Tough times for both consumers and entrepreneurs2022-10-26
What are the long-term effects of the current economic situation, for both consumers and producers? And how can we guide young adults towards more sustainable consumption. Researchers at Service Research Center (CTF) at Karlstad University answer questions on this subject.
Producers want to sell their products, of course, but many will experience lower sales figures. How can businesses prepare for the challenges of the current economic situation?
– Businesses are working on developing cost-reduction programmes that don’t affect the production of products and services that are viable on the market, says Lars Witell, professor of Business Administration at CTF. The challenge is that the production costs could result in certain products and services costing more than the market is prepared to pay. The key will be to find strategies for cost reduction now, without putting the company at risk in the future. Is this an easy task? Absolutely not!
Our world is based around consumption - how can you train yourself not to trigger your consumer impulses all the time?
– By practicing and evaluating your purchases on a scale of “need” or “want”, says Erik Wästlund associate professor of Psychology at CTF. We often buy things we want but don’t actually need. Often it’s the search and the act of purchase in and of itself that is enticing, rather than actually owning the product in question.
– Avoid buying products you cannot pay for right away, and avoid shopping on credit, both long-term and short-term credits, says Charlotte Bäccman senior lecturer in Psychology at CTF. Nowadays it’s easy to shop now and pay later via invoice, and it’s convenient if you want to return some products. However, it increases the risk of losing control of how much you have to pay at the end of the month. Consumers risk ending up in debt as soon as it’s payday.
What kind of services and products will people consume less, in order to save money?
– Consumers will have to prioritise what to spend their money on, says Lars Witell. This could be a challenge for the industries that struggled during the pandemic, as consumers will have to prioritise basic needs and reduce luxury consumption. There is a risk that events and restaurants will struggle. Those who can will also postpone necessary consumption.
– There will be a transition from consumption of new products to second hand products, says Erik Wästlund. We will also see a transition to cheaper products, especially in industries where good alternatives exist.
How will the economic situation affect Swedish innovations?
– Service innovations will shift from improving customer experiences to imposed innovations, which are innovations necessary for survival, says Lars Witell. These innovations could be about making the organisation more efficient, as well as finding new services to create revenue streams. In both cases, focus is on digital services for customers. Our studies in retail shows that this type of innovations have increased and become important for the companies, first during the pandemic and now because of the war in Ukraine and the energy crisis.
Could emphasising restraint be a winning strategy and strengthen a brand in the long run?
– Brands who promote restraint can be successful on a pressured market, says Lars Witell. But it has to be a genuine advice to the consumers to exercise restraint. In recent years, terms such as green washing and woke washing have emerged, aimed at companies who adopt a green profile without actually living up to it. A brand who manages to build a profile around restraint — and actually mean it — could be a winner.
How can we support young adults in all this?
– Today’s young adults are constantly being influenced by influencers and hidden advertisements in social media, says Charlotte Bäccman. This can make it hard to withstand the impulse to buy things and to maintain a financially sustainable consumption. For adults to discuss consumer behaviours with younger people could be a good idea.
Can you give an example of a situation related to consumption that young people could find themselves in?
– It’s popular for influencers to post an image of a piece of clothing on social media, which then trends and sell out right away, says Charlotte Bäccman. Influencers purchase several products and test them and sometimes combine this with interactions where the followers decide whether the clothes should be returned or not. Usually, it’s so-called fast fashion, which is cheap clothes which is usually of low quality and also go out of style quickly. This encourages the followers to adopt a consumption behaviour based on short-term thinking.
How should you approach these kinds of situations?
– One way of reducing your consumption is to think in terms of sustainability, says Charlotte Bäccman. Clothes that last for a while (that won’t get damaged in the wash or go out of style quickly) and that can be combined with clothes you already own. Sustainability is not about colours or materials. It doesn’t have to be designer clothes. A good rule of thumb is that you should be able to combine your new clothes with at least three to five other garments you already own.
– This doesn’t mean that should stop shopping, but that you should consider your purchases and that a shirt that goes well with several other pieces of clothing is a better purchase. Consumption is not always related to what we need. So it’s important to really consider if you really need something or if it’s just something you want. To evaluate your purchases on a scale of “need” or “want”.
And lastly - what are your best advice for managing the concerns related to higher electric bills, soaring interest rates and inflation?
- Draw up a budget so you can get a good look at your finances.
- Try to save money so you have reserves.
- Take advantage of any advice you can get. You can for example speak to your bank and the energy advisor in your municipality.
- Discuss your concerns with other people. Realising you’re not alone in your worries can help.