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Shoppers Form New Habits

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The Associated Press

Published: July 22, 2008

NEW YORK - Adrienne Radtke plans to keep riding her bike to work even if gas prices drop. Steve Pizzini got rid of his Cadillac Escalade in favor of a 16-year-old Acura and doesn't expect to have another gas-guzzler.

"I had a paradigm shift," said Pizzini, a financial analyst. "I spent the money on a nice car. But to me, it's not worth it. I don't think I will go that route again."

Every economic downturn changes shoppers in some way. But this time, experts say the new behaviors - fueled by higher gas and food prices, tightening credit and a slumping housing market - are the most dramatic and widespread that they have seen since the mid-1970s.

So retailers, marketers and investors are all trying to figure out which habits shoppers will keep and which they will drop when the economy recovers. Will the people who switched to store-brand ice cream go back to Breyers or Edy's? Will shoppers return to department stores or keep looking for labels at T.J. Maxx?

Radtke, 31, who holds down two jobs - at a veterinarian's office and at a flower shop - recently picked up shoe glue to fix the soles of her worn sneakers. She's buying store-label soups and crackers, and bought a bike for her commute after not having ridden one for five years.

Echoes Of The Depression

A rebounding economy may let some consumers revert to their old ways - like people who switched to smaller cars when times were hard in the 1970s but flocked to sport utility vehicles when gas got cheap again. But with more economists believing that the current woes will last well into next year, many think the underlying frugality will linger. Some Americans say their parents or grandparents affected by the Great Depression are still hoarding buttons and squeezing out several soup meals from ham bones.

"I shop cautiously," said Edna Sott, an 88-year-old resident of Berkeley Heights, N.J. "I would say that is a hangover" from the Depression.

Marian Salzman, marketing officer for public relations agency Porter Novelli, cites a "Depression mentality" that's making people "rethink their optimism in the economy."

The widening gap between discounters and mall-based apparel sellers was evident in monthly retail sales figures released last week. The International Council of Shopping Centers-UBS tally of 38 stores found that same-store sales at discounters rose 5.1 percent in June and 9 percent at wholesale clubs. Discount giant Wal-Mart posted a robust 5.8 percent uptick, its best June performance since 2002.

At department stores, though, same-store sales - or those at stores opened at least a year - dropped 4.1 percent.

"People are spending money on food and the products they need to sustain life," said Todd Hale, senior vice president at Nielsen.

He noted sharp declines in visits to clothing, office supply and hardware stores. He also said that sales of store-brand products in grocery items are up 9.1 percent for the year ended April 19, while sales of branded products rose a more modest 3.9 percent. More than half the sales growth from store label grocery items is now from dairy such as milk and cheese, an area that has seen soaring inflation.

Sweating The Small Stuff

Wendy Liebmann, president of WSL Strategic Retail, says Americans are trying to take "control of the little things" like mending socks or buying more store-brand food because they can't control big things like gas and food prices.

Their little changes, though, are forcing some companies to respond in big ways.

Auto executives predict that consumers' newfound appreciation for smaller cars will be permanent, causing major pain at auto plants. Toyota Motor Corp. was among the latest to announce a product overhaul, saying it will shut down truck and SUV production to meet the changing consumer needs.

Pizzini, 29, of Eagleville, Pa., says his elderly Acura gets almost three times as many miles per gallon as the Escalade, whose lease he got out of through a company called LeaseTrader.com. Since last October, LeaseTrader.com has seen a 24 percent increase in the number of people who want to downsize to a smaller car, spokesman John Sternal said.

Fred Clements, executive director of the National Bicycle Dealers' Association, said consumers stung by $4-per-gallon gas are shifting toward utility bikes and away from recreational versions. That's forcing bike shops to change their inventories and offer more training for consumers who may not have ridden a bike in years, he said.

Patricia Edwards of Wentworth, Hauser and Violich agrees that new fans of discounters will keep buying at discounters as long as the products measure up.

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