We’ve all heard people aren’t spending up at the shops like they used to. It’s a key reason venerable department stores such as David Jones and Myer are finding things so tough, and being forced to cut prices more than they’d like.
However, there are still some things that consumers are more than happy to spend their money on. And it’s not just the necessities.
In the year to May, for instance, spending on dining out grew much faster than other parts of the retail industry. While retail sales grew 3.5 per cent across the economy, restaurants and cafes enjoyed turnover growth of more than 8 per cent.
For shops selling clothing or bulky household goods such as televisions, however, it’s a different story altogether. Big department stores’ sales edged up just 0.89 per cent — well below the rate of inflation — with similar results for household goods.
All up, it seems people are hesitant about increasing their spending on many big goods but have no problems paying for a nice meal out.
What’s going on?
One theory is that the global financial crisis has triggered a long-term change in consumer behaviour. After seeing people overseas get into so much trouble with debt, we’re reluctant to put a new plasma-screen TV on the credit card.
Instead, the argument goes, we’re happier to spend on smaller indulgences such as meals out. Supporting this explanation, there’s also been strong growth in spending on entertainment, such as going to the movies, according to the Commonwealth Bank’s network of credit- and debit-card terminals.
As countries become wealthier, people also tend to spend a higher share of their income on services and relatively less on goods.
This is partly because there are only so many fridges, cars or televisions most people want to own.
There may also be a deeper reason for our growing preference for services, such as dining out or taking a holiday.
According to psychologists, spending on services tends to makes people happier than spending on goods. That’s because we tend to enjoy reflecting back on an experience later and talking about it with others.
Even the most impressive television set can’t deliver this kind of happiness.