SUMMARY

• With more savings and less spending amid the current recession, consumers are trading down, although product quality remains a concern

• As consumers stay at home more, in-home entertainment products and items relating to eating in should sell comparatively well

• Certain healthcare products and environmentally-friendly products are also relatively recession-proof

• Hong Kong exporters should put more effort into hooking up with low-cost retailers, while strengthening their own supply chain management

Unlike previous downturns in the early years of the decade, when traditional markets, not least the US and the EU, did not witness major changes in consumer behaviour, millions of consumers have now altered their lifestyles and buying preferences in many facets amid the global financial tsunami and the ensuing economic recession.

There is, in particular, a significant shift towards cheaper items and staying home, which will likely last for quite some years as savings in these markets, including the US where households used to spend rather than save, are expected to rise further, thus leaving less for conspicuous consumerism over the medium term and probably beyond.

Given the inclination to go back to basics, consumers are looking for discounted and practical products, rather than regular and high-price items. With purse strings tightening, they are exploiting every possible means to trade down - buying something cheaper or seeking bargains to save money.

Despite trading down, quality continues to weigh in the traditional markets. Thus far, there has been no significant switch to low-quality products, as consumers still clamour for quality at reasonable or discounted prices. Apart from quality and prices, consumers also ask for additional incentives, where offers such as extended warranty periods, free delivery and installation services may be sought after in the case of consumer electronics.

In the meantime, consumers are showing a stronger affinity for private labels, which are usually much cheaper, at the expense of branded products. In spite of varying paces, more private labels are being introduced in different traditional markets to boost sales, and the battle against national brands will likely intensify in a prolonged recession.

Tough economic times are further transforming the retail landscape of the traditional markets. As consumers are more willing to compare and shop across different retail outlets in search of affordability and value, they are shifting en masse to discounters and supermarkets, such as Wal-Mart in the US and Tesco in the UK, and department stores and luxury stores are feeling the pinch.

Meanwhile, there appears the reemergence of cocooning, a trend that sees people turning towards the comfort and protection of their homes, recognising the value of their families and connecting with friends. If anything, cocooning results in a change in lifestyle and hence new trends in consumer behaviour and spending preferences. 

As consumers stay at home more, home-based activities are on the rise. In particular, consumers tend to spend more time on in-home entertainment, while eating in more and dining out less. It follows that in-home entertainment products (e.g. video games) and items relating to eating in (e.g. packaged foods and kitchen utensils) should sell relatively well.

Healthcare is relatively insulated from the current downturn, as people still get sick and require medical care regardless of the state of the economy. To scale back expenses, consumers are looking for self-care health products, however. Also, certain environmentally-friendly products will likely continue to do well, given their ability to save money, probably via less power consumption.

To maintain their share in the traditional markets, Hong Kong companies should have a good grasp on the new consumer trends, as well as the emergence of potential niche products there, and then formulate the right product and marketing strategies.