The Consumer-Driven Economy at a Crossroads

Personal consumption expenditures accounted for some 70 percent of GDP prior to the Great Recession. The normal role of consumers in U.S. economic modeling was as recipient of all practical consumer goods and services production. Much of the increase in consumer spending was fueled by greater use of debt, through new forms of leverage such as low cost loans secured by home equity. During the recent recession, two forces combined for a perfect storm: the first was untested financial innovation (subprime mortgages) leveraging the second, an asset bubble (housing markets). In addition, revolving credit card borrowing peaked in mid-2008. This paper uses an innovative Retail Employment Index to help describe recent consumer behavior and presents a simple means of representing consumer retail spending within the constraints of the “new normal.”     

The changing consumer in Ireland

The decade of the 1980s was a difficult time for companies marketing goods and services in Ireland. The business environment was dominated by high unemployment and economic recession, due to a combination of internal and external factors, which dampened consumer confidence and restrained spending. Fortunately, the economy is recovering rapidly in the 1990s, with low interest rates leading to greater confidence which, in turn, is promoting both increased investment and consumer spending. The prospects for the remainder of the 1990s look favourable assuming stability in the business environment.This paper describes key features of the Irish economy, demography and society which determine the nature of the consumer market, and examines the variables that affect its performance. It also outlines the structure of the macromarketing environment and highlights important trends. It concludes with a discussion of the future outlook for the market and examines some of the implications for marketing management.     

What factors determine e-satisfaction and consumer spending in e-commerce retailing?

Evidently, the Internet has resulted in a fundamental shift in retailing practice, creating a shift in both consumer and business behavior, which has been compared to that of the Industrial Revolution. The purpose of this paper is to analyze customer satisfaction in e-commerce market. In particular, we determine the factors that affect customer e-satisfaction and the relationship between customer satisfaction and consumer spending in e-commerce retailing. We focus on how American based e-commerce firms are impacted by these developments and how marketing practices have reflected the developing e-commerce situation. The results show that customer satisfaction does have an impact on consumer spending in American based e-commerce retailers. Further, the relationship between customer satisfaction and consumer spending is positive, where higher e-satisfaction results in more spending in e-commerce. The results also show that there is a direct relationship among e-service quality, e- satisfaction and e-loyalty in terms of online spending by consumers. However, the analysis shows that e-commerce still faces challenges compared with traditional offline retailers since customers cannot feel and try the products, and may end up choosing the products that they do not want.     

Will the U.S. Auto Market Come Back?

In the Great Recession, the automotive industry has been one of the hardest hit sectors, along with the housing and financial industries. As the largest and most cyclical consumer spending sector, the automotive sector has historically been important for economic recovery after every postwar recession. Will it be the same this time? Will consumer demand for new vehicles stay depressed in a prolonged deleveraging process? In this paper, we present an analysis of the fundamental factors that determine long-term vehicle demand, together with the factors that drive its cyclical fluctuations. We believe the recovery of the auto industry is inevitable and that it will again become an important driver of the mid-term U.S. recovery. However, a quick return to the precrisis peak is unlikely, given the slow recovery of employment and housing markets and higher energy prices.     

Analysing consumers' ‘activism’ in response to rising prices

The purpose of this paper was to compose the profile of active consumers in Greece during a period of rising prices taking into account shifts in their consumption. A survey was conducted from 1 September 2008 to 21 November 2008 to collect the primary data source for the study. Questionnaires were administered to 200 consumers. To our knowledge this was the first attempt to offer insight into the characteristics of the Greek consumer in a period of economic crisis. For this purpose, econometric analysis was employed. Empirical results suggested that high‐income groups spend more for food commodities and are less likely to be active consumers. It was concluded that consumers have reduced spending for some basic and semi‐luxury products like fruits, meat, alcohol, sweets and coffee, and entertainment activities. The main factor which affected the reaction to price increases, as expected, was the monthly private income. Twenty per cent of the consumers are members of a national consumer movement organization, and support their actions against rising prices. Women, who research the market before purchasing a product, are more likely than men to participate in economic boycotts. By examining the profile of non‐active consumers and the reasons for their behaviour, we are able to propose a policy for the activation of the Greek consumer movement, which is necessary for the consumers' resistance to rising prices. Taking into consideration that Greek consumers face increased prices for food commodities and services, a policy framework to activate consumers is among the main prerequisites for maintaining consumers' well being. We suggest that the Greek Consumer Protection Institutes should regain consumers' confidence and focus on the dissemination of information about organized economic boycotts.     

A Behavioral Life-Cycle Approach to Understanding the Wealth Effect

The somewhat surprising strength in consumer spending in recent years has focused renewed attention on the much-debated wealth effect, the notion that when individuals feel wealthier, they consume more. This study utilizes survey data to examine the wealth effect within the context of the behavioral life-cycle model of savings. The results indicate that the likelihood of households spending more when their assets increase in value decreases with the portion of assets held in home equity. This unexpected finding is due to homeowners responding to the perceived wealth gain from increased home values by cashing out their equity. The likelihood increases with the portion of assets held in stock outside of retirement accounts, but is not significantly related to the portion of assets held in stock overall. Moreover, households that have a full-time income earner, are homeowners, have more education, have a younger household head, or expect economic growth, are more likely to report a wealth effect. Households that utilize savings “rules of thumb” are less likely to report a wealth effect. These results can be used to improve the wealth effect specification in consumer demand models and assist firms to target consumer markets.     

It's All About Wealth

The saving rate and amount of consumer savings has taken on heightened importance in both the cyclical and secular settings. Does the current low consumer saving rate imply that spending must grow less than income in coming months, therefore slowing economic growth? Does the large and soon-to-reach-retirementage Post WW II baby boom population have enough savings to continue to support consumption and economic growth over the next decade? To answer these questions, we first look at how well the standard NIPA saving rate measures savings, and we find it inadequate. We then turn to the more difficult task of determining the amount and adequacy of consumer savings for the large, soon–to–retire baby boom population.     

试论我国房价发展趋势

自1987年住房改革以来,房地产市场经过近20年的风雨历程,已具规模。但日趋上涨的房价让广大的购房者望房兴叹,何时才能居者有其屋“大庇天下寒士俱欢颜”成为21世纪、特别是“十.一五”规划实施中百姓关注之焦点、议论之话题。从影响房价居高不下的主因素来分析,我国房价仍有走高之趋势。     

From wheel of fortune to wheel of misfortune: Financial crises,cycles, and consumer predation

Predator–prey dynamics are widely used in ecology but seldom utilized in economics and marketing, despite their ability to express financial market agents' behaviors when considered in combination with economic cycles and financial crises. This multidisciplinary article presents a stylized framework of a market cycle that combines the notions of supply and demand and predator–prey interactions between buyers and sellers of housing mortgages. We illustrate our framework using data from the Global Financial Crisis and a Lotka-Volterra predator–prey model. We find that with our framework we can capture the dynamics of the market, particularly the peak and decline in the number of sellers and sold subprime mortgages. Our framework sheds a new light on consumer behaviors, pinpointing how they can put themselves into vulnerable prey positions. This article is one of the first of its kind to propose market phases and predator–prey dynamics nested in economic cycles and consumer buying trends.     

Factors Determining Consumer Interest in Catalogs

ABSTRACT

This paper attempts to explain how consumer interest in catalogs is determined. A number of factors are identified that influence consumer interest in catalogs. These factors include a set of economic and social factors, and consumer perceived risk, demographics, and prior experience. The influence of these factors on consumer interest in catalogs is tested using data from Saudi Arabia, an emerging market. Results indicate that the economic and social factors influence consumer interest in catalogs. Also, consumer perceived risk, education, income and prior experience are related to consumer interest in catalogs, while gender and marital status are not.     

Regionale Verteilungseffekte geldpolitischer Maßnahmen auf dem Immobilienmarkt

For some years now, the ECB is responding to the current deflationary phase and slow economic growth in the Euro zone with a low interest policy and bond purchasing programs. This has led to a surge in real asset prices, such as real estate. Inflation in residential property prices however varies regionally as a result of differences in supply elasticities. Thus, highest growth in prices could be observed in metropolitan areas. This article shows that such developments may lead to an increasing housing wealth inequality due to existing housing wealth distributions, local differences in homeownership, and barriers to entry to the property market. Additionally, these effects might be strengthened by indirect effects, such as filtering, rent-seeking, gentrification, and segregation.     

What to do if a dollar is not a dollar? The impact of inflation risk on production and risk management

An entrepreneur faces two types of risk: one from income generation, one from income spending. His income from firm profits is risky due to output price fluctuations and other risks. As a consumer, he is also exposed to inflation risk since he maximizes expected utility of real income. This article focuses on optimal production and risk management decisions of a risk‐averse entrepreneur jointly facing tradable output price risk and untradable inflation risk. Inflation risk applies multiplicatively to the entrepreneur's entire nominal income. Relative risk aversion and the risks' joint distribution determine the effect of introducing a futures market on production. For dependent risks, this effect may be negative if relative risk aversion is above one. Relative risk aversion and the joint distribution also determine optimal risk management with futures contracts where speculation on a real risk premium and cross hedging may be conflicting objectives. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:371–386, 2002     

The Internet as a Shopping/Purchasing Tool: An Empirical Investigation

ABSTRACT

Despite prolific growth in the number of Internet web sites, significant increases in the advertising and other promotional expenditures for Internet advertising, and the fact that millions of consumers are shopping for and spending billions of dollars purchasing products via the Internet, marketers have a limited understanding of Internet-related consumer behaviors. This study presents the results of an empirical study designed to investigate the degree to which one segment of that market–college/university students–has access to the Internet, shops for and purchases products via the Internet, and perceives the Internet as an alternative to more traditional shopping methods. More general uses of the Internet by this market segment are also explored, as are the impacts of consumer knowledge and experience with the Internet on on-line shopping and purchasing.     

Predicting Future Buyer Behavior with Consumers' Confidence and Sentiment Indexes

Knowledge of consumer attitudes and expectations is an indispensable marketing tool and may be useful for predicting changes in consumer spending and saving patterns. However, most empirical research on the value of consumer confidence (sentiment) indexes for forecasting future buyer behavior has focused on the statistical correlation between these indexes and several measures of consumer spending and business activity. As Huth et al. (1994) correctly pointed out, a more appropriate approach is to focus on the direction of Granger-causality between these variables. Prior to testing for Granger-causality, we investigate the stationarity properties of alternative measures of these variables and we employ a flexible lag structure. Our empirical results support the use of these indexes to forecast business activity but not consumer purchases or overall economic activity.     

Macro-economic determinants of consumer price knowledge: A meta-analysis of four decades of research

For the past four decades, dozens of researchers have studied consumer price knowledge, often with disagreements on the extent of consumer' ignorance about prices. While some of these disagreements have been attributed to research design variations among studies, no inquiry has yet been made on the role of the economic environment on consumer price knowledge. Nevertheless, environmental factors such as interest rates, unemployment, and economic growth may significantly influence consumers' knowledge of prices. Certain economic environments may therefore provide marketers with the ability to utilize pricing tactics which rely on limitations in consumers' knowledge of product prices. Using a meta-analytic framework, this paper synthesizes the results of 297 previous price knowledge studies to document the effects of inflation, unemployment, GDP growth, interest rates, country of study, and passage of time on consumer price knowledge. The meta-analysis results demonstrate that economic factors have considerable influence on explaining variations in consumer price knowledge. Managerial and public policy implications of the findings in light of turbulent economic environments are discussed.     

公私医疗卫生支出与经济增长关系的实证分析

众所周知,医疗卫生支出不仅关系到一个国家社会福利政策的规划,还对经济增长具有不可忽略的促进作用。然而,现有文献对于医疗卫生支出与经济增长关系之间的研究结论却是众说纷纭。鉴于此,本文根据医疗卫生支出的支付主体,将其分为政府医疗卫生支出和居民医疗卫生支出,并通过建立双向固定效应模型对公私医疗卫生支出对经济增长的影响进行分析。结果显示：从全国平均水平来看,政府医疗卫生支出每增长100％,带动经济增长12．08％,居民医疗卫生支出每增长100％,带动经济增长15．85％;但与此同时,考虑到不同地区的经济发展非均衡化时,政府医疗卫生支出和居民医疗卫生支出带动经济增长的效应差异甚大,其中政府医疗卫生支出对经济增长呈现“倒U型”效应,而居民医疗卫生支出对经济增长呈现“阶梯型”效应。     

Trompe l'œil: architects,consumers, and the need to rediscover technical function for ecologically sustainable housing

One challenge facing the need for ecologically sustainable housing is that it must cope with change over time. However, the flexibility required for housing to cope with change needs to be limited, as frequent change may offset the economy of resource use provided by durable housing stock. We describe two distinctly different but crucial aspects of housing services – social and technical functions – and briefly discuss how consumers and architects, who influence what consumers value in housing, have shifted design practices away from technical function and towards enhancement and growth of social function. Specifically, psychological obsolescence, which began in consumer products, is now emerging in housing, potentially accelerating demand for change as a result of fashion trends (an approach to the social function of identity expression) in housing. Four potential approaches to inspire consumer recognition of technical function in pursuit of ecologically sustainable housing are briefly discussed. These include promoting a ‘green’ fashion trend and three approaches that aim to restore the balance between social and technical function within housing design: regulatory tools, internalization of unaccounted costs, and incentives to move consumers from assumed to explicit recognition of technical function. Because they address the core problem of missing technical function, not just the increased demand for social functions, only these latter three approaches, possibly in combination, appear likely to contribute to a paradigm of ecologically sustainable housing.     

Analysis of free gift card program effectiveness

Retailers use various promotions, such as gift cards, to increase profits. When retailers give gift cards “free” to consumers who spend above specified thresholds in a single purchase, some consumers may buy more goods. We develop a model to derive the optimal purchase amount thresholds and gift card values. The model is developed for consumers without and then with a spending constraint. We find that the retailer's profit margin, the degree of forward buying and stockpiling, and use of gift cards in future purchases that would have been made with cash, are the most important factors in determining the profitability of gift cards. Gift cards may be very profitable for high-margin retailers who can limit the degree of forward buying and stockpiling, particularly when consumers use gift cards to buy goods they would not have bought from the retailer without gift cards. If this is how consumers use the gift cards, then consumers spending above the cards’ value at redemption can significantly increase their profitability. Without a consumer spending constraint, it is best for the retailer to offer at most one gift card at a large purchase amount. With a consumer spending constraint, it may be profitable to give gift cards at multiple purchase amount thresholds. We also show that the commonly observed policy of giving gift cards at equally spaced purchase amounts may be profitable when forward buying and stockpiling can be controlled. Moreover, we show that gift cards become more profitable when consumers are inconsistent, that is, they overestimate their probability of redeeming the gift card at purchase time. Finally, gift cards may have only a slight profit advantage over discounts if consumers are consistent. Consumer inconsistency and spending above the cards’ value increase this advantage.     

Materialism,Status Consumption,and Market Involved Consumers

Materialism has by all accounts an important impact on many aspects of consumer behavior. The psychological mechanisms through which materialism influences behavior, however, are not well studied. This paper describes a study of the influence of materialism on shopping intensity and amount of spending that takes into account the mediating influences of three important consumer characteristics: status consumption, brand engagement in self‐concept, and market mavenism. The researchers fit a model of these relationships based on the Meta‐theoretic Model of Motivation (3M) model to data from a sample of 351 adult U.S. consumers. The model fit the data well, and the results showed that indeed, status consumption, brand engagement, and market mavenism mediate at least partially the influence of materialism on shopping and spending.     

Quo vadis Wohnungspolitik?

The massive increase of property prices in some regions of Germany is a direct consequence of the ongoing financial and debt crisis. Low interest rates and high inflation expectations increase the demand for real estate. In addition to a potential price bubble risk, social problems arouse more and more public interest. Currently, many tenants are facing significant rent increases. Thus, the shortage of housing dominates the current housing policy discussions. The so-called “package for affordable building and living” includes stricter rent controls and other economic policy interventions which aim to ease the situation in the real estate market, but the interventions have the opposite effect.