Consumers’ lowered confidence in economic outlook causes them to postpone purchases of expensive products

Finns’ confidence in economy has plummeted close to the 2008 level

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The wholesale and retail sector fears that the consumers' crumbling confidence in their own and the country’s economic prospects is causing them to put off the acquisitions of more expensive durables.
      Traditionally, the uncertainty of the economy first manifests itself in lowered sales figures in speciality retail, and not so much in shopping for food.
      "The lowered confidence of the consumers is shown especially in fields where the unit prices of the products are high, in other words with various luxury items. Large investment decisions are postponed”, says Aalto University Professor of Marketing Arto Lindblom.
      Lindblom reckons that if the consumers’ confidence in their own economy deteriorates, in time it will also be manifested in the shops’ pricing policies.
     
In the space of a couple of months, the consumers’ confidence in the Finnish economy has descended close to the figures for the autumn of 2008, a study by EPSI Rating, an independent performance assessment organisation, reveals.
      Of the 14 countries where the study was carried out, in Finland the consumers’ confidence in the economy decreased most. Some 5,000 Finns were interviewed in September-October.
      So far the Finnish retail chains have not really reacted to the lowered confidence – apart from the end of September profit warning issued by Stockmann.
      According to the department store chain, the views for the end of the year have been weakened because of the European debt crisis so much that the entire year’s profit will remain below last year’s result.
     
British grocery and current consumer goods chain Tesco just announced that it would lower the prices of more than 3,000 everyday products by up to a third. The largest announced price drops would relate to Tesco’s own brands.
      Tesco, like many others, wants to hold onto its regular customers that it has reeled in with a bonus card system. Some of the price reductions are misleading, however, for at the same time the chain is reducing the bonus card benefits. Tesco explains that today’s customers prefer to get the benefits directly when making the purchase, not through a bonus card points system.
      To add insult to injury, Tesco has today been accused of misleading customers during its £500m ‘Big Price Drop’ promotion. Apparently the retailer increased the prices of many of its items in the weeks leading to the announced price-cutting campaign. In some cases the items’ prices were raised much higher than the original price and then, in the ‘Big Price Drop’, lowered only marginally, which means that after the campaign the customers still pay significantly higher prices than a couple of months ago.
     
In Finland it has been seen that in uncertain times the consumers start buying cheaper products, in other words, the grocery store chains’ own brands.
      So far the country’s retail chains are not planning to streamline any regular customer benefits.
      Director Ilkka Alarotu from Finland’s largest food retail chain the S-Group says that at least so far the uncertainty has not manifested itself in the sales figures.
      “Consumer confidence’s correlation with food buying is much smaller than with buying speciality items. In recession the store’s own brands increase their sales. We, too, increase their availability and increase the amount of available fresh produce. The aim is for our own brands to constitute 20 per cent of the sales”, Alarotu explains.


Previously in HS International Edition:
  Consumer confidence hits all-time high (28.9.2010)
  Consumers´ confidence in economy extremely strong (27.8.2010)

Links:
  EPSI-Rating: International Benchmark trends for Consumer Sentiment Monitoring Q3/2011 (.pdf file)
  EPSI Finland

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