By Ylan Q. Mui
February 26, 2009
Source: NBC News
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The economic downturn is forcing America's households to learn a tough lesson: how to fend for themselves.
Sales of starter sewing kits have shot up by 30 percent at Wal-Mart as families forgo the tailor. Landscaping companies have suffered a 7 percent drop in revenue over the past year. Procter & Gamble said that it has noticed more questions from customers about how to dye their hair at home to match salon coloring. The recession has had a powerful effect on the American state of mind. A Washington Post-ABC News poll released yesterday shows Americans have grown increasingly insecure about their finances since mid-September, as fears about making mortgage payments have spread and more believe the economy is in a long-term, serious decline. These feelings have helped set off a change in behavior so pronounced marketers and businesses have coined a name for it. They call it "insourcing": doing yourself what you once gladly paid others to do.
Two-thirds of those responding to the new poll said they've cut back on spending, including nearly a third who have pulled back "sharply." Americans across income groups said they are opening their wallets less often these days.
"There are many of us that have been spending money that we can't afford to spend and have taken on habits that we had no business taking on," said Paco Underhill, who studies consumer behavior and wrote the book "Why We Buy." "Those time-based trade-offs actually are some of the easiest forms of economizing that a person can do."
'Perception' Spending on pet services, for example, is expected to grow 6 percent this year after jumping as much as 40 percent earlier in the decade, according to an industry trade group. A report by SBI, a market research firm, shows the number of landscaping firms dwindled by 5,600, or 3.3 percent, last year. And an analysis of a range of services companies compiled by research firm Sageworks showed sales growth slowed to 4 percent last year, the lowest level in at least six years.
"So much of it comes down to perception," said Gordon Miller, executive director of the National Cosmetology Association, a trade group. "Do I perceive the service that I'm getting as an added pampering, or do I need it?"
Miller said his members report clients stretching the time between appointments. Professional Consultants & Resources, a beauty consulting company, estimated the salon industry continued to grow last year, but at 2.8 percent, a historic low. Susan Gustafson, president of Ratner Cos., which owns national chain Hair Cuttery, said more clients are showing up for just a trim, coloring their hair at home.
Many are adjusting their behavior even though their financial circumstances are unchanged, motivated by fear over the future of the economy.
Extended recession? Overall, 70 percent of Americans anticipate a downturn lasting well into 2010 or longer, according to the Post-ABC News poll. More than a third see it lasting two or more years. Those who see an extended recession are more likely to say they've pared back their typical buying habits. Take Chris and Mary Poleto of Haymarket, whose income is stable but who are trying to chip away at credit card bills.
Within one week, Mary changed the bulb in the headlight of her Mercedes, cutting out a $120 trip to the mechanic. The couple made a cake for their 11-year-old daughter's birthday party instead of spending $50 at the local bakery. And Chris, who works in a management job, picked up some cans of paint from the Sears in Fair Oaks to help a friend redecorate — seven hours of work but a savings of roughly $1,000.
"We really had to look at the equation to build in additional efficiencies," Chris Poleto said.
Consumers are weighing similar decisions across sectors. Paola Domenge, 34, of Potomac canceled her lawn service last year and now mulches the yard and trims the wisteria herself, saving as much as $500 a month — even before she was laid off from her marketing job about a month ago and started a bakery. Alina Zhukovskaya, 28, of Arlington dismissed her personal trainer to save $60 a week.
Camilla Bozzoli, 66, of the District decided $50 was too much to pay a tailor to dye one of her favorite, but well-worn dresses. Instead, she pulled out a bucket, gloves and a wooden spoon and did the job herself. "Fifty dollars is almost the price of a new outfit," she said. "It makes me feel good not only because of saving money, but as a philosophy of life not to waste."
'The new coffee spot' Advertising agency Peterson Milla Hooks, which produces commercials for Target, noticed the insourcing trend last summer as gas prices began to rise. Thomas Nowak, agency director, likened consumers' response to the financial crisis to the stages of grief: First there was denial and anger. PMH wanted to help Target move them toward the final stage of acceptance. "People say, 'You know what? This is the new normal, and we need to make the best of it,' " he said.
PMH created a series of ads dubbed New Day for Target that depicted an $11.88 yoga ball as "the new gym," a $29.99 espresso maker as "the new coffee spot" and $1.97 glass cleaner as "the new car wash."
Sewing products manufacturer Prym Consumer USA was surprised when sales of its basic sewing kit — a needle, thread and a few buttons costing $1.12 — began to rise six months ago at Wal-Mart stores. Typically, sales remain stable, said Laura Mooney, director of marketing for Prym. Sewing kit sales are now up 30 percent. Sales of its popular fabric adhesive Liquid Stitch, which costs $2.93, have skyrocketed more than 50 percent.
Wal-Mart said sales of herb gardens and tomato and pepper seeds are up, an indication that shoppers are trying to save money by growing their own food, spokeswoman Melissa O'Brien said. In Wal-Mart's auto department, sales of oil, filters, grease and funnels have also risen as more people opt to be their own mechanic.
Underhill, the retail consultant, predicts consumers' newfound self-sufficiency will last even after the recession is a distant memory. "Americans have always taken some pride in doing things for themselves," he said. But there may be limits.
Brenda Waller, 42, of Herndon said her consulting firm has frozen salaries, and she's worried about the future. She has called off the lawn care service for the coming summer and asked the woman who does her nails to cut them extra short — so the manicure will last longer. And no more pedicures. But she is holding on to DoodyCalls, a company that cleans up after her pets in the yard. Founder Jacob D'Aniello said his Charlottesville-based company grew by 21 percent last year.
"The only time I really felt we'd be in trouble," he said, "is if everybody woke up one morning and decided they liked picking up dog poop."
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