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According to Britt Beemer’s ARG/UBS Consumer Mind Reader Survey/ March 2011 Spring Forecast Out Today Americans Break Forecast
CHARLESTON, SC – According to the Consumer Mind Reader Survey/March 2011 Spring Forecast released today from America’s Research Group and UBS and based on research conducted over the weekend of March 8-15, Americans are cutting cut back on their credit card usage more than ever before – including the precipitous drop over the holiday season. For the first time in over 26 years of surveys, the Cash is King way of life that began in December appears to be maintaining itself if not growing. Americans using credit cards for the majority of purchases plunged to a startling 10.4%.
Moreover, in a major surprise, consumers showed a newly escalated caution – if gas prices hit $5, according to the survey, Americans say they will embrace a “spending freeze.”
Impulse buying hit an all-time low in over ten years of surveys of 14.2%.
“Behind much of this,” said Mr. Beemer, Chairman and Founder of America’s Research Group, “is something no one has really looked at - and that is that Americans are driving by vacant homes in record numbers - 64.8% told us they now see vacant homes in their neighborhood on a daily basis as compared to 58% last fall. Psychologically, when individuals feel that their home value may drop, they start to panic ‘how am I going to send my kids to college?’ What’s more, the vacant home drive-bys strongly impact the likes of cable bills. For the first time, this is on Americans’ cut-back lists in double-digits. If their homes appear to be dropping in value and gas prices look like they may hit $5, that cable bill that has crept up to $100-plus will now shrink to $50 with the savings reserved for gas or even college. Again those vacant homes are the secret psychological ‘bad boy’ in much of this.
“Another driver here,” continued Mr. Beemer, “is that a whopping two-thirds of Americans said that they had had high credit card balances in the past; of that number, a record-breaking two-thirds told us that they have gotten behind in their credit card payments. Psychologically, the memory of this experience has inspired Americans to stay within their discretionary income limits – and we’re seeing that for the first time, this change is likely a permanent one and a new way of life.”
“Another impact is that while our survey shows that women like the spring clothing that is now on view – and most (72.84%!) say they have seen it – they now will spend only if the clothing is discounted; this used to be a holiday-only trend or at least one where small discounts were ‘expected’ but now most – in this case 31% of women surveyed - will most likely buy when discounts are at 50% as compared to 9.20% at regular price; a whopping 86.6% told us they are more sales driven than even three years ago. 63% will now only shop if ‘there is a big deal advertised’ as compared to 43% five years ago. Those saying they plan to make a major purchase of $1000 or more in the next two months used to be in the 23% to 24% range; now it’s in the 10% to 14.7% range.”
“From a business standpoint, this is a rather pessimistic forecast,” said Mr. Beemer. “But from a consumer standpoint, the approach is further proof of what we discovered over the holiday season: this is the start of what we called The New Responsibility or the ‘Wallet Watch.’ The to-do list is ‘in;’ so is careful, often plodding research before spending even a dime; and so is buying more store brands. They are doing it and sticking to it. We have a new consumer on our hands and he and she are here to stay.”
Key Survey Results:
- 21.1% of Americans say gas prices/cooling/heating bills are making them spend less. An all-time high of asking this question over ten years.
- “If I like it, I buy it” is at an all-time low of 14.2% in over ten years.
- The number of shoppers using credit cards for a majority of their purchases is now at 10.4%, down from 16.0% a year ago. Since asking this question three years ago, 10.4% is the lowest level we have measured.
- The job security level of 61.9% is the lowest since November, 2009 when it was 54.7%.
- 64.8% see vacant homes in their neighborhood, up from 58% last fall.
- Gas prices are the biggest threat because 75.9% will reduce their spending levels.
The four biggest areas for spending reductions are:- Entertainment 31.2%
- Eating out 15.9%
- Cable TV 15.4%
- Travel 11.5%
- Groceries are in fifth place at 9.9%.
- This is the first time we have seen groceries as a response above 3%.
- Should gas prices reach $5, America will go into an immediate “spending freeze” and the areas most impacted are:
- Travel less 30.3%
- Eat out less 19.9%
- Carpool 14.2%
- Use savings 11.5%
Interestingly, 6.4% say they will have to get a second job.
- Americans are extremely fragile; any unexpected event “pushes” them into “not now” or the new “no spend trend.” Over 26 years of surveys, this attitude has translated into Americans cutting back 80% or more in their discretionary spending.
The ARG/UBS research consisted of 1000 telephone interviews conducted March 8 to 15, 2011 at ARG headquarters in Charleston, SC. The error factor is plus or minus 3.8%. The next ARG/UBS shopping survey will be conducted in early May of 2011. America’s Research Group, one of the nation’s foremost consumer research and strategic marketing firms, marked its 30th anniversary in 2009. CEO Britt Beemer is a key resource and advisor to leading brands and top retailers. He is author of The Customer Rules, published by McGraw-Hill.
UBS Global Equity Research provides the broad global perspective and in-depth analysis that institutional investors need to make good investment decisions. With more than 600 analysts, associates, strategists and economists in EMEA, APAC and the Americas, UBS covers approximately 85% of the world market capitalization – over 3,300 companies worldwide across 46 different markets. In addition to UBS’s disciplined fundamental research, clients also rely on UBS for corporate and expert access to give them the insight they need, when they need it.