Consumers cutting back luxury items during crisis

Australia: Consumers are hanging onto their recreation goods, such as golf clubs, and furniture as they put off discretionary spending during the economic slowdown, retailers say.

They blame negativity from the global financial crisis for a reluctance to spend on anything but the essentials.

“Consumers are being very particular,” Australian Retailers’ Association chief executive Richard Evans said, adding it was not a recent trend.

Soaring petrol prices and high interest rates in the first half of last year were a big turn-off for consumers as well.

And when the financial crisis caught up with Australia, consumers were already keeping their money in their pockets.

Evans said a big factor in consumer habits was the negative coverage about the financial crisis in October and November.

“If that wasn’t there, then consumers probably would have been back in the market by now in a significant way.”

Retailers had experienced the lack of confidence in recreation goods and furniture sales.

“The golf clubs will last another year, the couch will last another couple of months – that’s what we saw happening,” he said.

Restaurants had also fallen victim with consumers preferring to eat at home.

“You don’t go out and buy that $40 bottle of wine at the restaurant, you buy the same wine for $15 and buy some quality food at the supermarket and you go home and cook it.”

As a result consumers are “cashed up”.

“They’ll come back in a significant way and we’re starting to see some early signs of that.”

It was important to remember that unemployment was still low compared to the early 1990s, and Australia was coming from a very good base in terms of its balance sheet, Evans said.

But he was not yet sold on the government’s latest economic stimulus, despite nine million potential consumers receiving cash handouts of up to $950 each.

Evans said it was not clear how the government’s first stimulus package in December had been used by consumers.

A debit card system, rather than cash, was preferable because it would ensure the money was spent.

Source: AAP

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  1. […] Consumers cutting back luxury items during crisis « Retail News Updat.. […]

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