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Feb 28 2009, 9:21 am by Grant McCracken

Consumers in a downturn: a new spending habit?

What will the current downturn might mean to consumers?  Will their habits change in lasting ways?  Could we return from the downturn to discover that consumers are a very different animal, that our economy runs on new principles.  David Brooks wondered recently whether we might someday look like abstemious Amsterdam.  There is a scarier prospect: that we might go the way of Japan.

Here's a typology of possibilities.

1. a mere quantitative change 

Consumers scales back existing consumption habits.  They buy the same things, roughly speaking, but they shift from expensive to cheaper versions, from big quantities to small quantities.  This suggests a shift from European luxury cars to Japanese sedans, from luxury goods to something more generic, from national brands to store brands, from eating out to eating in, from steak to hamburger.  

The logic is a simple diminution, a quantitative change that produces no qualitative change.  The world of consumer demand remains what it always was, scaled back for the moment in a managed retreat.  When trust, job confidence, credit and prosperity are restored, the consumer will come charging back.  All is forgiven.  All is forgotten.  We will party like it's 1999. 

Variation 1.1

One variation on this scheme would be to scale back all categories except one.  This consumer would make cuts across the board, but would continue to eat out at the present level, or buy the same kind of car, or ... you get the idea.  For instance, we can imagine that some men might make extraordinary sacrifices to protect their purchase of a Ford 150.  This is a violation of the Diderot effect, the one that keeps consumer purchases consistent across board, and it is the kind of thing that happens only when driven by a particular idea or objective.  We need to watch for these violations, and then identify the ideas or objective that drives them.  I am a little surprised to discover that none of the national brands is promoting itself as the Exception Brand.  

Variation 1.2

Another variation comes from what Silverstein and Fiske call the "trading up" effect.  In this second departure from the Diderot effect, consumers scale consumption back and then engage in a balanced pattern of buying up and buying down.  Haagen-Dazs ice cream is purchased with CostCo savings.  In this case, we need to discover where and by what calculus these trade-offs are being made. Here too brands should be jockeying to become the "trade up" choice, or at least to avoid by the "trade down" alternative.

Variation 1.3 (the long term prospect)

The standing expectation is that consumers who scale down will scale back up when prosperity and credit return.  But it is possible that the new, more modest, positively Amsterdamian, consumption pattern will prove sticky.  This is what happened in Japan in the 1990s.  Consumers gave up free spending ways and never came back.  As Tabuchi put in in the New York Times, "free-spending consumers [turned] into misers, making them a dead weight on Japan's economy."

A change of this order takes a full-on anthropological investigation.  In the meantime, we may speculate. I think Scitvosky's model might be useful here.  He shows how the pleasure of a new purchase devolves into comfort and I wonder if the reverse is also true.  Displeasure, as we move to a lower level of consumption, might for some consumers eventually lose its sting and turn to comfort too. Or not.  

The question is whether we might habituate to a lower level of spending.  I think this can only happen if some of the deeper cultural drivers of the consumer culture fall silent.  These would include competitive spending.  (This is largely dead among some Millenials.)  It would also include the wish to stay in fashion or in touch with the curve.  (Here too some young consumers are turning their backs on fashion, especially the branded, mainstream variety.)  There are positive forces: the wish to go green, to "save the planet," this has been the great staple of elementary school education and it is now on the verge of being installed in our culture as orthodoxy.  (This is no doubt as it should be.)  This is where we really have to do our anthropology: what are the cultural drivers that might intervene here and lock consumption habits into place.  

In sum, consumer spending may look very like a tide, falling in every category in exact proportion to the loss of disposable income and credit.  Or consumers may manage their retreat less evenly, working trade-offs to protect some categories over others.  These prospects will become clearer when the ethnographic data is forthcoming.  

Next time: Thoughts on the qualitative scenario.  Specifically, how consumption patterns might change, if they are going to change in kind and not just in quantity.  

References

Brooks, David. 2009. "I Dream of Denver." The New York Times, February 17 http://www.nytimes.com/2009/02/17/opinion/17brooks.html?th&emc=th (Accessed February 17, 2009).

McCracken, Grant. 1988. Diderot Unities and the Diderot Effect. in Culture and Consumption. Grant McCracken, 118-29. Bloomington: Indiana University Press.

Scitovsky, Tibor. 1976. The Joyless Economy: An inquiry into human satisfaction and consumer dissatisfaction. New York: Oxford University Press.

Silverstein, Michael J., and Neil Fiske. 2004. Trading Up: Why Consumers Want New Luxury Goods and How Companies Create Them. Rev Portfolio Hardcover.  

Tabuchi, Hiroko. 2009. "When Consumers Cut Back: A Lesson From Japan." The New York Times, February 22http://www.nytimes.com/2009/02/22/business/worldbusiness/22japan.html?th&emc=th (Accessed February 22, 2009).

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Comments (5)

W. David Marx

To flesh out Tabuchi's narrative a bit, look at imported luxury fashion in Japan. During the "Bubble Economy" of the late 1980s and very early 1990s, the standard was to wear head-to-toe luxury brands like Chanel and Versace. This level of luxury spending continued throughout the early 1990s, even though the Bubble had burst. (The market did not peak until 1996.)

The nature of luxury imports to Japan, however, changed radically. The market was split almost equally between men's apparel, women's apparel, and handbags/accessories in the early 1990s, but by the early 2000s, the market was almost 50% handbags. Consumers wanted to keep wearing the same brands, but lower incomes forced them to start building wardrobes from relatively inexpensive Japanese apparel brands and then adding one luxury handbag or wallet from Louis Vuitton, Gucci, or Prada on top. This is an idea called itten gouka-shugi (one piece of luxury-ism).

Now in 2009, young people are too young to understand why luxury fashion was ever seen as a "middle-class standard," since they have no direct memory of Bubble standards. So they have now stopped even buying luxury handbags and are going with cheap domestic alternatives.

The other thing to remember about Japan is that salaries went from being almost equal to the U.S. in the late 1990s to now being around 75%. So you have this decrease in salary without much hope of economic rebound, and it makes sense that more and more people are "dropping" luxury fashion spending since it can no longer be a sustainable part of their lifestyles. Compare that to the Bubble when luxury apparel was not so much of a "reach" for upper-middle class consumers but a sensible and social way of using income surplus.

jlmccreery

My sense of what's happening with Japanese consumers is largely informed by the work of trendwatcher Atsushi Miura (http://www.culturestudies.com/profile/index.html), who points out that the period of rapid growth in the 1970s and 1980s was driven by the Japanese Baby Boomers, who, in contrast to their American counterparts, are a much narrower age cohort. The Japanese boomers were born between 1947 and 1949, since which Japan's birthrate has steadily declined. Coming of age and entering the labor market as the 1970s began, they were also the first generation to embrace the Ozzie and Harriet, Father Knows Best ideal of a nuclear family living in the suburbs, with a separate but equal division of labor between husband and wife, and dads who wanted to be friends instead of distant authority figures to their kids. They were the market whose purchases of homes, cars, and consumer durables complemented Japan's exports and made Japan the fastest growing economy in the world. Now they are in their 60s, retiring and throttling back, worried about the future and what will happen to their kids. The Boomer Jrs were the next big demographic wave but ran smack into the collapse of the 1980s bubble in 1991. As Japanese companies embraced neoliberal principles and began to restructure their operations, a minority of the brighter and more ambitious have become the _katchigumi_ (the winners) courted by luxury brands; the majority have become the _makigumi_ (the losers), who have been relegated in large numbers to temp staff positions and, even if full time, have seen their incomes stagnate. There is also a lot of talk about spoiled kids who have grown up without their parents' drive and discipline. I have written myself (in a short piece for a Chamber of Commerce newsletter) that the serious question is why, in the face of economic hardship, young Japanese act more like conservative bankers than budding entrepreneurs. I have also speculated about the psychology of people who have grown up in a society that is both highly structured and materially affluent; the prevailing attitude revealed by numerous studies is "I like what I have, leave me alone."

Steve Portigal

We finished an ethnographic study around this very topic, right before the New Year. One takeaway was that this was not the New Normal; people had let go of previous behaviors but their language framed those decisions as temporary ones; they were things that were "on hold" and there was a determination to return to the old ways (of course, not the BAD old ways, just the good old ways - perhaps fewer 'toys' which of course = bad, but more vacations and dinners out) as soon as they could.

If things stay the same for a year, that attitude might change, I don't know how long our memories are...

Christopher

The anthropological question is, I suppose, what are we truly -- are we consumption-happy as a people? Or consumption-phobic? This will, I think, determine what we 'return' to once balance is achieved.

It seems to me Americans are generally consumption-happy. We returned to decades of consumerism after the pits of the 1930s. Maybe its something in our exuberance. Perhaps its our nation of immigrants — competitiveness mixed with the relative ability to buy social standing.

Japan I would say, considering their history and conditions within the modern era -- poor, overcrowded -- has a character that sways towards quiet depression with miserliness as an art-form, an essential national trait.

Case in point: there's an exhibit right now at DC's Freer Gallery about the ancient forms of pottery mending in Japan. The repair of pottery -- where the repairs are not hidden but celebrated -- has its own set of names: kintsugi, yobitsugi and tomonaoshi. With, as in gift wrapping and flower arranging, it's own set of masters through the ages. All rooted in cultural-defining ideas about religion and the spirits within all objects.

So, my theory supposes, the Japanese lost to America (and it's always framed that way by Japanese, they lost the war), they chose to adopt our consumerism. But when that failed miserably they returned to a more elemental self. A truth about their natural character.

Anyway, that would seem to point o study on this issue.

Michael Powell


It is amazing to see how these cultural drivers are still letting people consume/buy things that, at least for a moment, move people away from their obsession with the economy.

But to Grant's point about cultural drivers that could freeze up consumption, I think there is a driver out there, particularly in pop culture, that might loosely be based on the "survivor" and feed into some culturally-mediated "survival instinct." My sense is that people want to see themselves as someone who has been through struggles and can survive it. And consumer deprivation could be one way that people are accomplishing this kind of transformation today, to the detriment of consumerism, of course. More and more people are trying to save up money, just in case they do lose their job or maybe even because their 401k has decreased, as opposed to a serious inflation problem, actual unemployment or defaulting on a mortgage. In many ways, it's like surviving a bad storm in the basement of your house: your roof may not leak and you might not have any property damage, but you still feel like you "survived" because you had your canned foods and flashlight ready, just in case. There are a lot of pop culture artifacts (songs, movies, TV, from Kanye West to Lost to, of course, the TV show Survivor) that speak to this driver—-and maybe few stories as poignant as the US Airways crash story in NYC in February. It was interesting to watch how the coverage of that story in the media quickly moved from being a "miracle" story (what are the chances?...one in a billion) to becoming a story of how a pilot managed to do his job while surrounded by panic: he was stoic, blocked out all distractions and did the job he had to do to survive.

In any case, it's certainly an interesting time in history to be observing consumer behaviors. Thanks for this post.