U.S. shoppers likely to remain frugal: report

SAN FRANCISCO Mon Mar 23, 2009 8:21am EDT

Sale signs are seen at a Target store in Colorado, February 24, 2009. REUTERS/Rick Wilking

Sale signs are seen at a Target store in Colorado, February 24, 2009.

Credit: Reuters/Rick Wilking

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SAN FRANCISCO (Reuters) - Shoppers who have cut back on purchases in the grim U.S. economy are likely to continue their conservative shopping habits even if the economy improves, according to a new study.

That signals continued bad news for retailers, who have been struggling to respond to a dramatic cutback in spending as consumers have opened their wallets only for essential items, while cutting back on extraneous purchases.

According to a report from retail consultancy Retail Forward and PricewaterhouseCoopers, current shopping behavior "will have plenty of opportunity to get entrenched."

The report, which estimates retail sales growth to be flat this year, found that three-quarters of respondents to a monthly survey of 4,000 consumers said they had shifted their shopping behaviors because of the economy.

Most said they were making do with less, or going without some favorite items.

"The habits learned during this economic crisis have the potential to permanently alter the mind-set of consumers," the report said. "The vast majority of shoppers who are changing their near-term shopping behaviors say they plan to continue them as the economy improves."

In the past year, U.S. consumers have reeled from job losses, tighter credit and a weak housing market, which have forced them to save money, often by cutting back on nice-to-have items or trading down to lower-cost chains.

To combat the consumer malaise, smart retailers will focus on downsizing, the report said, as adding stores to an already crowded retail landscape is out of vogue.

It cited smaller initiatives to build shopping buzz, such as limited editions of products or having existing stores target local markets.

The report also forecast that retailers will increasingly focus on private label brands to lure cost-conscious shoppers, while adding complementary categories of goods to their stores to make "one-stop" shops for consumers.

While warehouse clubs, like Costco Wholesale Corp, and supercenters, like Wal-Mart Stores Inc, are expected to fare the best in the weak environment in 2009, discount department stores and supermarkets will be the weakest, the report warned.

Sales of apparel, though expected to rebound in 2010, will be the hardest hit and slowest to recover, according to the report.

(Reporting by Alexandria Sage; Editing by Gary Hill)

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