Signs that the recession has changed consumer behavior. If not forever, then at least for a long time.
Look carefully at the results posted up by the world's biggest retailer, Wal Mart. As the New York Times reports, sales at US Wal Mart stores for the first time in its history have plummeted as price cutting competitors lure consumers away with better bargains. As the New York Times suggests, Wal Mart is getting a taste of its own medicine. They still made a bigger profit but that's only because of overseas expansion and cost cuts.
This story is interesting because it tells us that the recession has changed consumers. With high unemployment and lack of credit from the banks, they have become more cost conscious.
At the beginning of last year, I did a blog entry warning that a new consumer was emerging and that frugality would become the new chic. Instead of going over the top with spending, people would spend more carefully. And instead of giving gifts, they would donate the money to charity on someone's behalf.
It's a view borne out in this study which says we are seeing a "permanent" reduction in spending. "Consumers will, at least for a very long time, not spend beyond their means like in the past,'' the study says. "Their homes are no longer ATMs, credit is no longer free flowing and people now understand the need to save for tough times."
The other interesting part to this story is the change in Wal Mart's fortunes. It wasn't that long ago that people were saying Wal Mart was doing brilliantly in the recession because of its ability to provide discounts. But obviously, that hasn't been enough. Maybe it's because of the new frugality. Or maybe it's because consumers who traded down to discount retailers haven't permanently changed their buying habits, and are starting to return to their traditional shopping haunts that provided affordable luxuries.
Either way, it suggests a shift in consumer behavior. Wal Mart's ability to ride out this recession is not as sustainable as many had thought.
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