Alastair Morton writes:

The Guardian last Friday splashed pictures of baked beans and ‘Beamers’ across its front page to make the point that consumers’ habits are changing as a result of the credit crunch and other pressures on incomes. In particular, there are some startling statistics about BMW sales (down 40% on last year) and people’s levels of savings (down 48% on last year). In all of this, they suggest that a number of companies are benefiting from the ‘Aldi effect’, meaning that budget retailers and products (such as Aldi, Premier Inn budget hotels and own label foods) are more in demand as consumers tighten their belts.

However, the headline effects of downturn mask some more complex value trade-offs that consumers are making, and will continue to make, as they manage their squeezed finances. Over the last 5 years, discounters (especially Lidl) have added branded goods to their shelves, reaching levels as high as 30% of the product assortment in UK stores (sourced from MVI research). So switching to these retailers need not mean buying different products. Are consumers trading down and buying lower quality, or are they simply looking for the same quality, even branded, products at a cheaper price? Paul Foley, UK Managing Director of Aldi, argues ‘there is no trading down in buying the same quality product. You are just trading down in price.’

In ‘Feeling the Pinch’, a piece of research that we did recently, we were able to dive deeper and unpick the different ways that consumers are managing their money differently. Using a factor analysis, we found eight themes of coping behaviour that consumers are likely to draw on over the coming year, from spending wisely to borrowing to cutting back to reducing ethical consumption. Obviously there’s far more detail in the 70-page report, but a couple of core findings stand out.

First, people’s initial response to downturn is to try to buy the same things cheaper rather than buying fewer or different things. After this they buy less or cut out treats or luxuries. Secondly, levels of anxiety about economic downturn are a strong predictor of consumer behaviour – the more anxious consumers are, the more likely they are to make specific changes to their consumption behaviour in order to save money. Measuring consumers’ anxiety levels about their economic position – and how they’re changing – is the best way to gauge how rapidly consumer behaviour is likely to change.

The ‘Feeling the Pinch’ report is available for £3,500+VAT. Tailored briefings, which explore the findings and their implications for individual companies’ strategies and brands, are available from £6,000+VAT. To find out more, please email ftp@hchlv.com.

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