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Shopping In A Recession

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Shopping In A Recession

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Shopping In A Recession

Shopping In A Recession

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People are buying less and it appears consumer behavior may be changing. Is being frugal here to stay? Paco Underhill, founder and CEO of a behavioral market research and consulting company, talks about recession-era shopping.

ALISON STEWART, host:

This is TALK OF THE NATION. I'm Alison Stewart in Washington, Neal Conan is away. What was the last time you went shopping? Okay, how about just window shopping? How about surfing the net? For many people, opening a wallet to purchase a non-essential item has become a distant memory. While the economy is in the slide, so are retail sales. Not only are people buying less, it appears consumer behavior is changing altogether as are people's attitudes. Is being frugal here to stay or is this just a temporary shift? Just like riding your bike to work once a week last summer was, when gas was $4 a gallon. Or remembering to bring your public radio tote bag to the store every time in order to help the environment.

Well, we want to hear from you. What changes have you noticed in your own shopping habits. Our number here in Washington is 800-989-8255. The e-mail address is talk@npr.org. And you can join the conversation at our Web site, just go to npr.org and click on TALK OF THE NATION. Now later in the program, if you needed fast cash, what would you never ever sell, even if you were desperate? But first, shopping in a recession. Joining us from our New York bureau is Paco Underhill. He is the author of the book "Why We Buy: The Science of Shopping" and the CEO and President of Envirosell, a research firm that follows retail environments. Welcome to the program Paco.

Mr. PACO UNDERHILL (Author, "Why We Buy: The Science of Shopping"; CEO and President, Envirosell): Alison, thank you for having this bald, stuttering research nerd back on the air.

(Soundbite of laughter)

STEWART: Oh my goodness, that's quite a visual. Alright, on your firm's Web site, it says, we watch people shop. So what have you observed about the way people are shopping in 2009?

Mr. UNDERHILL: Well, I think there's several issues and there is - there is a group of us that is avoiding the shopping mall altogether, that is a group that is under immediate threat of being downwardly mobile. There is a second group that is taking pride in how little they're spending rather than how much. And they are discovering the tool of their Web-enabled mobiles phones to basically comparison shop in the aisles of stores themselves as opposed to before they walk in the door. And then there's a third group of us who have basically realized that the era of bling is over and conspicuous consumption, Alison, is simply bad manners.

STEWART: Well, I want to break those three down. That first group, the ones that are in immediate danger, now that's a diverse group. That doesn't mean that you necessarily are out on the street.

Mr. UNDERHILL: Alison, I think one of the things that makes this recession historically so unique is the fact that there are such a cross section of people who feel economic pressure - meaning this is the Merrill Lynch executive, this is the surgeon who simply had been spending too much money or the GM retiree who's looking at his healthcare benefits being slashed.

STEWART: Now, the last group you mentioned is talking about - you mentioned the era of bling is over. It is bad manners to spend money at this point. I'm guessing that morality plays into today's shopping experience and shopping behaviors.

Mr. UNDERHILL: Isn't it interesting that the era or the - the issue of green has stopped being a political issue and has become a moral issue? I think we are watching, at least for the time being, the era - the issue of consumption going through the same process.

STEWART: Now what about that group of people you mentioned - they do have the money. They have it, they're not in immediate danger, but they are not spending it. What needs to change to get these people to open their wallets because in many ways, they're the people that could may be help the economy get going again.

Mr. UNDERHILL: Well, I think we are waking up to the fact that we - yes, we still eat, we still drink…

(Soundbite of laughter)

Mr. UNDERHILL: …we still need to give people we love the icons of our affection. Our homes, our pets, our cars still need servicing. It's just that we have to do it with a little more sense than we had been doing it before. And I think we're watching that start to happen.

STEWART: Of all the changes you've seen going on about the way people shop, can you get me an example of a change you think that's actually here to stay? And then maybe an example of a change that I mentioned in the intro where people, you know, they're not riding their bike to work anymore because gas is inexpensive again.

Mr. UNDERHILL: Well, here is one that I noticed personally yesterday. It's something that we've been seeing but I personally experienced. I was in a grocery store in suburban New Jersey and I noticed that the closer I got to the cash register, the more discarded items I saw.

STEWART: Oh, that's interesting.

Mr. UNDERHILL: Meaning somebody put it in the basket, carried it for a couple of aisles, looked at it in the basket and then made the choice to either trade it out for something else or to simply trade it out, you know, permanently. And this is something we are seeing all over the place which is a little sense of buyer's remorse before you get to the point at which you have to exchange goods and money.

STEWART: Let's talk to one of our listeners. We've got Liz(ph) who's calling us from Delmar, Maryland. Hi, Liz.

LIZ (Caller): Hi. Thanks for having me on the air.

STEWART: Sure. So, how's it going for you during this recession? What changes have you had to make?

LIZ: Well, we've made quite a few changes. Just recently I've decided I need to start buying a Sunday paper so I can cut coupons. I've tried doing the coupons on the internet, which there's a lot of great Web sites that do that, but a lot of them require you to download a little program and it's filled with spyware. So, we've decided that that's not probably good for our computer. And we're just going to get the Sunday paper and cut coupons.

STEWART: Did you have a tipping point at some point, where you were at the store and you picked up something, and you think - you know, just look, I really probably shouldn't buy this because it cost too much, or wow, we really should start looking at the coupons for these things.

LIZ: Well, I always tend to buy, like, the store brands, but there's a few brand name items that we really like to have. Like, um, I tried some of the store brands, for like, contact lens solution and it just wasn't - that didn't work for us. So, you know, when we want a brand-name thing, it's probably good to look for a coupon.

STEWART: All right, Liz. Thanks a lot. Good luck to you and your family. And Paco, Liz brings up an interesting point, talking about she's looking for the store brands versus the brand names. In terms of big, brand-name items in big retail stores, let's say, we'll just say somebody who normally stops at Nordstrom's - are they now going to be going to the Target? What's got to change for them to make that shift, and how is Nordstrom going to keep that customer base?

Mr. UNDERHILL: I think that's an interesting issue here. First of all, we are watching people trading down, meaning that the customer that was shopping at a Kroger is now shopping at a Wal-Mart. The person that was shopping at a Wal-Mart is shopping at a dollar store. So people's shopping habits are focused down rather than up.

I think one of the important things for Liz to recognize is that the Food Marketing Institute and POPAI - the Point-of-Purchase Advertising Institute -point out that somewhere between 60 and 70 percent of all of our purchases in the grocery store are off our list.

And one of the most important issues about being a responsible consumer is writing your list first and then checking your list off against the coupon, rather than going through the coupon list first and then having that influence what your actual purchase behavior is.

So the issue is managing your inventory first, and then managing your savings second.

STEWART: And we're talking to Jim in Iowa. Jim seems to be a case in point of what you mentioned, Paco, about somebody who decides, you know what? I don't really need this. Tell us your story, Jim.

JIM (Caller): Well, we find that sometimes just having the temporary possession of an item - for example if we're at the Goodwill, and we see all these trinkets that other people have discarded, we maybe put it in our cart and handle it and look at it. And then before we get to the counter, we decide, well, we're going to de-shop, and we just put some of that stuff back, decide that 15 minutes of ownership has been sufficient.

(Soundbite of laughter)

STEWART: You're renting it for 15 minutes.

JIM: Yeah. It's a form of entertainment.

STEWART: Jim, thanks.

Mr. UNDERHILL: You know, Jim, there's an experience that I used to have at the public library, where I would pick up a book here, and I'd page through it. It would be interesting. And I'd see that the last time somebody took this book out was in 1954, and therefore I would take it out and put it back in so it wouldn't feel so lonely.

STEWART: We're speaking with Paco Underhill. He is CEO and president of Envirosell, a research firm that follows retail environments, and is also the author of a book called "Why We Buy: The Science of Shopping."

We want to know how your shopping habits have changed in the past few months, giving what's going on with our economy. The number is 1-800-989-8255. The email address is talk@npr.org. And Carol from Kansas City, whose on line four, yeah Carol says we're all late to the game. She's been like this - she's been frugal her whole life.

CAROL (Caller): Yeah. I'm in my 50s. I've been going to garage sales since my early 20s, and I've never - actually, most of my jobs have been part-time jobs, and my husband's a social worker. So we don't make a lot of money, but we don't spend a lot, either. So I feel pretty secure.

STEWART: Is this something that you learned from your mom and your dad or whoever raised you, your family?

CAROL: Yeah, I probably caught some of it from them, and also just I don't know. Maybe it's in my genes, too. My grandparents were very frugal, too.

STEWART: Carol from Kansas City, thank you so much. There are generational differences here, Paco, aren't there?

Mr. UNDERHILL: I think there are. But I think Carol talks about something in terms of being the leading edge, which is that there are many of us who are willing to consider a secondary market that would have been unthinkable to us 10 years ago, meaning that we're no longer calling it a used car. We're calling it adopt a Honda or a previously owned Lexus here, and that part of this is translating into people taking pride in being able to better use the budget that they have to work with.

STEWART: My favorite is previously enjoyed, something that's been previously enjoyed.

Mr. UNDERHILL: Yes.

STEWART: We're talking about shopping or, rather, trying not to in these tough economic times. Has your trip to the mall changed since the recession hit? What's changed in your life? We do like to hear from you. We're taking your calls right now: 800-989-8255. You can also send us an email. The address is talk@npr.org. Paco Underhill is going to stay with us. I'm Alison Stewart. It is TALK OF THE NATION from NPR News.

(Soundbite of music)

STEWART: Thanks for listening to TALK OF THE NATION from NPR News. I'm Alison Stewart. Neal Conan's away. We're joined right now by Paco Underhill. He's the founder, CEO and president of Envirosell, a behavioral market research consulting company. He's also the author of "Why We Buy: The Science of Shopping." He's joining us from New York.

The discussion today is about how your shopping habits have changed since the recession came in. And I want to read you an email, Paco, from Dan, who wrote to us from Newton, New Jersey.

He says I frequently shop on eBay, and I have always been picky about what items I purchase, and the recent downturn has made me downright stingy.

However, I still enjoy window shopping online. But so that I don't forget what I liked, I bookmark the items, whether on eBay or other online stores.

It allows me to come back to the items and still be able to look at them when I find that I need the item or I am in better financial straits.

What is it that retailers need to know about consumers like Dan that will get them to go ahead and perhaps buy what they've been looking at? What kind of changes do you foresee happening in our retail stores that will help consumers feel like okay, it's okay to spend a little more money?

Mr. UNDERHILL: One of the issues that has driven our business over the past few months is that merchants - whether online merchants or bricks-and-mortar merchants - are trying to do a better job of telling their stories, meaning that we as a culture realize that value isn't just about price. It's also about quality.

And how do we translate that quality statement into something that the customer actually understands? Why does this T-shirt cost 3 bucks, and this T-shirt costs 27 bucks?

STEWART: I want to go to Julie, who is calling us from Minneapolis, I believe. Hi, Julie.

JULIE (Caller): Hi.

STEWART: So you just came in from the store yourself, right?

JULIE: Yes. And this is my kind of show. My husband was out driving, and he just came in and said oh, my gosh, yeah. This is you.

(Soundbite of laughter)

JULIE: So here's the deal. I went to Walgreen's. I spent $33.76, and it lists my total savings as $27.04 because of the coupons that I used. I had $27 in coupons. So that was a big savings.

And then I went to the grocery store and used coupons and bought store brands and stuff, and they tell me I saved a grand total of $28, for a savings of 41 percent.

So I'm just frugal. You know, I always think I don't have time to clip coupons, but I have more time than I have money, and so to me it makes sense. And the other thing I do is I've started shopping at Aldi's, and I buy - you can't buy everything at Aldi's, but I do buy almost all of my produce there because the produce is very good, and it's very inexpensive. It's astonishing.

So it means I take more time because I go to two grocery stores, but I find once again that I have more time than money.

STEWART: Now Julie, are these changes in your lifestyle?

JULIE: Well, no. I've always been pretty frugal and always used coupons. But the change to Aldi's, yes, is. And the other thing, you know, you were asking about - you were talking with Mr. Underhill about the way retailers, you know, will look at the way they're selling things.

STEWART: Sure.

JULIE: I think it's about time that we not pay $70 for a pair of jeans or $26 for a T-shirt that you can get for three. I think that we've gotten so skewed, and I'm really looking forward to prices getting back to a little bit normal. I think that the inflation that we've been living through has been ridiculous.

STEWART: Julie from Minneapolis. You're impressive with your coupon-cutting. Keep at it. Thanks for calling.

JULIE: Bye.

STEWART: Does Julie have a point, Paco, that we were so - the scale had gotten ridiculous?

Mr. UNDERHILL: I think there's something that she's hit on, which is absolutely correct, is that globally, the fastest-growing merchants, whether they're Aldi, or Aldi's - Aldi owns Trader Joe's, or the other German firm, which is called Lidl. Those are the fastest-growing merchant organizations on the planet, and they're uber discounters.

They have no design equity on the floor. They don't give you lots of selection. They are all about private label or private sourcing, but you can walk in and get good-quality goods at an extremely reasonable price.

STEWART: We're going to talk to Rona from Riverside. So Rona, I'm going to ask you a little bit of an impolite question. How old are you?

RONA (Caller): I just turned 34 yesterday.

STEWART: Oh, happy birthday to you. You described yourself to one of our producers as a child of American pop culture.

RONA: Yes.

STEWART: Now how does this factor into how you are spending your money, or not spending your money?

RONA: Well, I mean, I, you know, grew up in Southern California, working in the mall, you know, spending my summers working and spending my money back into the mall. Sorry.

STEWART: Who's that back there?

RONA: My three-year, screaming potty.

STEWART: Oh, you need to go take care of that?

RONA: Anyhow, yeah, I'm on a headset. So anyways, so now, you know, we just moved back to Southern California and we want to, you know, we moved back because the prices - the real-estate boom popped, and now we can actually afford to live here.

And so we're working on buying a house, you know, and finally buying real furniture. But because of the economy, we don't want to spend now because we're thinking, well, everything is so inflated, just like the lady who was on the line now. You know, we see housing prices so inflated still in comparison to what people actually make in the area.

Otherwise, you know, if things actually matched people's income ratios, we'd be out there buying a house, buying furniture for the first time and buying everything that people buy in order to kind of work towards the family with two kids and the American dream.

STEWART: All right, well, good luck, Rona. And take care of your little guy or gal back there. Sounds like it might be an emergency. Don't want to get in the middle of that.

(Soundbite of laughter)

STEWART: Yeah, we all know the iPhone looks good and the new shoes, but these days, you're probably opting to save rather than spend. We do want to hear from you. Come clean about your shopping habits. Have they changed since things have gotten tough?

Give us a call at 1-800-989-8255. The email address is talk@npr.org. We're talking with Paco Underhill. He wrote the book "Why We Buy: The Science of Shopping."

And, you know, George Bush, former President Bush, he famously - or some would say infamously - told Americans during tough times, twice he mentioned that we should go shopping. And he had been ridiculed for this. But I'm curious. Do you think there's something to that idea that people have to spend money to get the economy to move? Do you think we're always going to be a consumer nation in one form or another?

Mr. UNDERHILL: Alison, I think most of us have woken up and found that our houses are too big, our cars are too big, our bellies are too big, and our debts are too big, and it's very important that we go on a diet.

We cannot continue to consume the way we have. Are we going back to the way we were? Absolutely never. Is it going to be painful getting to become more responsible consumers? Yes, short-term. Long-term, however, I think there are some positive ramifications to it. We need to better connect what we can afford with what we actually buy.

STEWART: And that's a good point. I mean, it's about moderation. To use your weight-loss analogy, you wouldn't just stop eating. You would modify your diet.

Mr. UNDERHILL: Absolutely not. We still love our children. We still consume. We still want to take vacations. We still want to give the people that we love the icons of how we feel about them. We just have to do it better.

STEWART: Let's talk to Linda, who is calling us from Missouri. Hi, Linda.

LINDA (Caller): Well, hi there. Thank you for having me on.

STEWART: Sure. I understand that you found a sort of a way to make this a little more fun.

LINDA: Well, it isn't always fun. I've always been rather conservative with my shopping. And I've tried to keep my kids to be moderate and conservative and look for quality items, because I think we've been ripped off for a long time with things we pay a lot for that really don't last.

My concern, that I see, is that, you know, I've shopped at all Aldi's, I've shopped at Wal-Mart, I've shopped at - but there's a lot more competition there. We've got people who were shopping at Macy's coming down to Target, and they're not happy about it, but they're doing it. Where am I going to shop next? That's my big concern.

(Soundbite of laughter)

LINDA: I've been the thrift store shopper, I've been the Aldi's shopper and, you know, I'm running out of places because, you know, you can go into the thrift store now and if my kids needed, you know, jeans to go hack around and play outside in, they aren't there.

STEWART: Interesting.

LINDA: So, part of what the economy has done is that it's taken away resources from people, you know, that haven't - don't have the flexibility. And the people who are shopping down - yeah, maybe they need to a little, but they don't need to do it so much that they're hurting the people who have no other options.

STEWART: It's a really interesting point you bring up. Thanks, Linda.

I also want to talk to Steve, who is calling us from Michigan. Hi, Steve.

STEVE (Caller): Hello.

STEWART: So, I understand your wife sends you on missions.

STEVE: Yes. She sends me out on a mission, knowing that she'll give me a list and I'll go shopping, knowing that I will not substitute, add or delete from her list…

(Soundbite of laughter)

STEVE: …or I get the wrath of whatever. But I also noticed her spending habits. She'll go on these TV, I don't know if I could say this, but, you know, the QVC type shows.

STEWART: Sure.

STEVE: And she'll wait for a product that has the easy payments before she'll start to buy it. That way, it seems like it's a lower cost, initially, to her.

STEWART: Thanks for calling, Steve. We appreciate it.

I'm sorry, I was just reading an e-mail here. This is from Jan(ph). He's calling us from Minnesota as well. One thing I always recommend to people is that when you're deciding to purchase something, consider the cost of the number of hours you need to work instead of the amount of dollars it cost. I find that it helps keep frivolous purchases down.

That's a very interesting way to think about it. Don't you think, Paco?

Mr. UNDERHILL: I think one of the things that's very important as a shopper, is to recognize the difference between the thrill of acquisition and the pride of ownership. Meaning that if you buy something, no matter what you spend on it, if you use it repeatedly, then it's been a good purchase, regardless of what the price is. If you buy something and take it home and don't use it, that's been a bad expenditure of your hard-earned money.

STEWART: Let's talk to Kenneth from Asheville, North Carolina. Hi, Kenneth.

KENNETH (Caller): Yes, hello. I found that the recession has had me buy things more locally, and that actually even if something is a slight bit more expensive, I'm more likely to buy it locally because I know that that money is staying in the local economy. And I know a listener earlier mentioned that, you know, buying a $3 T-shirt instead of a $27 T-shirt. And I think that's a great point they made, but if the $27 T-shirt is made in the United States and the $3 T-Shirt is made by child labor, then ultimately, even if I'm not paying the extra cost for that T-shirt, somebody else down the line is.

And I think that talking about the green becoming actually more of a moral issue than a political issue, it - the economy right now kind of invites us to notice the effects of our purchases beyond our own wallet and really on that kind of global scale because we can see that now.

STEWART: Kenneth from Asheville, thanks a lot.

Paco, he brings up an interesting idea, the idea of mindful consumption, mindful shopping.

Mr. UNDERHILL: I think that's a very… That movement, the localvore movement, is something that has a profound impact on our culture. I might point out that for almost 20 years, the local farmers market hasn't even come up on people's radar screens. And yet, as someone who lives in a city and someone who's been to the Asheville farmers market, the farmers market is an absolutely wonderful place. And the chance to be able to talk to the person who actually grew something or made something adds equity to both the purchase and joy to the acquisition process.

STEWART: You're listening to TALK OF THE NATION from NPR News.

Paco Underhill is joining us. He's the CEO and President of Envirosell, a consulting firm.

And I know you consult various stores about how to invite consumers in and what would be better for their selling - for them to sell more. And Bob, from Ottawa, Illinois, he has some advice of his own.

What are - what is your advice, Bob.

BOB (Caller): T-F-T-M-C, Alison. When I walk around big-box stores and see items that are not priced, I figure they're not for sale. I'm not tracking down somebody to find out how much of my money I need to put for an item they're not proud enough to put a price on. And once I do find some items, if I have to wait long in line to check out, I'll just walk out of the store, leaving my cart full and say, money leaving the store.

(Soundbite of laughter)

STEWART: All right. Everybody in Ottawa, Illinois, the guy yelling money leaving the store, that's Bob.

BOB: Yep.

STEWART: Thanks for calling, Bob.

I understand from some of your research, that these big-box stores, because some people do need to shop at them because of the - one of the only things available to them, especially if they live in certain areas - that the bigger store, that that's probably going go by the wayside, these gigantic stores.

Mr. UNDERHILL: I think we have reached the apogee of the big box. It doesn't mean that the big box is going to go away. But that in our perennial quest to engineer cost out of the supply chain, we can actually run a store that has the same degree of products in it and do it in a smaller footprint.

STEWART: When you look into your magic crystal ball, Paco, what do you think the world of retail will look like five years from now?

Mr. UNDERHILL: Well, thank you for asking. I think the world of shopping is going to change more in the next five years than it has in the previous 100. And this is being driven by a number of different things. First is the concept of convergence, which is the idea of our online world, our bricks-and-mortar world, and our access to immediate information via our mobile phones.

Second trend which is affecting us is the continuing empowerment of women. That historically, up until this moment, we have lived in a world of shopping where stores have been owned by men, managed by men, designed by men, and yet we expect females to participate in it. Let's recognize also that there's some things that give us pleasure to shop for and there are other things that are simply routine purchases.

Alison, if 80 percent of what we spend money on on a week-to-week basis is routine, how come our kitchens or our laundry rooms can't go shopping for us?

STEWART: I want to go to Rachel(ph) as we sort of wrap up this topic because, Rachel, the next generation is helping to keep you in line, right?

RACHEL (Caller): Yes.

STEWART: Tell me a little bit about what goes on in your family.

RACHEL: Well, I've always been a frugal shopper, but I noticed now that I pay more attention to it, I like - going back to what the gentleman said about meeting the person who - not only is selling the product but actually made it, I did that the other day.

But my daughter, she's using the vocabulary now, like she'll look at something - we went to the Disney Store for instance, and she's walking around and I promised her one thing because she had a really good report card, and she was deciding to think, well, I really don't need it, Mom. If you want, we don't have to find anything today because I don't need it. I just want it. And I thought that was kind of interesting.

And I was like, no, Mom, you can buy what you want. But she was like, but, you know, if you - if it's too much money, then we don't have to get it. I can just pick something else instead. So, she's aware of it, and I'm not sure if I kind of like it, but at the same time I'm kind of upset that she has to think about it that way.

STEWART: Rachel from Naples, Florida, thank you so much.

And Paco, we're going to finish with Rachel's point that a lot of people are having to make that distinction between want and need.

Mr. UNDERHILL: I - particularly for many of us - thank you Rachel for your daughter having recognized it…

STEWART: Yeah.

Mr. UNDERHILL: …but many of us who are over age 50, what do we really need? Fruit, pasta, wine, olive oil…

(Soundbite of laughter)

Mr. UNDERHILL: …yearly doses of socks and underwear, and then presents to tell people that we love them.

STEWART: That's a good point.

Paco Underhill, founder and CEO/President of Envirosell Consulting Firm, author of "Why We Buy: The Science of Shopping."

Thanks for walking through this with us.

Mr. UNDERHILL: My pleasure.

STEWART: I'm Alison Stewart. It's TALK OF THE NATION from NPR News.

(Soundbite of Music)

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