New research from The Nielsen Company finds that half (49 percent) of U.S. consumers are reducing their spending to compensate for rising gas prices, up four points from June 2007. Consumers are also battling high gas prices by combining shopping trips and errands (70 percent), eating out less (41 percent) and staying home more often (39 percent).
“Our research shows consumers are adjusting their spending to a significant degree in order to counterbalance rising gas prices,” said Todd Hale, senior vice president of Consumer Shopping & Insights, Nielsen Consumer Panel Services. “Large numbers of consumers eating out less and staying home more often signal a tough year for some restaurants, but there may be an opportunity for consumer packaged goods (CPG) manufacturers and retailers to find continued growth in healthy, at-home meal solutions and at-work meals.”
Higher Gas Prices Mean Fewer Ho Ho Ho’s
Nielsen’s survey finds that record-high gas prices likely contributed to 2007’s less-than-stellar holiday sales season. Sixty percent of consumers surveyed said they had less money to spend during the holidays due to increased gas prices, and 44 percent of consumers reported they planned on spending less money on holiday gifts in 2007 as compared to the year prior.
“Unlike 2005 and 2006, gas prices didn’t drop in the fourth quarter of 2007 to enable consumers to do their typical holiday binge buying,” said Hale. “That said, our research shows a jump in consumers shopping on the Internet as a way to deal with high gas prices. This should be a wake-up call for manufacturers and retailers alike to step up their ?direct-to-consumer’ efforts and utilize the Internet to communicate directly with consumers in 2008, emphasizing value, variety and convenience.”
Less Gas Dollars Equals More Supercenter Shopping, More Coupons
Nielsen finds that gas prices are impacting where consumers shop, with 27 percent of consumers reacting to gas prices by shopping more at supercenters, or megastores and big-box stores, where more items needed are in one store.
“Discretionary spending in 2008 is likely to be a challenge for most low- and middle-income shoppers, the core supercenter shoppers,” said Hale. “Although recent store expansions mean that supercenters are closer to more shoppers, nearly a third of households still travel 11 miles or more to a supercenter, and high gas prices will likely reduce the number of quick trips these households make. Supercenter retailers will need to entice shoppers with stronger earning power who are less vulnerable to high gas prices.”
Increased fuel prices are resulting in more coupon clipping, with 25 percent of consumers using coupons to save money, up from 20 percent in June 2007. Twenty-three percent of consumers indicate they will buy less expensive grocery brands to deal with higher gas prices, signaling a possible boost for private label or store-brand products and lower-priced branded products.
“2008 will likely be a challenging year for U.S. consumers and the economy as a whole as we grapple with growing inflation, credit card debt, declining house values – – as well as expectations for gasoline to hit $3.40 by spring,” said Hale. “Manufacturers and retailers need to be alert to the fact that consumers are looking to save by altering where they shop, how they shop and what products and brands they buy. Value, convenience and competitive pricing will be more important than ever in the year ahead.”
About the Survey
Results are based on Nielsen Homescan survey responses from nearly 26,000 U.S. consumers, geographically and demographically representative of the total U.S. population. The survey was conducted in December 2007, when regular gas averaged $3.06.1
About The Nielsen Company
The Nielsen Company is a global information and media company with leading market positions in marketing information (ACNielsen), media information (Nielsen Media Research), online intelligence (NetRatings and BuzzMetrics), mobile measurement, trade shows and business publications (Billboard, The Hollywood Reporter, Adweek). The privately held company is active in more than 100 countries, with headquarters in Haarlem, the Netherlands, and New York, USA. For more information, please visit, www.nielsen.com.
ChangeWave Survey Points to a Recession in Consumer Spending
ChangeWave Research’s latest consumer spending survey points to a recession in U.S. consumer spending. The survey, conducted January 2-8 of 4,604 consumers, focused on spending patterns for the next 90 days. The results show a negative growth rate going forward.
According to the survey, better than one-in-three respondents (34%) say they’ll spend less over the next 90 days than they did a year ago. That’s 9 percentage points worse than the previous survey in November. Just 29% say they’ll spend more — down 3 points from previously, while 36% say their spending will remain the same.
The decline in spending growth was seen occurring across all income levels — even among respondents who earn more than $150,000 per year.
“While this is ChangeWave’s fourth consecutive survey since June showing a consumer pullback, this is first time consumer spending growth has actually gone into the red,” said Tobin Smith, founder of ChangeWave Research and editor of ChangeWave Investing, who added, “Frankly, the news doesn’t look good on the spending front.”
To put these findings in context, compare the latest January 2008 numbers (see downloadable chart) with the gradual contraction experienced more than a year earlier (see June through September 2006) in the period known as the “soft landing.” Clearly, the current contraction looks quite different from a soft landing.
(To download the chart and the complete ChangeWave Consumer Spending report, go to http://www.changewave.com/consumer).
Reasons for Spending Less
The survey asked the 34% of respondents who say they’ll be spending less to say why they planned to spend less. Better than one-in-three (36%) pointed to Inflation — which is 6-points more than the previous ChangeWave survey in November. Another 33% blamed Higher Energy Costs, 4 points higher than previously.
In a strong sign that consumers are worrying more about their nest eggs, 57% of those spending less say they’re trying to improve their personal finances by reducing debt (32%) and saving more money (25%). These totals are also up 4 points since November.
Where is Spending Slowing?
Nearly every consumer category looked at in the survey scored lower than a year ago in terms of spending going forward. This decline was led by restaurant spending, which has deteriorated 12 points compared to year-ago levels.
Other consumer spending categories down in the current survey include Travel/Vacation (-7), Consumer Electronics (-7), Durable Goods (-4) & Household Repairs/Improvements (-2).
In other signs of weakness — better than half (56%) of respondents now think the overall direction of the economy is going to worsen over the next 90 days, a substantial 18-point jump since November. At the same time, only 9% believe the economy is going to improve, 7 points worse than previously.
The ChangeWave Alliance is a network of over 13,000 highly qualified business, technology, and medical professionals in leading companies of select industries — credentialed experts who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.