The New Consumer of 2009 and Beyond

Di interviews author and leading demographer Bernard Salt

We continue the theme of Managing in Uncertain Times with another excerpt from our new audio series. This time we have an excerpt from my interview with Bernard Salt, best selling author of three books: Man Drought, The Big Picture and The Big Shift. He is a columnist with the Australian and Melbourne Herald Sun newspapers, a regular on the Australian radio, television and speaking circuit, and heads a group of consultants with KPMG providing demographic, consumer and cultural based advice to business. All of this because of his unique ability to turn dry statistics into topical front page news.

Di:
You have quite a unique insight into the consumer that is emerging in 2009 and beyond. What does their demographic profile look like and how is that changing?

Bernard:
Well there is no doubt that the Australian consumer is changing dramatically in the early months of 2009. But if I can begin by painting a picture of what that consumer looked like say in the middle of 2008 where we have been, and then where we are going. By 2008 (middle of 2008) we were absolutely riding high unemployment was 4%. We had a culture of consumerism, materialism that had continued for 10 years. Almost like an era of prosperity, like a paradigm of consumerism, but it prevailed for at least a decade and it reached a pinnacle, I think in the middle of 2008. And it was reflected in what we were buying, plasma televisions, McMansions and manolo blahnik shoes, $900 a pair, easy credit and of course that was the problem living well beyond our means. But it was almost like the boom produced an era of extraordinary confidence and extraordinary selfconfidence. And particularly in the individual. We were a nation of individuals, the celebrity of the individual. It was even reflected on popular television with reality tv shows, singing and dancing, and Australian Idol and this and that. It was all about the celebration of me, my achievements and my manolo blahnik shoes and so forth.

But of course it all changed with the global financial crisis in the back half of 2008 and we saw a very different consumer emerge and it is still emerging. And this is the rise of what I call the new moral or conservative consumer. Initially prompted by the logic that people simply cannot afford the excessive consumerist behaviour of the past. The plasma tellies and all that sort of thing.

So we’ve recalibrated our expectations to more modest behaviours but there is also almost like a new morality that we are seeing. We have an opinion now on CEO remuneration. We have an opinion on issues of sustainability and in fact it goes beyond that; anti smoking, drinking, speeding, gambling, obesity is now an issue. We have opinions all of them. None of this really applied during the era of rampant consumerism but we have now stopped, taken stock, realised the error of our ways, if you like, and are paying back debt. We’re concerned about ethics and sustainability. So it is almost like consumer attitudes and values have turned on a sixpence over Christmas and I think we are still turning.

It is reflected in, and again an example of the manolo blahnik shoes, they are female shoes that now are worth about $800, $900 they are much favoured and celebrated by the girls in Sex and the City apparently. And whereas that was seen as a symbol of success and excess in the boom, something to aspire to, to own a pair. Whereas today the same principle would seem a little frivolous in the face of people who think their jobs, their livelihood and they’re out there spending $800 on a pair of shoes, even if you can afford it, it is immoral, you should not do it.

And it is that sort of thinking that is taking hold of Australian consumers at the moment. And I suspect US, UK and consumers right across the developed world. This is a global movement I think.

Di:
Is it a movement? By movement you suggest its something that will actually go beyond 2009.

Bernard:
I do think so. I think that every recession, I think with figures recently published we can now officially pretty much, call it a recession.

Di:
The R word

Bernard:
The R word yes. We have all been banned from using the R word until given the signal. It’s now permissible. But a recession actually changes consumer thinking. I regard a recession as being a bit like a war. In a war you have the boundaries, the geography changes. Germany used to end there it now ends here. And in a recession consumer values, consumer thinking and priorities, and I also think that worker/ employee attitudes change profoundly as well.

And so the mindset of thinking, the values, the prioritisation that went into the downturn are not the same that come out of the downturn. It is not just a matter of weathering the storm, surviving 2009, getting into 2010 and then we will all get back to the way it was; back in the boom years. The issue is, that it will never get back because we’ll change direction.

We’ll use the global financial crisis as a break point, as a circuit breaker and will shoot off in a different direction, and I think that direction is one of more measured consumption. Probably built around different drivers of wealth. In the late 1990’s, the driver of wealth was the technology, the tech boom the tech bubble. That then morphed into a property boom in Australia, the sea change shift, soon after the year 2000, 2001. That then morphed into the resources boom, which then morphs into the financial services boom. All wrapped up to give us this extraordinary period.

What I think will generate wealth and opportunity on the other side of the global financial crisis will be different thinking all together. I think it will be based around this new morality and it might be based around jobs, income, wealth, opportunity. Might crystallise around this new thinking, based around clean and new energy for example. It ticks all the boxes we needed as a matter of fact, it’s moral, it’s the right thing to do, it is lateral, it touches base with the values of generation X and generation Y, who will be running things after the baby boomers exit, after the global financial crisis. And it is the right thing to do.

Have a look at what Obama is saying about creating, the subject of creating 3 million new jobs, not in new energy but in more efficient energy. So it is not necessarily inventing a new way to power a motor vehicle. It is about making coal more efficient or petrol more efficient. I think that is where there is scope for extraordinary opportunity, wealth, business creation in the new decade.

Then of course the first thing everyone needs to do is survive the global financial crisis. But beyond that, looking at the next decade as a decade and thinking well where are likely sources of wealth and business opportunity. I think that it is going to be a major driver.