The pessimistic consumer

Consumer pessimism is driving most consumer spending changes, according to Information Resources Inc. (IRI), one of the leading consumer research groups in the U.S.

IRI recently released “Competing in a Transforming Economy 4.0: The New Equilibrium,” attempted to go  “beyond studying the common spending, self-reliance and self-health strategies that are becoming common place in today’s environment and examined how economic pressures have driven different types of consumers—by income level, household composition and even varying consumer mindsets—to change their strategies.”

An interesting finding of the survey is that households with kids are more likely to spend on an “affordable indulgences” — a sign of “stressed out consumers” according to IRI.
The survey noted that 78% of households with kids earning under $55,000 are postponing non-grocery purchases, but 64% of this same consumer segment is treating themselves to affordable indulgences compared to 54% earning the same income without kids.

From its post-inaugural survey, IRI found that pessimistic consumers are showing a real change in consumption. For example, they are searching for sale prices (87% versus 82% for all households), making personal care products last longer (62% versus 55% for all households), and buying fewer prepared meals at grocery stores (61% versus 55% for all households).

“Since the beginning of 2009, a new consumer equilibrium has emerged in which behaviors initially implemented to weather the storm have the potential to last well beyond an economic recovery,” IRI Consulting and Innovation President Thom Blischok said in a statement.

The IRI survey also found different behavior among income groups.

During the fourth quarter of 2008, IRI found that 69% of those earning under $35,000 were delaying non-grocery purchases, such as electronics, furniture and clothing, versus 63% earning $35,000-$54,00, 59% in the $55,000-$100,000 level and 46% in the over $100,000 bracket.

Also, 60% of consumers earning under $35,000 are changing their definition of what is essential compared to 58% earning $35,000-$54,000, 46% earning $55,000-$100,000 and 34% in the over $100,000 bracket.

IRI noted: “Forecasts indicate that 2009 will continue to be challenging and 2010 will improve slowly, which leads one to believe that consumers’ current spending strategies are not a flash in the pan.”