March 12, 2008
My husband traveled to Houston on Monday to visit a client. Before boarding his plane, he called from the airport to ask me to take my vehicle to our local wholesale club and fill up the gas tank, which was close enough to empty to make me wonder if I could make it that far. Watching the news on a monitor at his gate, he had heard that gas prices were expected to soar within the coming week as crude oil topped $109 a barrel and the dollar continued to fall.
Over my lunch break, I did as he requested—drove to the club, waited in line to get to a pump, only to find out that the pump I chose was out of order, circled the pumps, waited for another opening while watching the gas gage, and then filled up. My vehicle takes regular gas, which was priced at $3.1299. On the way home, I passed a station selling regular gas for $3.2999. As I see it, the $3.00 I saved by buying my gas at the wholesale club probably was eaten up by my drive to and from the station and waiting in line for a working pump. But it's the thought that counts, and these days, consumers are thinking long and hard about ways to save pennies.
I have a dear friend who told me several years ago that she throws her pennies away. Literally. She thinks pennies are dirty and not worth keeping. I haven't talked to her about this—to each her own—but I'm thinking she may be adjusting her perspective these days.
Among the many articles on the Internet about weakening consumer confidence and the fallout is The fall of the American consumer published on alternet.org. In this article, Barbara Ehrenreich wrote, "How much lower can consumer spending go? The malls are like mausoleums, retail clerks are getting laid off, and AOL recently featured on its welcome page the story of a man so cheap that he recycles his dental floss—hanging it from a nail in his garage until it dries out.
"It could go a lot lower of course. This guy could start saving the little morsels he flosses out and boil them up to augment the children's breakfast gruel. Already, as the recession or whatever it is closes in, people have stopped buying homes and cars and cut way back on restaurant meals. They don't have the money; they don't have the credit; and increasingly they're finding that no one wants their money anyway. NPR reported on February 28 that more and more Manhattan stores are accepting Euros and at least one has gone Euros-only.
"The Sharper Image has declared bankruptcy and is closing 96 U.S. stores. Victoria's Secret is so desperate that it's adding fabric to its undergarments. Starbucks had no sooner taken time off to teach its baristas how to make coffee than it started laying them off.
"While Americans search for interview outfits in consignment stores and switch from Whole Foods to Wal-Mart for sustenance, the world watches tremulously. The Australian Courier-Mail, for example, warns of an economic 'pandemic' if Americans cut back any further, since we are responsible for $9 trillion a year in spending, compared to a puny $1 trillion for the one billion-strong Chinese. Yes, we have been the world's designated shoppers, and, if we fall down on the job, we take the global economy with us."
Another depiction of what's happening with U.S. consumers can be found in the article Companies highlight value to consumers published on prweekus.com. Tonya Garcia wrote that at the present, "It's not just Wal-Mart that's on the low-price bandwagon." The company's stock is doing well, and Garcia cited one reason suggested by Newsweek Senior Editor and Slate.com columnist Daniel Gross: Americans are trading down.
"'Wal-Mart's cheapo reputation is serving it well,' Gross writes. 'As the latte era grinds down and credit tightens, Americans have stopped trading up and started trading down. That plays right into the hands of Wal-Mart, whose brand identity is all about saving people money.'
Garcia wrote, "Perhaps anticipating the economic trouble that consumers are now experiencing, back in September, Wal-Mart ditched its motto of 19 years, 'Always low prices,' and introduced 'Save Money. Live Better.' Price has always been a part of the retailer's branding message, but in emphasizing it, it now seems to have something to say that belt-tightening consumers want to hear."
The article cautions marketers against immediately jumping on the low-price bandwagon and then having to make a U-turn with their messages when business picks up. Instead, companies should examine their value propositions and continue to serve their customers accordingly. According to the article, "Anyone who uses [low-cost] as a lead point will be [using it] for short-term promotion," says Julie Winskie, president and chief client officer at Porter Novelli. "Cost is a component of your value equation. For the smartest consumer, it's really not an isolated variable."
Winski also said, "It's not trading down. People are buying smarter."
So there you have it. We're poorer and saving pennies, yet smarter. The irony of it all &