Corporations are starting to come to the realization that the world is going to become a much more frugal place when the recession finally breaks. The headline in this weeks Advertising Age says “Marketers fear frugality may just be here to stay.”
Some new statistics may back up this fear.
According to a new Retail Outlook report from Platt Retail Institute, an end to the economic freefall of 2008-2009 may be on the horizon but a reduction in consumer spending may continue for a prolonged period.
Due to both a lack of credit availability and declining household wealth, a return is likely to historic levels of consumer spending. For the past 24 years or so, consumer spending as a percent of GDP (Gross Domestic Product) has been creeping up. For example, at the end of the 1981 recession, personal spending accounted for perhaps 67% of GDP. Today, it approaches 71%.
The days of increasing incomes, net worth and debt are now behind us, and this forced period of austerity in spending will be felt most acutely by retailers.
