According to analysts, this December 16 is one of the three busiest days of the year. And against all odds, in the middle of a rollercoaster of interest rate hikes, crippling inflation and open wars, it continues the spending orgy. We ask why Jose Luis Nuenoholder of the Intent HQ Chair of Changes in Consumer Behavior at IESE and author of the book ‘Everything is terrible, but I’m fine’ (AECOC), where he draws some conclusions from the data of almost 190 million purchase transactions of a quarter of a million Spaniards.
What’s going on out there?
During the pandemic, people stopped buying and saved, and after the opening, a tsunami occurred in the first two years. People wanted to replace, first, what was used a lot in confinement – furniture, ‘electro’, making repairs -, with the problem that supply chains were clogged, which meant a postponement. Then, with inflation unleashed and the brutal fall in GDP, one could think that there would be a cut in spending, that private label consumption would increase, that history would end in recession. But the data said not at all. The categories in which the consumer said they were going to cut back the most – clothing, restaurants, travel – are the three that have grown above inflation.
The consumer said they were going to cut back on clothing, restaurants and travel, and these are the categories that have grown above inflation
Have we gone crazy?
There are two million more people working. A real miracle!
Many of them, with precarious contracts.
Our study was on household disposable income; That is, what you spend because you want to, once you have covered everything that comes to you by bill, plus food (a total average of 66%). So, you put two million into the system, many of them young, who do not earn much, but cannot become independent or undertake long-term projects, but who do not have monthly bills nor can they take out credit, and they spend on placebos.
“Young people who work don’t earn much, but they can’t become independent, and they spend”
Placebos?
Cheap clothes, travel, bars and restaurants.
Does it happen everywhere?
After the pandemic, in Japan restaurant visits have fallen by 50% and in the US, McDonald’s opened the first restaurant without a dining room, in Fort Worth (Texas), at the end of 2022. They consume hermits. But here we need to socialize. Let’s take it to the street. So what we are seeing has to do with young people, and with the liberation of many parents, who allocated part of the money to their children and now can spend it. There are also tourists and those who telework and spend long weekends in a hotel or an Airbnb.
There are economists who talk about the ‘YOLO effect’ (acronym in English for ‘you only live once’).
Economists, who sometimes inspire me, are extraordinary in having predicted ‘seven’ of the last two recessions.
He doesn’t trust them, wow.
If I trusted them, I would think that 2024 is going to be fabulous because it is going to be a deflationary year. There will be no deflation! The food and beverage sector – 16% – is not going to go down, because there is a paradigm shift: the deadlines for adapting industries to the requirements of ecological transition are running out and that means crazy investments. Who is going to pay for that?
“Economists say 2024 will be a deflationary year. There will be no deflation!”
Us?
That’s inflation. It will not be 2% in food, but rather between 3 and 5%, and if so, I am worried that, after this bonanza in consumption, a recession will come and unemployment will occur. Politicians should think about creating jobs all the damn day! Because today’s consumer is resilient, who is demonstrating the ability to get ahead despite everything.
Let’s continue with the future. Where will the shots go?
I’ll give a few marks. 1/ People will want to spend, but also hear that they are saving while they spend. 2/ The real and perceived price will be important, due to the persistence of inflation and the exhaustion of consumer resilience (in the luxury sector, which is going like a shot, it is beginning to be noticed). 3/ You have to attract the elderly, who are the ones who have money. 4/ You have to retain the consumer, look for incentives so that they do not buy from someone else. And 5/ We must look for new market avenues.
“I’m amazed by GSP1, injectables with applications in molecular biology, for example, to lose weight”
What else can be invented?
Now I am amazed by GSP1 (Gene-Specific Primer), injectables for applications in molecular biology, for example, to lose weight. Saxenda, Ozempic and other inventions can be great destroyers of the diet business, gyms, sports stores, and ‘fast foods’. The older ones, if we last, are going to be injected into all kinds of circumstances.
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Meanwhile, what does the consumer expert consume?
In services, subscriptions, clothing, restaurants, travel, technology. All my life I have thought that I exist to spend.