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Americans Trade Up (And Down) in Purchase Patterns
"NEW YORK -- Americans are continuing a pattern of trading up to premium priced "New Luxury" goods and trading down to lower-cost value brands, according to a recent consumer purchasing survey conducted for The Boston Consulting Group by Harris Interactive.In this third annual survey of adults with household incomes of $50,000 or more, consumers demonstrate how markets have split -- some consumers purchasing the premium priced products at 200% or more over average goods and others trading down and buying the value option. This split has caused growth at the top and bottom ends of virtually all categories surveyed. Consumer companies and retailers stuck in the middle with average goods and average prices are finding their markets eroding."Consumers appreciate quality and are putting their money on the line," says Michael Silverstein, Boston Consulting Group senior partner and author of Trading Up: The New American Luxury (Portfolio). "They continue to trade up in several categories of goods and services -- cars, homes, appliances, dining out, and trade down to balance their budgets. Many of the consumers we surveyed have a 'personal calculator' that sets the amount they are prepared to spend on a particular good. For their trade-up purchases, they are looking for the right combinations of technical improvement, functional benefit and emotional value."Over 80% of the respondents to the survey said they trade up in five or more categories, and 75% said there are some priorities that are too important to skimp on. Choices seem to be motivated not by style or status, but by what gives people a sense of well-being and respite from day-to-day pressures. Two-thirds said they know all the details of the products they favor.The survey asked consumers about their spending patterns in 79 product and service categories and included a new section on grocery and household items.The top 10 trading UP categories for this year are:Personal computers (52.1%)Meat (51.3%)My home or apartment itself (50.7%)Furniture (49.4%)Sit-down restaurants (48.1%)Cars (48%)Bedding (47.6%)Kitchen appliances (46.7%)Home entertainment products (46.6%)Travel/Vacations (46.3%)There are variations based on demographics -- but also some common themes, the survey found. The top category for young men is personal computers. Divorced women named cars and their own homes and apartments as their preferences. Both like sit-down restaurants. Home-related goods, such as washers and dryers, furniture and bedding, top the list for married couples with kids at home.In order to trade up, consumers also continue to trade down aggressively, according to the survey. Here are the top 10 trading down categories:Canned foods (50%)Dry goods (46.6%)Snack foods (46.4%)Household cleaners (46%)Paper products (46%)Fast-service restaurants (45.7%)Accessories (45%)Soft drinks (44.8%)Bottled water (43.6%)OTC health remedies (43.1%)"This trend is not going to abate," Silverstein says. "The forces behind it are too powerful, both on the demand and supply side. That means sooner or later, in one category after another, we will see markets re-structure and the middle hollow out. Low-cost countries like China, international supply chains and the management of intellectual property will play big roles and demand as much attention as traditional success factors in consumer and retail such as brand management and merchandising."Visit The Boston Consulting Group: www.bcg.comThis report is new this week in The Business Journal's small business how-to section. To see what else is new, click here or click on the "how-to" tab at the top of The Daily Business Journal Online home page."