The Consumer Sentiment Series
Emerging from the isolation of the past 15 months, US consumers express optimism—some cautiously and others confidently—about resuming their pre-pandemic activities.
By Lara Koslow, Nick Zwemer, Claudia Ojeda, and Aaron Arnoldsen
Like no other. It’s an economy similar to the high inflationary environments seen in the ’70s and ’80s, but without the disco ball, fuchsia leg warmers, and risqué Madonna song echoing in the background—and even more notably, without the high unemployment rates typical of past recessionary periods. (See Exhibit 1.) The post-COVID-19 revival appears to be providing buoyancy to some aspects of the environment, with high levels of actual employment and strong consumer confidence in employment both today and into the future. (See Exhibit 2.)
(Madonna, 1987)
That said, most consumers across the four countries we researched believe that we are in a recession—and say that they are spending more and saving less. (See Exhibit 3.) Only 18% have seen their income increase in the past six months, and over half believe that they are financially worse off today than they were six months ago. (See Exhibit 4.) The recession and inflation are primary concerns across countries, in 87% and 81% of net households, respectively. Fear of a prolonged Russia-Ukraine war is also raising concern, but that concern is significantly higher in Europe, at 80% or more, than in the US, at 62% of net households. (See Exhibit 5.) And although fewer consumers say that they feel financially worse off in the US than do in other countries, as of early September, only 31% of net households in the US households agree that their country is on the right economic path, compared with 59% in the UK, 49% in Germany, and 43% in France.
(Run DMC, 1986)
Why doesn’t this recession fit the norm? Well, actually, it may. The seemingly unicorn nature of this economic cycle is likely to be ephemeral. For one thing, even though employment is currently strong and confidence in employment is high—atypical indicators in a recession—employment tends to be a lagging indicator that may spike multiple quarters after a recession
(Queen & David Bowie, 1981)
Not only are consumers spending more today than they were six months ago, but they are also saying that they believe that increased spending will continue in the future. (See Exhibit 6.) Although rising prices of essentials are the primary driver of increased spending—a reflection of inflation—we also see some nonessential purchases and pent-up demand in categories restricted during COVID-19 contributing to higher spending.
(Laura Branigan, 1984)
Shopping behavior is shifting as consumers not only look for deals and promotions, but also make fewer trips to the store or shop online more often, likely to avoid expensive gas usage. Increasingly, consumers are trying to save by cooking at home rather than ordering takeout or going to restaurants. (See Exhibit 7.) Relatedly, discount retailers and online marketplaces have seen a surge in spending at the expense of official store websites. (See Exhibits 8 and 9.)
(Cindy Lauper, 1983)
We have identified six archetypes of consumer spending behavior that define where consumers plan to increase net spending versus where they plan to decrease it during the next six months as they face inflation and a softer economy. (See Exhibits 10 and 11.) Consumers across countries say that they expect to increase their spending in inflation-driven essentials categories such as gas, utilities, food, and housing. Consumers continue to anticipate spending more in categories restricted by COVID-19, such as travel, a sign of pent-up demand. (See Exhibit 12.) Categories in which consumers typically do not reduce consumption during recessions—such as organic food, pet supplies and nonprescription medication—are also likely to see a lift in revenues, given consistent purchasing despite inflated prices.
(Tom Petty, 1989)
Predictably, consumers expect to decrease net spending on nonessentials such as clothing, increase deal hunting, and substitute lower-cost brands and alternatives. The category that consumers across multiple countries most consistently point to as an area where they are likely to reduce their spending is clothing. (See Exhibit 13.) But while average consumers plan to rein in their spending on nonessentials, many high-income consumers still express an intention to spend more in discretionary categories, suggesting that the recession has yet to impact this group. (See Exhibit 14.)
(Whitney Houston, 1985)
The question remains how long employment and confidence in employment will hold up in the face of inflation and shrinking GDP—and when changes in those metrics will impact average and high-income consumers. Given the prevailing uncertainty about when the tide may turn, it is critical for companies to prepare for consumer spending declines and to closely monitor consumer sentiment and behavior. We may well be approaching a moment when the economic environment will look a lot more like the recessions of the past—when we tuned in to MTV and blasted
BCG’s Consumer Recessionary Behavior Snapshot series is based on data drawn from an online survey of consumers and actual consumer behavior data from various partner sources across multiple countries worldwide. Each Snapshot highlights a selection of insights from a comprehensive ongoing study that BCG provides to clients. The survey is produced by the authors, who are members of BCG’s Center for Customer Insight (CCI), in partnership with coding and sampling provider Dynata, the world’s largest first-party data and insights platform. The goal of the research is to provide our clients and businesses around the world with periodic barometer readings of economy-related consumer sentiment and actual and anticipated consumer behavior and spending to inform critical crisis triage activities, as well as planning and decision making. A team composed of BCG consultants and experts from CCI completes the survey analytics.
The situation surrounding economy is dynamic and rapidly evolving, on a daily basis. This research is not intended to: (i) constitute financial or business advice, nor be a substitute for the same; nor (ii) be seen as a formal endorsement or recommendation of a particular response. As such you are advised to make your own assessment as to the appropriate course of action to take.
We would like to thank our key contributors for this article:
Lara Koslow is a managing director and senior partner in the Miami office of Boston Consulting Group, with a focus on growth strategy, marketing, branding, consumer insight, and commercial/go-to-market topics across industries—in particular, travel and tourism, consumer, retail, and automotive. She is the global leader of BCG’s customer demand, branding, and innovation business, which includes BCG’s Center for Customer Insight and Lighthouse centers of excellence. She is also the North American leader of the firm’s travel and tourism sector. You may contact her by email at koslow.lara@bcg.com.
Nick Zwemer is a project leader in the firm’s Miami office. He is a member of the Consumer and Marketing & Sales practices. You may contact him by email at zwemer.nick@bcg.com.
Claudia Ojeda is a managing director and partner in BCG’s Miami office. She is a member of the Consumer practice, and her work focuses primarily on the Travel and Tourism sector. You may contact her by email at ojeda.claudia@bcg.com.
Aaron Arnoldsen is a partner in the firm’s Seattle office, with a focus on advanced data analytics and software engineering. You may contact him at arnoldsen.aaron@bcg.com.
The Boston Consulting Group’s Center for Customer Insight (CCI) applies a unique, integrated approach that combines quantitative and qualitative consumer research with a deep understanding of business strategy and competitive dynamics. The center works closely with BCG’s various practices to translate its insights into actionable strategies that lead to tangible economic impact for our clients. In the course of its work, the center has amassed a rich set of proprietary data on consumers from around the world, in both emerging and developed markets. The CCI is sponsored by BCG’s Marketing, Sales & Pricing and Global Advantage practices. For more information, please visit Center for Customer Insight.
BCG Lighthouse is an AI platform that enables rapid decision making on the basis of short-term sensing of high-frequency indicators and medium-term scenario planning. It integrates real-time consumer and market-level data with BCG’s proprietary models and company-specific internal data. Data and models include Consumer Activity Index (CAI), epidemiological models, online and mobile behavior (web traffic, search, social media trends, and footfall) and consumer data (for example, sentiment, credit card spending, and unemployment data). Data sources are available for 180 countries.
Dynata is the world’s largest first-party data and insights platform. With a reach that encompasses 62 million consumers and business professionals globally, and an extensive library of individual profile attributes collected through surveys, Dynata is the cornerstone for precise, trustworthy quality data. The company has built innovative data services and solutions around its robust first-party data offering to bring the voice of the customer to the entire marketing continuum—from strategy, innovation, and branding to advertising, measurement, and optimization. Dynata serves nearly 6,000 market research, media and advertising agencies, publishers, consulting and investment firms, and corporate customers in North America, South America, Europe, and Asia-Pacific. Learn more at www.dynata.com.
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顧客中心主義がカギであり、それはアナリティクス、アジャイルなプロセス、テスト・アンド・ラーンのカルチャーを通じて可能になります。BCGは、マーケティング・営業組織と協働して、それを実現します。