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Will the poor economy permanently affect how we shop?
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San Jose Mercury News (MCT) - Carolyn O'Brien used to glide into Nordstrom, let the fashion moment seize her and buy whatever was in her price range, with little concern for sales or discounts.
Highlights
McClatchy Newspapers (www.mctdirect.com)
4/13/2009 (1 decade ago)
Published in Business & Economics
These days, she combs the racks at Macy's or JCPenney, where coupons and discounts mean savings of 40 percent or more.
"I don't buy anything unless it's on sale now, and not just a little sale, it has to be at least 20 percent off," said O'Brien, who works for the California Skin Institute as a patient care coordinator. And, she said, she may keep her thrifty shopping habits even after the economy rebounds.
But will her new way of life outlast the current downturn?
The Great Depression witnessed a generational change in consumer behavior, when learning to live with less became a habit _ and one that many clung to even when the good times returned.
Now, some research suggests that even as Americans have downshifted their spending habits because of the current recession, buying only essentials, shopping less _ and trading down when they do _ they are seriously reassessing their consumerism, not just now but also for the long term.
"To what extent will this behavior persist even if the economy bounces back? That is the big question," said Frank Badillo, vice president and senior retail economist for Retail Forward, a consulting and analysis firm.
The firm conducted a survey in August and again in February to gauge consumer habits. It found both times that about three-fourths of the 4,000 survey respondents said they have significantly or somewhat changed their shopping behaviors because of the economy. And once entrenched, this "recession shopping behavior" has the potential to linger even after the economy improves, according to the report.
"Oh my God, yes," said Sunnyvale, Calif., resident Barbara Buldo, who has been unemployed for a year and was looking around a Marshalls store recently. Once a regular customer at Marshalls, T.J. Maxx and Ross stores, the laid-off lumber company field representative said her mainstay shopping is now done at thrift stores. And she said that is likely to continue, even if she finds a job.
"I very rarely even buy here," said Buldo, 58, whose entire outfit of suede boots, jeans, a fleece vest and jacket was purchased at thrift stores. "If I buy anything here, it's discounted bubble bath for $3.99."
The loss of many of her most valued possessions _ including her diamond rings, her motorcycle and her mobile home, which she is putting up for sale this month _ has taught her what is important in life, said the mother and grandmother.
"The whole family has gained new values," she said. "If you value material things and lose your home, then you are left with nothing."
U.S. consumer behavior changed drastically during the Depression, when 25 to 30 percent of the work force was unemployed. Frugality was the rule of the day, a mindset many continued for the rest of their lives. But in the decades since, easy money policies led to an explosion of credit, and consumption. Now, with the current crisis, many who have never had to economize are being forced to do so for the first time in their lives. Credit isn't as readily available anymore, either.
Some economists are uncertain whether new, thrifty shopping habits will stick. It's "normal for families to adjust their spending in deep recessions or when personal financial trouble hits," said Steve Levy, an economist and director of the Center for Continuing Study of the California Economy.
The recession after the dot-com bubble burst saw spending fall, he said, as it did during the recessions of the early 1980s and 1990s. Historically, Levy said, consumers returned to old habits slowly over a few years, waiting until they felt secure that the economy and their jobs were stable.
The current consumer behavior most mirrors what happened in the early 1980s, when tax and interest rates were high and unemployment rampant, said Marti Kopacz, a retail distress expert with Grant Thornton, a corporate advisory and restructuring services firm. Just as they did then, consumers are trading down one level.
A Nordstrom shopper, for instance, might switch to Macy's, while a Macy's shopper might go to JCPenney or Kohl's. And those customers who have become comfortable buying basics at less-expensive stores may continue to do so even after things improve.
In fact, experts say the category hurting the most and the one that may take the longest to recover is luxury goods, because it's the one area in which consumers can delay purchases.
"In a world where 95 percent of us had jobs, it was only natural to trade up on some things," said Mark Wilcox, managing director of retail programs at Affinity Solutions, a retail marketing and technology services company in New York. "These days, we're more likely to make systematic changes downward. The only ones benefiting are Wal-Mart, Costco and Goodwill."
Economist Levy argued that a return to previous habits will take time. "Families will spend more, and on more expensive items, as jobs return and incomes rise. We may not go back to the 'old ways' for a long time, if by old ways you mean people buying things they cannot afford without dangerous borrowing."
Homemaker Ana Rios said she has changed her shopping ways, though she's not sure it will be permanent.
"I used to stop by here when I came to the grocery store just to see what was new," said Rios, who was shopping recently at Marshalls. "Now I come here looking for specific things I need because I don't think now is the time to make mindless purchases."
Once a mall cruiser who loved to seek out sales, Rios said she is avoiding those temptations for now. Even though she hasn't had major financial upheaval in her life, she's aware how quickly it can happen.
She views the belt-tightening as an adventure. "It's like camping, instead of staying at a nice hotel," she said.
___
© 2009, San Jose Mercury News (San Jose, Calif.).
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