Recession: Shifting consumer responses – April 2010
Welcome to the latest edition of Euromonitor International’s global consumer tracker designed to help you keep in touch with consumer responses to the recession all over the world and more crucially to map signs of recovery via shifting consumer purchasing behaviours and attitudes in 50 developed and developing countries as they emerge.
We explore the latest news within consumer themes including the newest thrift news, shifting consumer loyalty and downsizing and to what extent consumers are trading up or back to normal? This tracker includes stories on how factory-produced cuisine is on the rise in France; Argentineans are shopping in advance to save money; and fast fashion is gaining momentum in Korea.
THRIFT UPDATE/FRUGALISTA NEWS
Themed Hong Kong streets offer bargains
Shoppers in Hong Kong do not have to pour over a retail directory or search the internet to find the largest selection of sneakers, flowers or assortment of dried fish in town, as they all know that there are dozens of wedding gown shops on Kimberley Road, that sports shoe shops line Fa Yuen Street; florists jam Flower Market Road; and abalone and shark’s fin suppliers pack Des Voeux Road West.
Hong Kong has many theme-driven clusters of small businesses that defy the conventional wisdom of avoiding direct competition. Economists refer to the phenomenon as the “clustering effect”, saying it acts as a magnet for shoppers. Cindy Fu, who walked out of a shop with two big bags of abalone, dried scallops and Chinese sausages worth HK$4,600 (US$580), said: “I don’t check the prices of other stores but follow my parents who have been shopping at this shop for 20 years.”
Lam Pun-lee, of the department of business studies at Polytechnic University, said grouping similar shops together lowered the cost of marketing and created more choices for consumers. “Hong Kong is a small city,” he says. “The presence of a few shops of similar products can grow into a cluster. That in turn attracts spending crowds.”
Japanese outlet malls gaining popularity
Outlet malls have become popular in Japan, as people become more budget conscious. But the shops are usually located in remote suburbs, and may not be easy to get to. However, one shopping centre in Tokyo has brought outlet shopping to the city.
The shopping complex re-creates medieval Europe. It opened in 1999, with around 160 boutiques and restaurants. But in December, the entire third floor was renovated to accommodate close to 50 outlet shops – a first for Tokyo.
Like other outlet malls, items are heavily discounted, sometimes between 50 to 70% off the retail price. It is not just the affordability that attracts shoppers, but the choices as well. One shopper said, “There are discount items at outlet shops.
There are also the latest items sold at the regular price, so we can choose from both. That is what I like about it.” Interestingly, this particularly outlet is renowned not just for its prices, but also a chance to talk to good-looking retail assistants who offer tips on the latest looks of the season.
Swapping is the new shopping in Holland
Holland has a long history of second hand businesses and flea markets and thus has had no problem importing the concept of swapping from the USA and the UK. Instead of getting rid of their clothes, locals are swapping them in private and public events and of course making use of specialised internet sites such as eBay.
According to one blogger, “it is not only about saving money. It is also about having a clear conscience while we keep up with the demands of the ever-changing fashion world.” And with such ideas in mind, Colleen Geske and Tamara Raab created the “Swap in the City” event. In an interview with the internet news provider Expatica, Colleen says: “The idea of a clothing swap is not new; however, I wanted to create a fun afternoon out for women in the Amsterdam area, around the theme of fashion, beauty and charity.
I am passionate about the idea of green fashion: clothing nowadays has become disposable, but with ‘Swap and the City’, perfectly good quality clothing finds a new home rather than gathering dust at the back of a closet or being dumped in landfill.”
Haggling is now more effective in the USA thanks to a “cultural change”
Not long ago, Americans considered that the prices that appeared on the supermarket shelves were inflexible, and that they could only be modified by discount coupons or during special offer days. Not anymore. An article entitled “recession-weary consumers find haggling can cut costs”, published in the St. Louis Post-Dispatch details how American consumers have overcome their fear of haggling and even negotiate with store managers, in order to get prices reduced.
Also, it says that retail stores, that back in the day could not change the value of their products, have begun considering that it could be “good for business” to welcome those who haggle. The article quotes a survey that states: “two-thirds of Americans tried in 2009 to bargain for a better deal and that -in most of those cases- the hagglers succeeded at getting retailers to lower prices.” According to consulted analysts, it is a “cultural change” rather than a desperate act triggered by the crisis.
SHIFTING CONSUMER LOYALTY (TAKING IN LUXURY/ BRAND NOSTALGIA/PRIVATE LABEL GOODS)
Symbol of Czech communist shopping continues to survive onslaught of malls
On February 10, the Prague department store Kotva celebrated its 35th anniversary. During the communist era, a trip to Kotva was as close as most Czechs could get to real luxury. However, even after the arrival of modern-day shopping malls (including one that is located directly across the street from it), Kotva remains open for business.
According to Jana Cíglerová, former editor of the Czech edition of Elle magazine, “Kotva was one of the only three department stores we had back then. It was considered the most prestigious place to shop, when you said that you shopped at Kotva or you got something there, you were considered cool. It just had this flair.”
However, she adds that “When the shopping malls came, people lost their interest or their appetite in shopping at Kotva, because it hadn’t changed its shopping style. There still was counter service only, and the angry and rude shop assistants were still there, and not a lot of variety.” However, she admits that “People still find their way there, which I don’t really understand.”
Starbucks’s imminent arrival in Budapest prompts contrasting reactions
Almost three years after it was first announced, the opening of Budapest’s first Starbucks coffee house is now only weeks away. As is usually the case, the entry of a multinational giant into the local market has prompted a range of contrasting reactions.
According to one Budapester, “Trashing Starbucks is easy if you ignore the fact that up until recently (the last few years) finding a properly made cappuccino, latte or even a simple espresso in Budapest was almost impossible. The mere spectre of a Starbucks opening spun a hundred copycats and as far as I’m concerned raised the bar on accepted standards.”
Source: Euromonitor International from trade sources/national statisticsNote: Market sizes based on retail value RSP.
Fast fashion gaining momentum in Korea
The fast fashion Japanese company, Uniqlo, was the first to enter Korea in 2006 and since then there has been a trickle of fast fashion companies setting up shop. The latest to hit the shores is H&M arriving to occupy four floors and 2,600 sq. metres at the Noon Square shopping mall.
About 2,500 people lined up recently for opening day in the Myeong-dong fashion district. Local companies are now jumping aboard the fast-fashion bandwagon with SPAO, short for “speciality retailer of private-label apparel original” operated by the E-Land Group who opened up a 2,880 sq. metre shop in Myeong-dong, which features the most expensive real estate in Korea.
How the uncool become cool in the UK and vice-versa
Microsoft’s rebranding efforts seem to be paying off: Microsoft has been crowned as the brand with the best reputation in the UK. It was as recently as June 2008, shortly after the US$300 million rebranding project was announced, that Microsoft was described as a “soulless, power-hungry purveyor of lacklustre products” by tech-specialist magazine fastcompany.com.
The annual Business Superbrand Top 500 Survey saw Google, last year’s number one, slide into fifth place. Microsoft was followed by the Rolls Royce Group, Blackberry (from 42nd place) and Virgin Atlantic. Chairman of Business Superbrand, Stephen Cheliotis, told Sky News: “Perhaps Google has become too big and people are maybe just starting to lose their love affair with this small upstart which was once very creative and very different.”
ATTITUDES TO PLASTIC, OTHER FORMS OF CREDIT AND SAVING
Buying, the Argentine way of investing and saving
“Official” inflation went up almost 10% last year, although some consumers and analysts believe the increase in prices was almost double that figure. The projections for this year are similar, so Argentine people are looking for the best way to save and invest the money they earn, without it getting depreciated or devalued.
Some have found a very peculiar way of doing so: shopping in advance. According to the consulting agency LATCO and other experts, the fear people have of their money losing its value in the coming months is making them consume more. “Rising inflation moves consumption of some durable goods such as cars and white goods (refrigerators and washing machines),” explained Daniel Vardé, a LATCO partner. The trend is being boosted by more offers of “flexible loans” to consumers, launched by the banks to attract consumers, through which they can buy with their credit cards and enjoy 36 interest-free repayments.
More Irish now dipping into savings to meet living expenses
A survey conducted by the Educational Building Society during early 2010 has found that a growing number of Irish consumers are being forced to dip into their savings to meet day-to-day expenses. The survey found that almost half of respondents were using their savings to fund their general living expenses, up from less than a third in a similar survey conducted twelve months ago. 90% of respondents said that they now found it more difficult to save.
The survey also found that the 80% of consumers who are in full-time employment were saving an average of €299 each month. However, the majority still prefer to borrow, rather than save, in order to finance a large purchase. A minority (20%) have reduced their socialising in order to increase the amount that they save each month
Are Spaniards being short-changed?
According to a new report by Spanish Consumer Association (CEACCU) many Spaniards are not really aware of where their money is being invested. In 70% of cases, they do not have time to read through the contract as they are under pressure to make a decision.
Meanwhile, most people do not check out the investment packages offered by other banks, as 85% are customers of one bank only, home to their bank account. Half of the people surveyed believe that a retirement plan is essential.
One in four do not keep the paperwork related to their investments and 40% do not read the small print. 54% of bank customers do not understand the financial jargon and are often not fully aware of what their rights are as contractors. At least 11% of savers believe that buying shares on the stock exchange is risk-free and 14.5% think the same about investment funds. Finally 60% of those surveyed said that they do not have a retirement plan because they do not earn enough money.
DOWNSIZING, TRADING UP OR BACK TO NORMAL?
Egyptian car sales accelerate
The Egyptian car market has bounced back after a slump. The Automotive Marketing Information Council, which publishes statistics on the basis of information provided by car dealers, noted that there was a huge 63% year on year increase in cars sold in January 2010.
While in January 2009, 10,765 units were sold, January 2010 saw the sale of 17,551 units. Passenger car sales grew most notably, leaping to a 96.4% increase in January this year compared to January last year. Consumers are showing a preference for mid-size automobiles. Passenger cars in the 1.5-1.6 litre range skyrocketed by 183.5% to 9,681 sales.
Malaysian motorcycles gain traction
With the economic crisis, unstable oil prices and a car market that seems to be stalling in a number of markets, local motorcycle manufacturers are seizing the opportunity to launch new models with attractive features.
A local Malaysian manufacturer, Mofaz Motosikal Sdn Bhd (Momos) is gearing up to sell 3,000 units of their Madass 125 this year. This target will double their sales from 2008 and the company remains optimistic and confident this target can be reached.
The price tag is RM6,000 (US$1,795). Euromonitor International statistics show a steady increase in motorcycle sales from 2004 through to 2008 although the market shrunk in 2009. Given the way this one local manufacturer is gearing up for production, these figures may change over the coming year or two.
Source: Euromonitor International from national statistical offices/OECD/Eurostat.
Mexican beer consumption grows and a myth is toppled
In Mexico, economic analysts usually say that beer consumption figures indicate the way the economy will go; for in the last decades, the fall and rise in the sales of this beverage have been similar to the fluctuations of GDP.
For the first time, though, the myth was disproved. Despite the 2.7% contraction of the GDP in the fourth quarter of 2009, beer consumption in Mexico remained stable. During the whole of 2009, domestic demand for this beverage increased by over 1% compared to the previous year, a very positive result if one takes into account the 6.5% contraction in the economy.
According to the El Semanario agency, the crisis also encouraged the consumption of beer rather than other distilled spirits, such as tequila and other more expensive drinks.
Luxury car sales slump in Romania
The number of new luxury cars registered in Romania fell by 64% between 2008 and 2009, according to the data from of the Association of Automotive Manufacturers and Importers in Romania.
This indicates that even the country’s most affluent consumers have been squeezed by the global economic downturn. Just 800 luxury cars were sold in Romania during 2009, accounting for a mere 0.8% of the overall import market.
Separately, data from the Vehicle Registration Department shows that 233 ‘high performance’ vehicles (cars costing at least €100,000 and with at least 400 horsepower) were sold in Romania between 2007 and 2009. Maserati was the most popular marquee, with 73 vehicles sold over this period, followed by Bentley (59) and Ferrari (48).
Economic upturn equals happy Taiwanese shoppers
On the first day of the Lunar Year which coincided with Valentine’s Day, department stores in Taiwan saw sales increase by 10 to 20% compared to the same period last year. According to Shin Kong Mitsukoshi and Sogo, both stores saw a turnover of over NT$100 million (US$3.13 million) that day. “When the downturn was in full swing this time last year, people were hesitant to spend even with the consumer vouchers the government issued to every Taiwan citizen.
Now they are willing to spend,” the department stores said. Places that are more appealing to youth were teeming with students and young couples holding red envelopes, ready to spend the money that their parents or grandparents had given them. “My girlfriend and I spent more than NT$4,000 (US$125),” said a high school student surnamed Hsieh. “For us, everyday is like Valentine’s Day.”
THE GREEN BAROMETER OR ARE CONSUMERS FINANCIALLY FIT ENOUGH TO CARE?
Companies (and consumers) are not green enough say Brazilians
Two out of ten Brazilians now take into consideration how committed each brand is to the environment before purchasing a product. The market share of “sustainable” products is still small compared to those in the United States and European countries; but the change in habits shows that “these numbers only tend to increase, even more so with the use of the new technologies”, affirms a report conducted by UnoMarketing and MobConsult.
The survey discovered that in the past 10 years, Brazilian consumers have been more aware and critical of the measures adopted by companies. According to many analysts, Brazilians “have many expectations regarding green company actions, but they are disappointed because many of those promises are just words, there is no real commitment”, says Ricardo Voltolini, journalist of the Environmental magazine.
Canadians are not that active environmentally… and they know it
They are not precisely the citizens that do the most for the environment, but there is something positive in this: at least they are aware of it. Only one in five Canadians awards himself an “A” (the highest qualification) for commitment to the environment.
However, “80% say they are motivated to do more to reduce their personal and household impact”, Gerald Butts, President and CEO, WWF-Canada, said. The organization believes the survey results are positive ones, for they confirm that “Canadians are motivated to do much more than the status quo”.
Healthy, yes – but at a lower price say Germans
After a decade of double-digit growth rates, the organic food boom in Germany seems to have come to a halt – or rather, a lull. Most market insiders interpret the lack of growth in the market not as a shrinking trend but as a re-valuation.
Ten years ago, eager eco-consumers only found their organic food in specialised shops and evolving chain stores such as Alnatura, Basic or Vollcorner. Now, every supermarket or discount chain has their very own organic range, at far lower prices than those charged in specialist stores. So, while the market actually grew 2% in volume sales, people spent less on their organic food.
The economic crisis has made consumers more aware of their spending, and this was a lesson the makers of trendy organic lemonade, Bionade, had to learn painfully when they tried to increase the price of their popular drinks.
Against this trend, consumers spend their money on organic cosmetics and body care, as this subsector of the market continues to experience growth. Currently, the bio-budget of the average German consumer stands at €84 per annum.
Polish green contradictions
A new report by the Institute for Ecological Development says Poles have little or no concern about the environment while eco-activists are negatively perceived. On the one hand, 60% of Poles say that they respect environmentalists’ work, 70% percent understand the necessity of looking for renewable energy sources and 80% describe their actions as pro-ecological.
Meanwhile, 80% of respondents cared only about the price of products while shopping, and only 5% care whether products meet eco-standards while less than 2% of Poles check if a package is recyclable. About the report, the online newspaper thenews.pl concludes: “The survey shows a huge gap between what Poles declare and what they actually do in relation to the environment.”
Low-carbon businesses hail a new Turkish environmental era
Business leaders from across Turkey came together in March for the “Constructing a Low-Carbon Future” conference. The aim was to brainstorm on how Turkey could make a transition to a low-carbon economy. The business leaders agreed, according to Turkish newspaper Today’s Zaman, that environmentalism should be “everywhere”. Not only is the pressure on Turkey coming from the EU, but it is also coming from consumers, who are questioning the carbon-intensive production of the goods they buy.
WHAT’S FOR DINNER?
High quality cheese is the new “it” food in Chile, but it is scarce
The Baco bistro, a restaurant in Nueva de Lyon Street, Providencia, sells more than 150 kilos of cheese per month, in different dishes. But none of these cheeses are Chilean; they are all French. The restaurant specialises in cheese, but it is not alone. “Cheese is becoming a fashionable food and trend in Chile and, as always, there is reason for its consumption”, reveals Chilean newspaper La Nación. Suddenly, wealthy consumers have discovered the authentic Roquefort, the original Camembert, exclusive Brie and other celebrities like the Petit Basque.
Men and women with high incomes want them in their favourite restaurants and want to know about the best Chilean cheese, although, they say, home-grown cheese still lacks originality, diversity and character. The owner of bistro Baco says that two years after he opened his restaurant, there has “been an evolution” in cheese consumption in Chile.
Healthy restaurants flourishing in Columbia
It has been a year since the city of Bucaramanga’s Health department began bestowing exclusive certificates on those restaurants committed to offering a healthy menu to their customers. The success of the scheme has prompted other restaurants to join the bandwagon, and ten additional restaurants were recently awarded the certificate. To acquire the credential, restaurants have to serve at least one portion of fruit and one portion of vegetables and reduce the content of starch in their meals while using only natural ingredients in the preparation of the food.
Factory-produced French cuisine
French cuisine suffered a dent to its reputation after an event that should have been a proud day for it. Officials announced that they were awarding 600 restaurant, brasserie and bistro chefs with the label “Maître Restaurateur” (master restaurateur).
The embarrassment stemmed from the fact that these officials had announced in 2007 that they were hoping to award the label to 20,000 chefs. The title is given to those using mostly fresh produce, and refusing pre-cooked, industrial dishes.
Paris correspondent for The Times Online quoted critics who noted that the small number of labels actually awarded is indicative of “the spread of factory food, such as spray-on flavours and vacuum-packed sauces”.
Selling food to India
Food safety is becoming an issue many food companies cannot ignore if they want to build brands or maintain customer loyalty. In a country such as India, food safety can be one of the biggest challenges for retailers and consumers alike.
In a recent online survey conducted by Nielson, 97% of Indians consider food safety an important element when they shop, while 73% of Indians are confident in the safety of the food they purchase from their local store.
For those Ukrainians with a taste for the finer things in life
A new gourmet shop in Kiev is being hailed by the city’s gastrophiles and bon viveurs. Offering such delicacies as cold-smoked shark and 50-year matured balsamic vinegar, Delight’s prices may be eye watering for the majority of local consumers, but for a minority, it would appear to represent something approaching culinary Nirvana.
According to one effusive newspaper columnist, “the gourmets of our city can rejoice at last. They will be able to satisfy their hunger for exquisite delicacies without having to go out to a restaurant or taking a trip abroad.”
TREATS THAT CONSUMERS CAN’T DO WITHOUT
The importance of internet access to Egyptians
A new global poll, conducted by the BBC World Service, has indicated the importance of the internet to Egyptians. According to the report, which was published at the beginning of March, Egyptian users are more likely than others in the Africa/Middle East region to indicate a dependence on the internet, with more than half (55%) saying they could not cope without it.
Russian consumers buying more new clothes
With 17,200 visitors, the latest Russian trade fair for apparel, Collection Première Moscow (CPM), which took place in Moscow in late February 2010, attracted 7% more people than last February’s event. Fashion specialists from all over Russia attended the Collection which was said to have reverted to its pre-recession glory. About 1,200 brands from 30 countries, 20% more than last September, showed their collections for autumn/winter 2010/11.
The shows included women’s, children’s and menswear, young fashion and lingerie, leather and fur, bridal and evening wear as well as accessories. The mood was reported to be positive, since “the developing Russian market is a vital factor for the CPM” as Bugatti export manager Jan Heitmann was quoted as saying.
Online UAE shoppers continue to splash out
Consumers in the UAE spent on average more than US$1,000 online during the fourth quarter of 2009, the highest in the Middle East Africa and Asia Pacific regions, according to a survey of online shopping habits conducted by MasterCard Worldwide. UAE consumers spent an average of US$1,048 online during Q4, down from US$1,193 during the year-earlier period.
The most popular items bought by online shoppers were airline tickets (43%), books (34%), CDs and DVDs (30%) and home appliances and electronics (29%). Online shoppers in the UAE made an average of four purchases in 4Q 2009, down from 4.2 during 4Q 2008.
THE LATEST FROM THE CONSUMER COCOON (THE HOME/ENTERTAINMENT HUB)
25 million Brazilians now watch cable TV
There is a new sign of Brazil’s economic strength; the extraordinary growth of paid TV among consumers from all sectors of society. Brazil was behind compared to its neighbours; such as Argentina, where 70% of the homes pay for cable or satellite TV. According to the report issued in February by the National Agency of Communications (Anatel) there are 7.62 million clients for paid TV, which represents around 25 million viewers.
In February alone, 150 thousand homes hired the service, an increase of 2% on December 2009, informed the Official State Agency. It is believed that in each Brazilian home, there is an average of 3.3 people. The Football World Cup and the option that cable offers for watching local and foreign matches have convinced male viewers to hire the service as has a rise in advertising by companies offering football coverage on cable TV.
Young Chinese consumers prefer to stay home for the New Year
Some young Chinese consumers chose to spend the week-long Chinese Lunar New Year holiday this year at home. They shopped online, sent virtual greetings to relatives and friends, and even watched virtual fireworks.
The new practices, which are in stark contrast to traditional customs, have sparked controversy. Traditionally, Spring Festival was a time for a reunion of family, relatives and friends, as well as an opportunity to visit temple fairs to buy new clothes and traditional headwear. “I usually feel tired during the week and would rather stay at home,” said 24-year-old Li Ying. “As people’s living standards have improved, the sense of satisfaction traditional festive customs bring to Chinese people has faded,” said netizen “Yudanfengqing” in an online posting.
According to statistics from Taobao.com, China’s main online retail site, transaction volume in Spring Festival special goods exceeded 1 billion renminbis (US$146.6 million) in January alone.
Technology + community = better life for Thais
Despite Thailand’s adhoc approach to broadband, technology is making inroads into small pockets of the consumer landscape. Thailand’s largest cable TV service, ISP provider and 3rd largest mobile phone operator, True Corporation, is teaming up with the Magnolia housing estate comprising luxury residences to launch innovative home solutions, called iHome.
This collaboration is focused on offering a modern lifestyle via various communication devices such as mobile phones, computers and TV’s connected via 3G, Wi-Fi and broadband internet connection.
THE TRAVEL BUG?
Heart over statistics for Germans
Marriage is back in fashion with younger people. 84% of Germans polled by “Galawedding“ magazine think you should marry for love and not the taxman (90% of men). In 2008 there were 4.6 weddings per one thousand Germans (4.5 in 2007).
Another growing trend, especially for second marriages, is getting married abroad with an exclusive group of guests – or without. Classic destinations are Mauritius, the Seychelles and South Africa.
Cheaper Greek holiday accommodation?
Greece’s national hoteliers association has urged members to offer cheaper options to attract domestic visitors, as Greek consumers are expected to significantly cut holiday spending this year.
In a statement released in March, the association argues that the sector cannot afford to lose its domestic demand, as it accounts for more than 20% of a hotel’s total income. The report stresses the need to offer Greek tourists the same prices that are offered to foreign visitors.
Indonesian backpackers find adventures in their own land
32-year-old Heru Hendarto loves to be on the road with fellow backpackers, exploring every corner of the archipelago. Heru said. “It’s so satisfying because we can explore the area and mingle with the local people in our diverse country”.
Heru pointed out that it is actually easier and cheaper to travel to neighbouring countries like Malaysia, Singapore or Thailand than to remote areas in Indonesia. “Hence I join a backpacking group to get good deals”. There are a growing number of backpacker communities in Indonesia dedicated to backpackers and travellers who want to share experiences, look for fellow travellers and to find the best deals.
The Philippines encouraging more medical tourism
Across the Asia-Pacific region, countries are now competing for the medical tourism dollar. It is gearing up to be one of the most competitive sectors in the industry and the country has decided to join the fray. Euromonitor International statistics show that in 2009, there were 2.6 million leisure tourists and 0.6 million business arrivals into the Philippines.
The Director of the National Economic Development Authority, Dennis Arroyo, says that around 200,000 foreign patients are expected to come to the Philippines every year, creating a US$3 billion industry by 2015. The Philippines is not only trying to boost the number of medical tourists but also to position itself as a retirement haven for the world’s aging population.
Singaporeans still keen on travelling
There is simply no stopping Singaporeans from going ahead with their travel plans. Travel agents said many are going ahead with travel plans to Thailand and South America, despite natural disasters and fears of protests.
Tour agencies offering packages to South America, which includes Chile, said bookings are “pretty steady”. They said some consumers are not as concerned about their own safety as much as whether the earthquake will delay their trip.
Similarly, most Singaporeans are unfazed about holidaying in Thailand, even though there are concerns about large-scale protests. One determined consumer commented, “We do not care about that, because I believe if we want to go there, we are all out to go there.”