free spending ways and never came back.  As Tabuchi put in in the New York Times, “free-spending consumers [turned] into misers, making them a dead weight on Japan’s economy.”

A change of this order takes a full-on anthropological investigation.  In the meantime, we may speculate. I think Scitvosky’s model might be useful here.  He shows how the pleasure of a new purchase devolves into comfort and I wonder if the reverse is also true.  Displeasure, as we move to a lower level of consumption, might for some consumers eventually lose its sting and turn to comfort too. Or not.

The question is whether we might habituate to a lower level of spending.  I think this can only happen if some of the deeper cultural drivers of the consumer culture fall silent.  These would include competitive spending.  (This is largely dead among some Millenials.)  It would also include the wish to stay in fashion or in touch with the curve.  (Here too some young consumers are turning their backs on fashion, especially the branded, mainstream variety.)  There are positive forces: the wish to go green, to “save the planet,” this has been the great staple of elementary school education and it is now on the verge of being installed in our culture as orthodoxy.  (This is no doubt as it should be.)  This is where we really have to do our anthropology: what are the cultural drivers that might intervene here and lock consumption habits into place.

In sum, consumer spending may look very like a tide, falling in every category in exact proportion to the loss of disposable income and credit.  Or consumers may manage their retreat less evenly, working trade-offs to protect some categories over others.  These prospects will become clearer when the ethnographic data is forthcoming.

Soon: Thoughts on the qualitative scenario.  Specifically, how consumption patterns might change, if they are going to change in kind and not just in quantity.

References

Brooks, David. 2009. “I Dream of Denver.” The New York Times, February 17 http://www.nytimes.com/2009/02/17/opinion/17brooks.html?th&emc=th (Accessed February 17, 2009).

McCracken, Grant. 1988. Diderot Unities and the Diderot Effect. in Culture and Consumption. Grant McCracken, 118-29. Bloomington: Indiana University Press.

Scitovsky, Tibor. 1976. The Joyless Economy: An inquiry into human satisfaction and consumer dissatisfaction. New York: Oxford University Press.

Silverstein, Michael J., and Neil Fiske. 2004. Trading Up: Why Consumers Want New Luxury Goods and How Companies Create Them. Rev Portfolio Hardcover.

Tabuchi, Hiroko. 2009. “When Consumers Cut Back: A Lesson From Japan.” The New York Times, February 22http://www.nytimes.com/2009/02/22/business/worldbusiness/22japan.html?th&emc=th (Accessed February 22, 2009).

Acknowledgments

This post appeared over the weekend at the Atlantic Business Channel:  http://business.theatlantic.com/

13 thoughts on “Consumers in a downturn: a new consumer habit”

  1. vry good post. may not restore the confidence into the markets – rightfully so – but into antropology – rightfully so too.

  2. We finished a study around this topic, right before the New Year. One takeaway was that this was NOT the New Normal; people had let go of previous behaviors but their language framed those decisions as temporary ones; they were things that were “on hold” and there was a determination to return to the old ways (of course, not the BAD old ways, just the good old ways – perhaps fewer ‘toys’ which of course = bad, but more vacations and dinners out) as soon as they could.

    If things stay the same for a year, that attitude might change, I don’t know how long our memories are…

  3. The anthropological question is, I suppose, what are we truly — are we consumption-happy as a people? Or consumption-phobic? This will, I think, determine what we ‘return’ to once balance is achieved. It seems Americans are generally consumption-happy. We returned to decades of consumerism after the pits of the 1930s. Maybe its something in our exuberance. Perhaps its our nation of immigrants competitiveness mixed with the relative ability to buy social standing.

    Japan I would say considering their history and conditions within the modern era has a character that sways towards quiet depression and miserliness as an art-form, an essential national trait. (There’s an exhibit right now at DC’s Freer Gallery about the ancient forms of pottery mending in Japan. The repair of pottery has its own name: kintsugi. With, as in gift wrapping and flower arranging, it’s own set of masters through the ages.)

    So, my theory supposes, the Japanese lost to America (and it’s always framed that way by Japanese, they lost the war), they chose to adopt our consumerism. But when that failed miserably they returned to a more elemental self. A truth about their natural character.

    Anyway, that would seem to point o study on this issue.

  4. It is amazing to see how these cultural drivers are still letting people consume/buy things that, at least for a moment, move people away from their obsession with the economy. But to your point about cultural drivers that could freeze up consumption, I think there is a driver out there, particularly in pop culture, that might loosely be based on the “survivor” and feed into some culturally-mediated “survival instinct.” My sense is that people want to see themselves as someone who has been through struggles and can survive it. And consumer deprivation could be one way that people are accomplishing this kind of transformation today, to the detriment of consumerism, of course. More and more people are trying to save up money, just in case they do lose their job or maybe even because their 401k has decreased, as opposed to a serious inflation problem, actual unemployment or defaulting on a mortgage. In many ways, it’s like surviving a bad storm in the basement of your house: your roof may not leak and you might not have any property damage, but you still feel like you “survived” because you had your canned foods and flashlight ready, just in case.

    In any case, it’s certainly an interesting time in history to observe consumer behaviors. Thanks for this post.

  5. Re what Steve Portigal says: Sorry, but there’s no way to do this politely–ABSOLUTE CRAP! And I say this as someone who is an anthropologist (Ph.D. Cornell 1973), has lived in Japan for almost three decades, and has authored a book on Japanese Consumer Behavior. Before making sweeping assertions about national character based on a minor art form seen in a U.S. museum, you might want to consider some relevant material circumstances: (1) a rapidly aging population, 1/5th of which is already 65+; (2) the retirement of the Japanese baby boomers, a much narrower age cohort than in the U.S. (1947-1949 vs. 1946-1964), whose “new families” spurred domestic demand for houses, cars, and durable goods at the same time that Japan was making inroads in global markets in the 1970s and 1980s; (3) the 1991 collapse of the Bubble Economy, followed by corporate restructuring that flattened middle and working class incomes and pushed too many young Japanese into temp staff positions from which they are now being fired in droves. There may also be something to say about kids whose lives have been both rigidly structured and materially affluent, who seem to lack the drive of their grandfathers, who had lost a real war and were determined to win the economic one, a goal that was pretty much achieved before 30-somethings were born. Lots to say here but evocations of natural character based on art and traced to losing WWII–got to say it again–ABSOLUTE CRAP!

  6. John McCreery:

    Regardless of the substance, your critique is off-target because Steve Portigal never mentioned Japan at all. Perhaps you meant Cristopher? Always a good idea to fix the target before unloading the ALL-CAPS epithets.

  7. Apologies to Portigal. It was, indeed, Christopher whose remark I found so irritating. That said, there are moments, not often but some, when SHOUTING IS JUSTIFIED.

  8. The anthropological question is, I suppose, what are we truly — are we consumption-happy as a people? Or consumption-phobic? This will, I think, determine what we ‘return’ to once balance is achieved.

    It seems to me Americans are generally consumption-happy. We returned to decades of consumerism after the pits of the 1930s. Maybe its something in our exuberance. Perhaps its our nation of immigrants — competitiveness mixed with the relative ability to buy social standing.

    Japan I would say, considering their history and conditions within the modern era — poor, overcrowded — has a character that sways towards quiet depression with miserliness as an art-form, an essential national trait.

    Case in point: there’s an exhibit right now at DC’s Freer Gallery about the ancient forms of pottery mending in Japan. The repair of pottery — where the repairs are not hidden but celebrated — has its own set of names: kintsugi, yobitsugi and tomonaoshi. With, as in gift wrapping and flower arranging, it’s own set of masters through the ages. All rooted in cultural-defining ideas about religion and the spirits within all objects.

    So, my theory supposes, the Japanese lost to America (and it’s always framed that way by Japanese, they lost the war), they chose to adopt our consumerism. But when that failed miserably they returned to a more elemental self. A truth about their natural character.

    Anyway, that would seem to point o study on this issue.

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