In this post we will have a look at how the new economic realities since the recession are shifting consumer habits, and especially among the youngest generation. This is part 3 in a three-piece series on how the post-recessionary economy is affecting the youngest generation.
In 2009 Harvard marketing professor John Quelch identified four new types of consumers that were bred out of the recent recession. He mentions that the recession of 2008 (it’s still a de facto recession for most citizens) threw off traditional segmentation methods. What emerged are market segments that are not mainly characterized by their demographic groups, but by the degree to which they were affected. These are, 1) “The Slam on the Breaks” consumers who experienced debilitating losses and had to cut costs to the bare minimum; 2) “The Pained but Patient” group experienced financial loss, but remained generally optimistic for the long term. These consumers made short term adjustments, and would postpone purchasing big-ticket items and durables. Cars belong to this product group. Millennials’ estranged relationship with cars has been attributed to a value shift, but might there be an element of economic distress? 3) Then we have the “Live for Todayers”, who tend to be young and urban. This segment hasn’t saved much and therefore hasn’t lost very much either. They are childless, carefree and will continue with their fun lifestyles until they lose their jobs. 4) The last category is the “Comfortably Well”. They were either cushioned by existing wealth or not heavily invested in market when it came down. Could we even hypothesize that some in this group actually gained from the recession? This group will often try not to exhibit too ostentatiously that they are well off. Except for those like to flaunt their recent wealth. Nuancing the consumer patterns in the wealthy groups the very rich seem to channel their wealth in the direction of consumer behavior that can leverage true and permanent power such as expensive education for their kids.
Four years into a mostly jobless recovery (there are glimmers of hope!) these consumer groups still dominate the consumer landscape. So whereas the consumer confidence is down for most income groups, it is strangely paralleled by the staying power of the luxury industry, which seems to have barely sneezed during the financial meltdown and in it’s aftermath. So on the one hand we have the blooming consumer trends of boutique-style, gourmet foodie experience, artisan uniqueness and designer brand lavishness. On the other, low-cost retail box stores and dollar stores continue to thrive long after the recession. Almost eight years after Walmart made attempts at wooing the middle class market by introducing high-end products, the retailer giant is now focusing on bargain items and introducing express stores which makes low cost items more accessible to consumers who might not have dependable access to transportation. (Will they compete with the Amazon drones?)
We see similar patterns for child products. Affluent children are adorned with “ultimate luxury hotel experience for children” and apparel from designer brands. Lines of children’s’ wear are offered by designers such as Ralph Lauren, and more recently by Gucci, Stella McCartney, Marni and Burberry. The child oriented part of Burberry’s market share stood for 19 %of it’s growth from 2011 to 2012.
Traditional toy manufacturers cannot report similar profits. Toys are not evolving at a pace as its’ better days as fewer product innovations are happening in this category. Large toy producers are staying with tried and true concepts that were popular when today’s adults were children. After a year with sequesters, government shutdown, furloughs and welfare cuts (e.g. SNAP), holiday shopping this year is not exactly looking promising for retailers nor manufacturers. Immediately after the recession the toy industry actually did quite well since parents often compensated for expensive child experiences such as trips to Disneyworld with more toys.
E-commerce and the pressure to offer deep discount may perpetuate toy manufacturers’ challenges. Toys are also losing some of their value with the ubiquity of handheld electronics . Why buy bulky items when you can download entertainment in the form of free apps of user videos?
Another harbinger of a generation growing up in the shadow of a recession is their acumen for “thrify coolness”. Before the recession, frugality was often associated with being cheap and carried a social price. But just like after the roaring twenties when advertisers had to relearn how to communicate with cash-strapped consumers, kids today think of frugality as a virtue and will sing along to Thrift Store with abandon. Even the “unbox” or “haul” type videos reveal generational consumer differences. Whereas Generation Y girls will often talk up high priced luxury items in these videos, those created by Generation Z girls will often take pride in savings, upscaling potential and creative uses of products. Or just make fun of the haul concept all together!
It’s not that many years ago when the tween market was on every marketer’s mind. And maybe it still is. But today’s teens belong to a smaller generation with less money to spend, so they might not be the shiniest fishes in the pond anymore. Moreover they are displaying skills at creating their own content and could be less swayed by the manufactured entertainment marketers and professional content providers spend fortunes to provide. As Dr. Quelch says: “The longer a recession, the more time consumers will have had time to develop coping mechanisms such that they don’t revert back to their previous behavior.“ The Homelanders will likely adapt to post-consumerism with greater ease than their older sisters and bothers will. Moreover, in charitable giving the youngest generation outdo the older generations. Some studies show that as many as 90% of children have given to charity at some point.
Clearly, frugality alone will never be enough to alleviate poverty and economic distress. What is needed is cohesive reform. In fact many economists both on the left and right of the political isle agree that it will be difficult to create meaningful growth with the current level of income inequality. Thankfully the generation coming up might give us some hope that they will go to great lengths to make that happen.
This concludes a series of three (four) posts on how the economic downturn spawned a new generation of children. Poverty is an often ignored variable in strategic, marketing or generational analyses. It’s the elephant in the room that nobody likes to talk about. But it doesn’t leave only because we pay it little attention. The generational theories of Strauss and Howe predicted that we would enter a phase of crisis which could result in difficult economic times for many. But humans are resilient and proactively changing their environments. If we are to learn from history, we should not dismiss the possibility that today’s problems will give way to change and new, sustainable growth paradigms. As Martin Luther King once said: ” The arc of the moral universe is long, but it bends towards justice”.