Where There’s a Will: Innovations that Encourage Consumers to Spend during Economic Downturn
In the face of economic uncertainty, it is easy to see why consumers are budgeting rather than spending. This mindset inevitably prompts marketers and small business owners to come up with new ideas to attract consumers to spend. From home cooks to food trucks to new innovations in budget carriers, consumers are encouraged to just loosen up and spend.
- In times of economic downturn, diners are a lot more discerning than they used to be. Consumers are more experienced and hospitality operators need to evolve and enhance their offerings. For example, Marks & Spencer in the UK showcased its food product line by offering customers free tastings in their cafés;
- While some retail chains in the United States are fighting the trend of extreme couponing, it is not advisable to alienate bargain hunters. Savvy consumers are adept at finding deals and mining promotional coupons online, and coupon redemption often grants retailers repeat business.
Globally, bleak news on the eurozone crisis and rising unemployment in the USA coupled with the slowing down of China’s economy can be heard on the news almost daily. With the 2008 global financial crisis barely out of sight and clouds still on the horizon, consumers are naturally tightening their purse strings. It is this very behaviour that had marketers thinking of new ways and means of luring consumers to spend more, and they are doing so by coming up with innovations that are in line with current consumer’s sentiments. Instead of promoting luxury and big-ticket items, they are riding on consumers’ desire to maximize their disposable income.
Money well spent on making life easier
Fuelled by the popularity of reality shows like My Kitchen Rules and MasterChef, time-poor parents and busy workers in Australia are paying up to A$500 (US$520) a week to have gourmet meals personally prepared at home even in the face of economic concerns. Canberra-based personal chef Mark Taylor said: “Australia had been slow to catch on to the trend but people are now much more aware of the industry. When we look at our stats online, people are Googling personal chef a lot more.” Director of personal budgeting service My Budget, Tammy May, said she was not surprised the industry was booming in a busier world. “More and more we’re outsourcing our life, so we can fit in more of the stuff we like to do and use that extra time to generate additional income.”
I feel good inside and out
While undergarments are something consumers need to replenish no matter how the economy is doing, manufacturers are not afraid to reinvent the wheel making boxers, briefs and undershirts that were once an afterthought into a significant category of men’s fashion. Fast-fashion giant H&M recently teamed up with Armani to launch a new undergarment collection by David Beckham that caused a worldwide buying frenzy. Patrick Doddy, director of A|X Armani Exchange, says: “One of our brand’s now-core styles, the hip brief, was added to the offerings because of the popularity of low-rise pants, and seamless products became a necessary addition when silhouettes became slimmer.” Chief industry analyst with market research firm The NPD Group, Marshal Cohen, says: ”A decade ago, all the innovation was coming out of the shape of the bottom – you had the hybrid boxer-brief and younger guys wearing boxers. Now the growth is in undershirts – guys are wearing them as everyday wear, not just for occasions.”
Global Real Market Size of Men’s Underwear, Nightwear and Swimwear: 2007 – 2012
Source: Euromonitor International from national statistics/trade sources
Note: Data for 2012 is forecast. Historical and forecast data based on constant prices and fixed 2011 exchange rates. Market sizes based on retail value RSP.
Let’s dine out informally
While many consumers are cutting down on dining out at restaurants, food trucks are a growing culinary trend particularly in the United States. Food trucks move constantly, “broadcasting” their location on social networking sites and parking wherever they can find enough space. Many urban consumers find the idea fun and innovative. “Food trucks ticked all the boxes by mixing different cuisines and city life. I can get Korean beef bulgogi to Mexican tacos to Louisiana jambalaya and going to different neighbourhoods that I never thought of going to,” said LeAnn Henderson, a huge follower of food trucks in Los Angeles.
In Melbourne, Australia, Peter Santos, originally from Denmark, says it is common to see all types of street food and beverages sold from bicycles in many Danish cities and towns, offering espressos, Chinese takeaway, fresh roasted nuts and pancakes. Santos, who began importing Danish Christiania cargo bikes in 2006, says small-business owners in Australia are saddling up to the opportunities bike stalls offer. Among his more recognisable customers are the Good Brew Company and Tiffins Melbourne, the city-based curry business that delivers direct to workers’ desks.
Pieces of paper that save me heaps
Bargain-conscious shoppers are increasingly using technology to flex their bargaining power. Online sites have sprung up around the world helping consumers compare pricing in traditional stores with items online. Online retailer Amazon recently offered shoppers the ability to scan barcodes on books at other stores and promised to beat prices charged by competitors. Apps for smartphones that also allow consumers to scan product barcodes have become more common, helping to swing the power of price fixing away from stores and towards shoppers.
Meanwhile, discount coupons have been given a new lease of life in the last couple of years propelling their use to one of the most popular “innovative” trends among shoppers in the United States and Asia Pacific region – thanks to a reality show called “Extreme Couponing”. Brian Hoyt of American couponing site RetailMeNot.com says the extreme couponing trend reflects “consumers looking for ways to save money any way they can, very much the way their grandparents did during the Great Depression.” The techniques are most often deployed at supermarkets and drugstore chains as they are natural targets for heavy coupon use because they stock staples like food and toilet paper, which are non-negotiable purchases even in a down economy. Recently in Australia, a A$2 (US$2.10) coupon deal for Hungry Jack’s Whopper Burger crashed group buying site Scoopon, with more than 120,000 coupons sold countrywide in under three hours.
Not just bland food and a small screen
With fewer consumers taking vacations in the face of the economic meltdown in the eurozone, European airlines are introducing new innovations from in-flight Wi-Fi internet to mobile check-ins to lure consumers on board in the upcoming summer holidays. “The European and American airlines are spending to catch up with Middle Eastern carriers,” says Henry Harteveldt, co-founder of airline research company Atmosphere Research Group. “European airlines and airports were always ahead with online check-in and now they are leading the way with mobile check-in and paperless boarding.” New check-in apps from British Airways, Virgin Atlantic, easyJet and BMI mean that passengers can check in and board via their smartphones without a paper boarding pass in sight. Dutch airline KLM has taken the technology even further with its ‘Meet and Seat’ app, which will soon let passengers choose whom they sit next to based on the Facebook and LinkedIn profiles of fellow passengers. Meanwhile, Finnair is testing a headset that will send light into the brain via the ear canal to reduce jet lag.
Real Consumer Expenditure on Air Travel in Western Europe: 2004 – 2012
Source: Euromonitor International from national statistics/UN/Eurostat/OECD
Note: Data for 2012 is forecast. Historical and forecast data based on constant prices and fixed 2011 exchange rates
The trend seeing consumers looking to save will continue as long as the global economic outlook remains uncertain. However, given the right price and level of appeal, consumers are still willing to spend. While big ticket items may be losing their lustre, small yet fun purchases may be the next big thing. For example, app games on mobile devices have millions of consumers around the world spending, mainly due to their affordability and the ease of acquiring them. Despite each game costing from just US$0.99 to US$1.99, game manufacturers such as Rovio and Zynga, which produced Angry Birds and Scramble with Friends respectively, are bringing in the millions due to the huge popularity of these games.