Retailers Wake Up to "Forever Frugal"

Retail industry analysts are finally embracing the same reality millions of Americans have been living for years. The good old days of easy spending are gone, and they aren’t coming back. Instead, consumers who were burned in the days of easy credit have mended their ways and switched to cash for good. It’s a new era that retailers are calling “Forever Frugal” but consumers know as “Common Sense.”

The Forever Frugal Mindset

Forever frugal is the term retail industry analysts have come up with to describe people who cut back during the downturn of 2007 – 2008 and haven’t chosen to resume their previous spending habit. In plain English, it’s consumers who decided – once and for all – that they didn’t need to have the latest gadgets now and that $4 for a cup of coffee was excessive. They’ve opted to spend their money on generic versions of popular products, avoid unnecessary splurges, and save their extra cash.

For retailers waiting for the “shopping recovery,” forever frugal is a real problem. America has come to depend on a consumer-driven economy, but that economy isn’t working anymore. Consumers are buying about 10 percent less on average than they did before the downturn, a number that hasn’t budged even as the government touts our ongoing “recovery.” Retailers who are living by the official numbers are thus facing some hard realities.

A Smarter Choice

In consumer sentiment studies, respondents talk about forever frugal choices as simply being the smarter thing to do. Booz & Co’s survey of shoppers found that most believed the recovery wasn’t here and that they had too much debt already. As a result, even retailers’ most tempting offers are falling flat.

The things that are working in the forever frugal market are store brands and smaller package sizes. Some 20 percent of all food and household items purchased in 2011 were store brands or private-label products, a shift from the 15 percent of the market these products commanded before the recession according to Symphony IRI. Smaller package sizes for certain household goods – first aid, hair care products, and men’s toiletries – also help cash-strapped consumers get their favorite products without tying up money in bulk packaging.

Shoppers feel they’re doing the right things. More than 75 percent now use a list, and coupon clipping has increased. Retailers can no longer appeal to impulsive instincts and have responded by focusing on value, coupon promotions, and niche marketing to drive sales.

Consumer Advantages

One of the hardest wake-up calls for retailers has been that brief glimmers of light in the economy are not backed up by hard dollars on the ground for their customers. As a result, many retailers are over-ordering, anticipating elements of a recovery that just aren’t coming. The holiday season for 2011 is a perfect example of this phenomenon.

Early in 2011, the economy was looking good – at least on paper. The first quarter results were strong, and since they came out in April when many retailers were planning Christmas orders, most retailers ordered optimistically. However, late spring and summer turned into more hard times for the global economy. Debt concerns at an international level have trickled into our own anemic economy, and now industry analysts think that inventories for Christmas and year-end are going to be too high.

Forever frugal shoppers can take advantage of retail missteps like this – and really, if they’re being frugal, they should! To move the anticipated extra inventories, retailers will be using heavy discounts and loss-leader promotions. For frugal shoppers in the market for a big-ticket item, this could mean significant savings. Popular toys and gadgets will also be heavily promoted, but they might be better buys just after the holidays when retailers get really desperate to hit year-end sales targets.

The learning curve for retailers on forever frugal will likely take a while. Yet they are waking up to the fact that the easy spending days of the past are over. For consumers with hard cash and a sharp eye, this chapter in the forever frugal era means bargains to be had. After all, where there aren’t bargains, why buy? A frugal mind knows there’s no need to ever, ever, ever waste a dollar.