The new frugality is here to stay

At an event last month I was asked, along with other chief executives, whether the present change in consumer patterns is cyclical or structural. In other words, as and when the economy starts to recover, will consumers simply revert to their old, free-spending ways?

My response was a polite version of “dream on”. There has been a change in the zeitgeist that will not unwind in a hurry. Conspicuous consumption is going to be “out” for some time, replaced by caution, thrift, and a search for authenticity and sustainability.

You only have to glance through the newspapers to see this. They are full of features about camping, staycations, “nesting” and growing your own veg.

The TV schedules reflect the same themes, with more programmes about nature and holidaying at home, while the property programmes focus on improving your home as a place to live, rather than to sell.

The reasons these trends are here to stay are part economic, part social. Economically, the trajectory of any recovery is likely to be flattened by the need to repair the damage to public finances caused by the bail outs to the banks. That means higher taxes.

Added to this will be the effect of rising unemployment, which sadly may have some way to go, even though our more flexible labour markets will soften the blow. Socially, I believe the scarring caused by the scale and speed of the downturn is such that it has caused people to re-evaluate their lives and consider what’s important. The result is a thriftier, greener, more home-centred consumer.

Smart retailers are acting – in the past few weeks we have seen Waitrose report strong sales of its lower-priced Essential Waitrose grocery range and Sainsbury’s plans to sell own-brand cereals in recyclable plastic bags.

Our businesses have experienced similar trends. At B&Q, sales of basic tools are doing well as people return to DIY, vegetable seeds are up more than 40 per cent and we’re even selling more chicken coops (it’s an urban trend apparently). 

The trends in France are similar, with increasing interest in eco-tourism and more energy efficient homes. Eco-ranges at our Castorama business now account for 11 per cent of sales, with greenhouses up 14 per cent and rising sales of new eco-paint ranges.

In Kingfisher’s Eastern European markets, such as Poland and Russia, these trends might take longer to emerge but in China there is a growing interest in greener products.

However, that UK supermarkets are reporting falling sales of expensive organic ranges shows that today’s cost-conscious shopper wants to save the planet but not at a premium price.

If value is there, sustainability is alive and kicking. Energy efficiency is one example, and when B&Q cut the price of loft insulation to £1 a roll in February we sold a million rolls in just three weeks, saving a typical homeowner £200 a year in lower energy bills.

The “new frugality” is probably here to stay and retailers are going to have to adjust their products, services and prices, as well as their operational models, accordingly.

Ian Cheshire is chief executive of Kingfisher