There is no question that technology is increasingly important to consumers — and it doesn’t take research to prove that point. Still, Prosper Insights & Analytics’ annual research into what consumers consider expendable and untouchable shows just how important the internet and mobile devices are.
In fact, technology dominates the top untouchables in today’s budgets — good news for retailers who have capitalized on that type of investment.
“As more and more retailers have been upgrading their technology over the past several years, where websites are more mobile-friendly and there’s more comparison shopping options and apps, the smartphone is not just for communicating with friends. It’s a shopping tool,” says Phil Rist, Prosper’s executive vice president of strategy.
“We saw in the recent holiday season how much activity was done on the smartphone while [consumers are]out shopping, looking for things on their phone, sometimes while standing in line at another retailer.”
When push comes to shove, it’s the purchase of the luxury handbag that is — and always has been — first to go, the research shows. But as the economy improves, the resolve softens: In 2008 — the first year Prosper conducted the survey — 92 percent of those surveyed said the luxury handbag was expendable. This year, it was down slightly to 89 percent.
“The handbag is a handbag,” Rist says. “The connection to the outside world has now become a necessity.”
Clearly the mood is up
Consumer confidence is up, according to the survey, which was completed in December: Some 55 percent of respondents said they were confident or very confident the economy would be strong over the next six months.
Men were more likely than women to believe that, while the 55-plus demographic and those with higher incomes also were more inclined that way.
This was no blip; Prosper’s January survey showed the highest consumer confidence since the monthly survey began in 2001. When asked their feelings about a strong economy in the next six months, 60 percent of those surveyed said they were confident or very confident. That was just after the massive tax overhaul was passed with lofty promises of more income in people’s pockets; though it may have been buoyed by that news, it has remained above 50 percent for more than a year now. In the decade prior, only five months had consumer confidence above 50 percent, and three of those months were prior to the Great Recession.
“The momentum coming out of the holiday season is very strong,” Rist says. “The stock market is up and consumers are hearing about lower taxes.”
A tool, not a possession
As for the mobile phone’s increasingly untouchable status: “We’ve been seeing this for a while,” Rist says. “It’s not a possession like the handbag is. It actually is the Swiss Army knife of our times. You can communicate, shop, take photos, set reminders. It truly is something that shoppers are using in so many different ways, both in entertainment and managing their lives.”
He notes that just 15 years ago when the term “Cyber Monday” was coined, it was because people were shopping online at work. “That’s where the broadband connection was, and it was faster than the dial-up service at home,” Rist says. “Now, with these mobile carriers, everything is fast.”
The untouchability of internet service — ranked that way by 80 percent of respondents, consistent since the question was first asked in 2008 — is also worth noting, Rist says. It is a full 20 percentage points above the next item: mobile/cell phone service. Haircut/color — the most untouchable non-technology item — is ranked that way by 41 percent of respondents.
The internet is driving popularity — or at least untouchability — of other technologies, too. A mobile phone with text and video options has come a long way since 2008 in both quality and expendability. Then, 77 percent of those interviewed said they could live without it; now it’s down to 45 percent. Upgraded mobile devices like smartphones and iPads also have become more untouchable. In 2008, 88 percent of respondents said they were OK to cut one out — it’s now down to 56 percent.
Streaming services — not even a blip on the radar in 2008 and 2009 — are becoming increasing more untouchable. In 2010, 84 percent said they were expendable; it’s now 65 percent.
“From both the entertainment side and shopping, it’s about empowering the consumer with the choice of how they want to manage their time,” Rist says. “In this day and age, the consumers, in many cases, are spoiled by choice. They can get entertainment when they want it, on their schedule, and they can shop wherever and whenever they have time — even if that is standing in line at another store.”
When it comes to what is untouchable or expendable, age has a significant impact. Older people are more likely to find organic and gourmet foods more expendable than the two younger age groups. In fact, they are seven points higher on the expendability of organic food and 11 points higher on gourmet foods than the 18-34 bracket.
The youngest group, though, is more likely to find a haircut and color as expendable: Two-thirds of them find those services expendable, compared with 53 percent of those 55-plus.
The 18-34 year olds also are more likely to consider charitable contributions something they can cut; some 73 percent of those 18-34 call it expendable, compared with 57 percent of those 55-plus.
When it comes to vacations, the older the respondent, the less expendable. Almost seven in 10 of those 18-34 said they would cut out vacations, while 66 percent of those 35-54 and 60 percent of those 55-plus said they found it expendable.
Everything that drains a consumer’s budget is competition for retailers. And while shopping still ranks as fairly expendable, there is a small positive trend. Since 2008, specialty shopping has become slightly less expendable. Then, 91 percent said it could go. Now, it’s 87 percent. The same slight dip occurred for department store shopping — down from 81 percent to 76 percent.
Discount shopping showed the opposite. In 2008 — at the beginning of the recession — 57 percent called it expendable. Now, it’s up to 63 percent.
Where cuts are happening
When asked where consumers had cut back in the past year, it’s clear that dinner and a movie are no longer the go-to entertainment options. In fact, the top four areas where cuts have happened are all in dining: fast food, fast casual, casual and fine dining. Movie tickets come in at the fifth spot; it’s worth noting that none of the areas provided as options saw more than half of respondents say they had cut back in the past year.
Other areas of food — organics (26 percent) and gourmet (30 percent) — did not see the same level of declines as the various forms of dining out did. And that daily cup of gourmet coffee? Just over one-fourth — 27 percent — said they had cut back in the past year.
When asked if they had made any changes in their views over the past six months, all age groups — 18-34, 35-54 and 55-plus — said they had begun to focus more on what they needed rather than what they wanted. That topped all three age groups, but the youngest group was more likely to say so, with 44 percent saying they had made this change.
The second most frequent response — “I have become more practical and realistic in my purchases” — also was shared across the age groups. But the oldest category ranked “I worry more about political and national security issues” as their third biggest change. The other two demographics said they were more likely to become budget conscious.
When looking at those issues by gender, both women and men said they had begun to focus on needs rather than wants — but women were significantly more likely to say so than men. Some 47 percent of women said they were need-oriented, compared with 32 percent of men. In fact, fewer than one-third of male respondents noted any changes in spending in the last six months.
On first glance, it might seem that the expendables/untouchables list hasn’t changed much — but it says a lot about what consumers are willing to spend on and how that is shifting.
Sandy Smith grew up working in her family’s grocery store, where the only handheld was a pricemarker with labels.