As wealth vanishes, consumers retrench

This headline above is lifted from today’s Report on Business section in the Globe & Mail. It is one of two interesting articles about how consumers are responding in these uncertain times.

This first article discusses how consumer attitudes to spending (less) and saving (more) are changing in response to a 4.4% decline in household net worth. But we all know that how consumers spend less and save more differs from product to product and category to category.

The second article, just two pages later, leads with the headline “More parents opt to skimp on baby’s ride: Luxury buggy makers feel the pinch as cost-conscious buyers turn to less expensive brands.” It appears that “once booming sales of status-symbol strollers are taking a hit.”

While it is rather easy to assume that an expensive stroller is part status-symbol. And that consumers can quite easily rationialize that baby won’t notice a different stroller, this may not be the whole story.

In our society we see our children as innocent. The fact that the economy is weak is not their fault. So if parents are trading-down a stroller, are they compensating in other ways to trade up? Are there other baby brands, perhaps less conspicuous ones, that will see a boost in sales, while expensive buggies decline?

Alternatively, our whole approach to wealth could be changing. Perhaps wealth is not taken for granted as easily, and we want our children to be satisfied with good enough, and not seek identity and validation through having “the best.”

Either approach is intersting, and has different implications understanding how consumers react to the rapidly changing market conditions. We do know one thing: consumer reaction is rarely predictable – and something we should be doing a lot of thinking about.

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