Consumer confidence hits new low

Hong Kong - The economic crisis is no longer a crisis of perception but has affected local consumers' spending patterns and habits, said Justin Garrett (pictured), director of consumer research for The Nielsen Company.

The HK consumer confidence index has plunged from 118 in 2007 to 70 in the first half of this year, which for the first time has dropped below global average. 

Compared to a year ago, seven in 10 consumers believe HK is now in a recession from 27% to 74% with over half at 56% pessimistic that the territory will be out of an economic recession in the next 12 months. 

With local companies such as HSBC continuing to layoff employees, it is no surprise that job prospects over the next 12 months is at all-time low from 75% optimistic last year compared with only 5% this year. 

Compared to this time last year, two thirds of HK people have changed their habits to save on household expenses with the top three cost cutting measures include cutting down on holidays and short breaks, spending less on new clothes and reducing out of home entertainment such as going to the cinemas and eating out at restaurants. 

The downturn has seen more people travelling on public transport at 69% for 2008 with a steady increase in patronage on MTR from 29% in Q1 to 36% in Q4 last year.

Garett said besides cutting back on travels, people are also choosing lower cost destinations such as Greater China and Thailand. Those who travelled outside HK in the past year has dropped from 74% in Q1 to 57% in Q4 for 2008. 

Saving is now the top option when people have spare money with significantly less would invest on stocks.

Not all is gloom as after covering essential living expenses, HK people still want to take holidays, spend on out-of-home entertainment and buy new clothes with their spare cash. 

"The world has changed. Companies need to understand consumers mindset and how we can overcome these concerns," Garett said.

Instead of pushing their goods and services to consumers, companies need to work with consumers.

He said having a price war to drive volume in the current environment is a zero-sum game. Now is a good opportunity to build relationship with consumers beyond price.

While promotional strategies will always remain, marketers could engage consumers to connect with brands by building loyalty and relationships. 

The fundamental pattern of people spending hasn't changed and Garett said it is about finding the right consumers to build loyalty and market share and to balance their marketing strategies to think of the long-term rather than short-term.