Being cheap is suddenly chic

McClatchy Newspapers (MCT) - The economy hasn't had an effect on Jennifer Sommers' salary. Nor is she spending less.

She is, however, more selective about her purchases.

Sommers now shops the sale racks at Urban Outfitters instead of the latest arrivals, eats at a local cafe instead of more expensive restaurants, and waits for movies to come out on DVD instead of going to the theaters. She also rides her bike nearly everywhere she goes.

"I still pretty much spend on the same stuff. But I think I'm spending a little wiser," said Sommers of Kansas City.

Welcome to the new frugality.

An uncertain economy, marked by higher food and energy costs, unpredictable politics, volatile financial markets and tightening credit, is having a chilling effect on many consumers.

In good times, consumers drive about 70 percent of all economic activity through their spending decisions. Now, shifting shopping patterns will help determine whether a wobbly economy officially dips into recession.

Almost every retail spending category was down or flat in August, according to TNS Retail Forward, a market research firm based in Columbus, Ohio.

But consumer confidence bounced off a 16-year low, thanks in part to moderating gasoline prices, the Conference Board reported this month.

Those shifting shopping patterns, though, are revealing retail winners even in a tough environment.

The new retail trends in these uncertain times? Spend to save. Cheap is chic.

"At this point, every level is experiencing economic turbulence," said Mandy Putnam, vice president at TNS Retail Forward. "So choices are value-driven _ trading down from premium brands to national brands or national brands to private labels, department stores to discount stores, mac and cheese instead of meat. Anything that helps them save is going to be hot."

Grocery shoppers are more and more likely to use coupons, to pick store brands over national brands, and to choose home meal replacements instead of eating out.

"People say they don't want to spend all that money at restaurants, but they don't want to take all that time to prepare meals at home," said Shannon Hoffman, owner of GreenAcres Market in Kansas City. "So they're getting rotisserie chickens, the salad bar, the hot bar, frozen dinners. It's been a steady growth for the last couple of months, since the $4 gas deal."

Consumers also are buying in bulk and stocking up on sale items, which also has led to increasing sales for freezers _ up more than 7 percent this year to nearly $400 million compared to the same period in 2007, according to the NPD Group, a New York-based consumer and retail research firm.

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"We are not going to let our food costs rise faster than our food budgets," said Harry Balzer, vice president at NPD Group.

So brown-bag lunches have become the new workplace accessory, especially for professionals 35 to 54, he said.

When consumers do eat out, they often move downscale a bit, leading to a boost in sales at fast food restaurants, which were mostly up in July compared with a year ago.

"We are doing all kinds of promotions in our restaurants, over and above what McDonald's is doing," said John Jelinek, owner of three McDonald's restaurants in Kansas City. "One gimmick, we put bacon on the $1 double cheeseburger and sell it for $1.69. We're making more money, more profit and the customers are buying it like crazy."

Less than a fourth of fine dining operations increased sales in July compared with a year ago; 61 percent said sales were down, and some local upscale restaurants have nixed lunch all together.

"Consumers basically equate using restaurants with part of their standard of living and in general are loath to substantially cut back," said Hudson Riehle, senior vice president of research for the National Restaurant Association. "But they do change their patterns _ which concepts they will go to, how frequently they will go, the types of items they will order."

Savers, nesters and the environmentally friendly are opting for energy-efficient products. That includes cheaper transportation, from bicycles and scooters to more energy-efficient cars. When gas prices were soaring in July, so were Vespa sales, up 174 percent compared with July 2007.

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"It's a combination of several things _ gasoline prices, dependency on foreign oil ... and more Americans wanting to do their part," said John Redmond, who will open a Vespa dealership in Kansas City's Crossroads Arts District this fall. "You can get 80 miles to the gallon on average in a Vespa, when you are lucky to get 20 miles a gallon in the average car."

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Home Depot is struggling to keep its energy-efficient products in stock.

"Consumers can save an exorbitant amount of money on their gas bills," said Lesia Akins, co-captain of the "Green Team" at a Home Depot in Kansas City, who has seen an increased interest in window film, silicon caulking and pellet-burning fireplaces. "But they look at it as both saving money and good for the environment, so it is twofold."

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But even as people nest more, they want a nice place in which to hunker down.

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Home furnishing retailers such as Nebraska Furniture Mart are posting record years. The Kansas City, Kan., store is popular for people redoing their kitchens or picking up digital flat-screen TVs. However, with new home construction down, Nebraska Furniture Mart is seeing a decrease in sales of flooring.

"Do we feel the pain? Yes, we do. But the tougher the economy gets, the better our business gets," said Bob Batt, executive vice president of the Omaha, Neb.-based company. "When times get tough, they say 'We really have to stretch our budget and get the most bang for the buck.' The home is the castle for the family, and that's where they like to be, so they will put more money into the home."

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Indeed, sales also are up at home furnishings store Nell Hill's in Kansas City and in Atchison, Kan.

"People are staying put instead of scaling up to a new house, and they are finishing remodeling projects," said Mary Carol Garrity, owner of Nell Hill's. "That's worked to our benefit. They are buying rooms full of furniture and more expensive things, more quality things that they get to live with forever, not just making do. They are buying as an investment."

Others may just opt for a new lamp for the living room or art for the dining room, said Leo Andrade, co-owner of L&L Home Goods and Gifts, also in Kansas City.

"They can't sell their house, so they are doing updates," Andrade said. "And because they are nesting, having people over for dinner, they want a new serving set."

Then there is some discretionary spending _ liquor, lotteries and candy _ that has seen sales spikes, perhaps as temporary relief from our economic sorrows and hope for the future.

"Consumers are on automatic pilot to save as much as they can," said C. Britt Beemer, chief executive officer and founder of America's Research Group, a Charleston, S.C.-based firm that studies consumer behavior.

"But we don't see people cutting back on their vices. Some items may even be doing better because people are under such pressure."

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© 2008, The Kansas City Star.