The recession as consumer therapy
I read a column this week that discussed our new age of frugality. It asked whether companies that made huge profits from Americans’ previously out-of-control spending habits could adapt to an era of thriftiness. It made me recall a series we did two years ago called Consumed and consider whether we’re truly seeing a permanent change in American thinking.
The column I mentioned comes from MSN Money, Hello frugality; Goodbye, good life:
“We’re absolutely finding that a new frugality has taken hold, one that seems to have some staying power,” says Krista Faron of market research company Mintel, which tracks consumer spending patterns. It’s playing out across all retail sectors, including fashion, food and home improvement, Faron says.
“Yes, this is a new age,” agrees Ken Perkins of Retail Metrics. “Consumers are much more focused on value now. Before, it was all about coming home with the latest handbag. Now it’s about shopping your closet.”
SHOPPER VOICE MONTAGE: I wanna get some jeans, a purple shirt… I need the iPhone like I need air… We wanted to be first in line to make sure we got what we wanted…
RYSSDAL: Do you ever wonder how long the American consumer can keep it up; can keep just going and going and going?
WONG: You know, we’re being stretched, and I turn to my kids every so often and I ask them, how many more pairs of jeans do they need? How many more handbags can they buy? And how much room to they have in their closets? And they keep going, and they keep buying, and the port keeps seeing more and more cargo coming through here.
Not anymore. Through November, 2009 Long Beach imports fell 23% compared to the year before.
In another story, Sarah Gardner gave us the history of America’s spending binge:
It wasn’t that long ago that being thrifty was America’s number one virtue. But beginning with FDR, a string of presidents has extolled the virtues of Keynesian economics and spending our way to wealth.
From FDR all the way to President Bush:
After the attacks of 9-11, Bush asked Americans not to ration consumer goods or plant victory gardens, but to continue participating in the American economy. Five years later, he was even blunter:
PRESIDENT GEORGE W. BUSH: And I encourage you all to go shopping more.
Spending is now more than patriotic — it’s become the American way of life.
Within months of those words being spoken, it all came crashing down. Some people in our series, like Harvard professor Elizabeth Warren, saw it coming:
WARREN: This is one of the scariest parts for me. The typical family is carrying now about two months’ worth of income in credit card debt. So what’s going to happen long-term? Do we have a period where all these families that are carrying all this debt simply cut back on their consumption so that they can pay off the outstanding debt loads? Is that gonna be a long, slow decline, or is it going to be a one-time smack? Either way, the consequences for the economy cannot be good.
Now that the smackdown has occurred, I ask: What are we witnessing? A temporary moment of sanity and belt-tightening or a truly defining attitude change that sinks into our bones and those of our children?
If you look at the behavior of some retailers, it appears they’re just trying to ride out a storm. Take Target’s new promotion, for example:
With consumers focused more on the price of toothpaste than buying a new bedroom lamp, Target has gone warehouse.
In a part of the store normally used for seasonal merchandise, the retailer has stacked hulking packages of bottled water and paper towels on pallets. Shelves are lined with supersize jugs of laundry detergent and bulk-size packages of batteries. Shoppers can dig through bins of $1 neon-colored flip flops and packs of athletic socks for $7.
The seven-week promotion, “The Great Save,” started showing up in stores over the weekend.
Seven weeks. Somehow I don’t think that’s going to cut it. But what do you think? Will being thrifty become America’s number one virtue again – permanently?
I’ll end with this somewhat encouraging note from an interview I conducted during Consumed. The guest was UCLA professor Peter Whybrow, author of “American Mania”.
WHYBROW: What happens in mania is first, people are very happy and they seem to be extraordinarily engaged. And then slowly, everything begins to fall apart as they become completely driven by this growing physical and mental derangement. And so it’s almost as if we’ve gone beyond happiness.
JAGOW: Hmm. That’s scary.
WHYBROW: Well, we could stop it — you know, the good thing about the human being is we do have a rational part of ourselves. The only problem is, at the moment that’s all we have, because all the social restraints have disappeared. And when you take off the social brakes, and we have individualism as the icon of what we’re all trying to achieve, there’s no social feedback that traditionally in the market has prevented people from being greedy, to put it bluntly. I mean, if you look around, there are lots of evidence of greed, which I consider to be a behavioral disorder.
Is the recession providing a cure?
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