News & Observer | newsobserver.com | Retailers face lasting fallout as we learn frugality

Published: Jul 21, 2008 12:30 AM
Modified: Jul 21, 2008 06:21 AM

Retailers face lasting fallout as we learn frugality

 

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

Every economic downturn changes shoppers' behavior. But this time, economists and financial analysts say, consumers are changing their ways more dramatically than they have 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?

THE HANGOVER AHEAD: When the economy rebounds, some consumers may 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 many observers think the underlying frugality will linger. Marian Salzman, chief marketing officer for public relations agency Porter Novelli, cites a "Depression mentality" that's making people "rethink their optimism in the economy."

COMING OUT ON TOP: Plenty of stores have benefited from shoppers' woes and are hoping to retain new customers when the economy rebounds.

Andrea Thomas, executive vice president of private brands at Wal-Mart, thinks that many shoppers will stick with store labels, because the quality has improved so much. Overall, Wal-Mart expects to retain affluent customers when the economy recovers because it has made improvements in its stores and customer service.

RETREADS: At the Alexandria Shoe Repair and Leather Service in Virginia, sales have increased 18 percent since February. "I am seeing a younger crowd who lives in the disposable world," owner Barbara Steube said. "They are learning an economics lesson. They will see the benefit of the savings and how much money they walk away with when they fix their shoes."

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