Rise And Fall Of The Post Crisis Consumer?

By. Celestine Arnold, Director of Emerging Media

Marketers have spent the last two years talking about a national shift in consumption behavior from mindless to mindful. Books have been written and blog posts penned about changes in consumer behavior such as living a more liquid life and the rise of collaborative consumption. There is even a  Ted talk from Chief Insights officer of Y&R, John Gerzema, about the rise of the post-crisis consumer and the long term effects of the Great Recession on people’s consumption habits. There is also strong evidence to support these long term consumer shifts like the resurgence of the United States savings rate.

So, it was with some surprise that I read yesterday’s article in The New York Times titled, “Revival in Lending Leads To Surge In Car Sales.” Apparently, sales of new cars rose 11 percent, to around 11.4 million, in 2010. Hoorah for the economy! Oh wait - “More than 859,000 new cars were sold to consumers with a so-called subprime credit rating in 2010, a nearly 60 percent increase from the year before, according to CNW Marketing Research.”

Is it 2008 all over again? Has the financial industry and the public learned nothing? General Motors, a brand that has just come out of bankruptcy, is engaging in this risky lending. While the blogosphere may be a bit anxious, some industry pundits understand the brand’s rationale for engaging in subprime lending. Donna Harris from Auto News said, “General Motors Co.’s foray into subprime leasing is a smart move as long as it proceeds with caution.” De ja vu, anyone?

Also worth puzzling over is how many Americans have actually changed their consumption behavior due to the Great Recession. These are hard times so obviously, some people are now spending less, because they have less. But how many have changed their thinking on consumption at the core? Thirty percent? Ten? The Great Depression produced behavioral shifts among a mass amount of people who adopted frugality as a lifelong habit. Did the Great Recession have the same effect ? The jury is still out, but it’s something to watch.  

Regardless, there is one thing that there is no doubt about. It’s something StrawberryFrog’s Director of Cultural Development, William Allen, said to me the other day: “We are living in the time of the Great Gatsby.” Income inequality is as high as it was then. So, while the rich have seen a fast economic recovery, the gap between them and the rest of us just continues to grow.