Boston, MA – June 8, 2010 – The L.E.K. Consulting Consumer Sentiment Survey (CSS) has identified shifts in consumer attitudes and spending behaviors that have important ramifications for retailers. Key findings include a significant uptick in affluent consumer spending and optimism, insight into major drivers of purchasing decisions, and shifting online commerce expectations.
The L.E.K. study found that affluent consumers (households earning >$150,000 annually) are bullish on the economic recovery and more than one-third (39%) believe their spending was either not impacted materially by the recession or has already returned to pre-recession spending levels. The general population, by contrast, is significantly more cautious. Only 12% expect their personal finances to improve by fall 2010 and 65% don’t anticipate that their finances will rebound significantly for the next 12-24 months.
According to the L.E.K. research, the affluent consumer is the only demographic that is spending more today than before the recession, and is the only group planning more purchases (expected 3.5% increase) in the near future. By stark contrast, the general population has decreased its spending by more than four percent since the onset of the recession, with no significant spending increases on the horizon.
“L.E.K.’s survey findings show that wealthy consumer spending is outpacing the general public significantly and appears to be literally pulling the U.S. out of its recession,” said Andrew Rees, Vice President and Head of the L.E.K. Consulting Retail Practice. “The distinct affluent demographic underscores why retailers need to truly understand what motivates each customer type. Deep customer segmentation will give retailers the insight to chart a clear course despite hazy market conditions.”
Impact on Key Consumer “Megatrends”
The L.E.K. Consumer Sentiment Survey identified individuals who describe themselves as “passionate” about specific consumer trends, and the results provide insight into how retailers can better serve their customers. Importantly, the percent of high-income individuals who align themselves with these megatrends is typically more than seven percent higher than the general population. Select findings on key “megatrends” are:
Trading Up/Trading Down
- The recession amplified the phenomenon as consumers were forced, more than ever, to make choices in their consumption;
- “Selective splurging” is now growing again as shoppers are increasingly returning to some purchases of higher-end brands;
- Consumers have shifted purchasing habits slightly from price reduction toward quantity reduction since L.E.K.’s October 2009 CSS.
Organic and Natural Food
- About 17% of the population is in the sub-set of consumers that truly drives organic/natural purchases and is willing to pay more, or go out of their way, to indulge this preference;
- However, nearly 24% of affluent households fall into this camp;
- This category was quite sensitive to the downturn, but passionate consumers expect a significant surge in their organic purchases “post-recession".
- 21% of consumers really drive this category;
- However, only 10% of consumers are willing to pay a premium for green products;
- Consumers generally remain skeptical about the validity of many environmental claims.
Online Shopping Trends
The most prevalent megatrend through the recession continues to be online shopping. The U.S. Commerce Department reports that e-commerce sales totaled $38.7 billion in Q1 2010, indicating a continued shift of retail sales to the web. Of the total respondents to the L.E.K. survey, nearly one quarter said that their online shopping increases every year. The survey also found that the web plays an important role in influencing in-store purchases.
“Online shopping continues to be an important focus for retailers, and our survey found that one quarter of consumers’ purchasing decisions in physical stores are influenced by their online experience,” said Dan McKone, Vice President of L.E.K. Consulting. “Consumers are also emphatic that they expect consistency across various elements of the multi-channel merchandising. In particular, we found that retailers that don’t think through the implications of pricing inconsistency across the store versus online channels risk alienating customers.”
Additionally, the study found that the influence of social media on purchasing is growing.
Consumers on social networks who see product recommendations from friends plan to purchase those items 12% of the time. However, the best way to elicit a response from consumers continues to be through motivating them to “elect-in” to a retailer’s ongoing communications campaign. In fact, the study found that consumers were more inclined to respond to an email from a retailer, if they have joined that retailer’s mailing list (26%), than they are to respond to an email forwarded by a family member or friend (21%). Retailers that can convince consumers to become a part of its online community (perhaps through promotions or other incentives) can build a powerful connection that can support long-term sales.
About the Survey
The spring 2010 L.E.K. Consulting Consumer Sentiment Survey (CSS) polled 2,000 U.S. households in April 2010. This is L.E.K.’s fourth consumer study. Additional survey demographic information is available upon request, as well as a similar study of Canadian consumers. Additional spring 2010 L.E.K. CSS findings are available online at http://www.lek.com/About/ConsumerSentimentSurvey.cfm.
About L.E.K. Consulting
L.E.K. Consulting is a global strategy consulting firm that specializes in corporate strategy, transaction services, and performance improvement. Founded in 1983, L.E.K. currently employs more than 850 professionals in 20 offices worldwide. Global clients include Fortune 500, FTSE 100, Eurotop 300, and many of the largest firms in Asia-Pacific. With a reputation for solving the most complex issues, L.E.K. collaborates with business leaders to accelerate the pace and precision of strategic decision-making.
As a leading advisor to the Retail & Consumer Products industry, L.E.K. works with senior executives looking to enhance profit performance through the development and execution of long-term growth strategies, services enhancement, merchandise management, new product development and execution, and operational effectiveness. www.lek.com
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L.E.K. Consulting Consumer Survey Reveals Retail Spending Trends in Key Demographics