As I listen to the drumbeat of economic news and predictions, I’m beginning to hear a refrain – that if we think (and plan) as though our buyers are going to return to unrestrained spending when this recession is over, we may be planning on quicksand.
For any of us who knew folks who had lived thru the 1930’s recession, their frugality was legendary. They saved those tiny bits of soap remnants, reused envelopes for making lists, put aside money religiously for a rainy day. Even though the Great Depression may have been 40 or 50 years back for them, they never forgot the lesson of how bad it could get and how fast it could get bad.
The hypothesis that is being written and spoken about is that, while this recession is unlikely to be as bad as the depression, it will have a lasting effect on buying habits even as joblessness improves, credit frees up, house prices improve. Entire generations may rethink and change their buying patterns.
An article in the Harvard Business Review (July-August 2009) by Paul Flatters and Michael Wilmott, called “Understanding the Post-Recession Consumer” puts some meat and detail on that hypothesis. The authors are trend trackers and the article lays out the trends they feel are accelerating and those they feel are slowing. A number are food for thought for remodelers.
Among their accelerating trends is discretionary thrift. While some consumers must be thrifty because of their lower incomes, this habit is now extending to many affluent buyers who “desire a more wholesome and less wasteful life,” note the authors. They go on to write that “Many postrecession purchases, we suspect, will be less extravagant versions of the originals.” If this trend takes place, it would appear that our remodeling consumers will want fewer frills, maybe even less extravagant square footage and more value for their dollar.
Along with discretionary thrift, the authors predict a dominant and lasting trend will be a demand for simplicity which will help to reduce stress. This may bode well for those remodelers who can simplify the buying process, streamline the delivery and package their services very clearly.
A trend the authors see as at least temporarily slowing is green consumerism due to the often more expensive price tag on green products. However, Flatters and Wilmott “expect green consumerism to recover and accelerate postrecession …as consumers regain confidence and disposable income to fully express their growing concern about climate change and the environment.” Many remodelers are selling sustainability because they are passionate about good environmentalism. Others are beginning to tout green because they believe it is fashionable or will help them sell. A temporary dip may well move them out of the market.
A second article, “Selling to the Debt-Averse Consumer” by Eric Janszen in the same issue of the Harvard Business Review suggests that companies will have to figure out “how to make do without the former life of the economic party: the monthly payer.” While not all remodelers involve themselves in the financing side of the business, many of their jobs are made possible by financing that the consumer obtains. Janszen advises – much like the previous authors – that “Messages that center on family, life simplification, and getting back to basics will appeal.”
The point is that the effects of this recession will be with us for the next decade if not longer. It’s clear that no one knows when our economy will be back on the road to health and what the long term fallout will be from generations of people learning that the stock market does not always go up, that even if they do a good job they may not keep their job, that houses do not always rise in value and that much of what they buy they do not need.
And that means we all have to become sleuths to stay up on just what messages those jungle drums are sending. Here are some ideas:
- Gather economic information everywhere and all the time. In a month’s time, you can chat with a hundred sources in your market – your banker, your accountant, your plumber, your grocer and your fellow remodelers. Make a habit of finding out how things are going in your market.
- Find some publications (paper or online) like this one as well as those writing about general business (I like Inc. and Harvard Business Review) that you trust and take time to read them. In today’s fast changing market, books may be too slow for gathering up-to-date economic information.
- As you make changes in your company structure, offerings, systems focus on simplification, being user-friendly, efficient, economic, value-focused. Make changes that will work for you and your buyers in the long run.
It should be an interesting ride.