Business

Shoppers may stay thrifty

SAN JOSE, Calif. — Carolyn O'Brien used to glide into Nordstrom, let the fashion moment seize her and buy whatever was in her price range, with little concern for sales or discounts.

These days, she combs the racks at Macy's or JCPenney, where coupons and discounts mean savings of 40 percent or more.

"I don't buy anything unless it's on sale now, and not just a little sale. It has to be at least 20 percent off," said O'Brien, who works for the California Skin Institute as a patient care coordinator. And, she said, she might keep her thrifty shopping habits even after the economy rebounds.

But will her new way of life outlast the current downturn?

The Great Depression witnessed a generational change in consumer behavior, when learning to live with less became a habit — and one that many clung to even when the good times returned.

Now, some research suggests that as Americans have downshifted their spending habits because of the current recession, they, too, are seriously reassessing their consumerism, not just now but also for the long term.

"To what extent will this behavior persist even if the economy bounces back? That is the big question," said Frank Badillo, vice president and senior retail economist for Retail Forward, a consulting and analysis firm.

The firm conducted a survey in August and again in February to gauge consumer habits. It found both times that about three-fourths of the 4,000 survey respondents said they have significantly or somewhat changed their shopping behaviors because of the economy. And once entrenched, this "recession shopping behavior" has the potential to linger even after the economy improves, according to the report.

Some economists are uncertain whether new, thrifty shopping habits will stick. It's "normal for families to adjust their spending in deep recessions or when personal financial trouble hits," said Steve Levy, an economist and director of the Center for Continuing Study of the California Economy.

The recession after the dot-com bubble burst saw spending fall, he said, as it did during the recessions of the early 1980s and 1990s. Historically, Levy said, consumers returned to old habits gradually over a few years, waiting until they felt secure that the economy and their jobs were stable.

The current consumer behavior most mirrors what happened in the early 1980s, when tax and interest rates were high and unemployment rampant, said Marti Kopacz, a retail distress expert with Grant Thornton, a corporate advisory and restructuring services firm. Just as they did then, consumers are trading down one level.

A Nordstrom shopper, for instance, might switch to Macy's, while a Macy's shopper might go to JCPenney or Kohl's. And those customers who have become comfortable buying basics at less-expensive stores might continue to do so even after things improve.

In fact, experts say the category hurting the most and the one that might take the longest to recover is luxury goods, because it's the one area in which consumers can delay purchases.

"In a world where 95 percent of us had jobs, it was only natural to trade up on some things," said Mark Wilcox, managing director of retail programs at Affinity Solutions, a retail marketing and technology services company in New York. "These days, we're more likely to make systematic changes downward. The only ones benefiting are Wal-Mart, Costco and Goodwill."

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