Going generic (7 Nov 2008)

In a post titled "Recession Trumping Brand Loyalty," Yves Smith links to this WSJ article about consumers discovering generic products while shopping:

About 40% of primary household shoppers said they started buying store-brand paper products because "they are cheaper than national brands," according to a September report by market-research company Mintel International, which interviewed 3,000 consumers. Nearly 25% of respondents reported that it is "really hard to tell the difference" between national brands and store brands of paper products. Store brands on average cost 46% less than name-brand versions, Mintel found.

That 25% figure seems a little low to me and suggests the tenacity of brand brainwashing.

But progress is being made on that front, if the several, almost comic anecdotes the article offers as evidence can be trusted:

When Summer Mills visited her local CVS drugstore recently, to save a few dollars she bought the store-brand facial scrub rather than the Olay version she normally uses.
"I thought I'd be able to tell the difference, but I couldn't -- I looked at the ingredients and they seemed almost the same," says 30-year-old Ms. Mills, a stay-at-home mother of two in Ardmore, Okla. On her next shopping trip, "I'm going to buy the store-brand moisturizer and cleanser -- it's less money."

You don't say. (Smith's acid aside on this: "Moisturizers are one of the many ripoffs foisted on the fairer sex to keep them broke and dependent on male support.")

It seems silly that people would need to discover that there's little qualitative difference between branded and unbranded goods. But perhaps what makes this discovery so salient for consumers is the reassurance it provides that their changing spending behavior won't lead inevitably to a decreased standard of living. You can kept the same sort of stuff, only cheaper, when you go generic. People generally choose to fail to recognize this discovery in flush times because it impedes the chief appeal of brands, which is to serve as a vector for the consumer to experience the lifestyle marketing for various products vicariously -- brands allows us to turn the soap we use into an expression of our inner truth, to make buying a new shirt our momentary entrée into a world of glamor, to make a richer identity for ourselves through the myriad associations brands can be made to bear.

The Economist's Free Exchange blog, in this response to the WSJ article, blames the abandonment of brands on "recessionary thinking," an inordinate crisis of confidence at the individual level that has irrationally driven up what economists call the demand for cash.

Only, it doesn't make sense that everyone else is cutting back. Yes, many people have lost their jobs. Some other have founds themselves with enormous debt burdens they're struggling to meet. But many households, maybe even most households, aren't facing seriously different circumstances than they were six months ago. And yet their behaviour is changing, and those behavioural changes will themselves generate reductions in spending, investment, and ultimately employment. Good labour will find itself idled because folks like me are nervous, and for no other reason.

From this view, the stream of bad economic news alone was sufficient to alter consumer behavior and undermine consumerism, even though the chief consumers are not actually feeling the economic pain. If you want consumerism to be thwarted, is there reason for optimism in that? Or does that show how shallow shopping habits are and how susceptible they are to capture?

Update: Rob Walker points out that "unbranded" goods are merely branded by the retailers themselves, without the aid of expensive marketing campaigns. He suspects these branded store lines have better margins then the old generics because they get a brand premium -- a better price for the name and look alone. I think those ad campaigns are what make brands feel like brands -- something you are participating in as a consumer -- and even though the store brands have gotten better at mimicking the packaging appeal of branded goods, they fall short, unless the store itself has become a powerful brand, a la Wegman's.