The Eagles Nest

The New Consumer!

The real estate market in Canada has heated-up in the past few months, with the release of pent-up demand by first time home buyers and the attractiveness of extremely low mortgage rates. Plus, in the Province of Ontario, there is the coming introduction of the harmonized sales tax in 2010 which will add thousands to the price of new homes and people want to avoid the additional costs. During this temporary blip, financial institutions should ensure that their clients understand rate sensitivities, e.g.should the rates increase significantly when it is time to renew their mortgages. If the going in rate is 2.25% and at renewal it is 7.5%, what is the impact on monthly payments? It is senseless to pile on mortgages which do not have a rate tolerance consideration built into the origination process.
Putting this temporary aberration aside, all financial institutions are facing a different post-recession consumer. Hard lessons have been learned involving wealth, income and health losses everywhere we turn internationally and continuous erosions are still apparent with our neighbours, the United States of America. 2010 should finally demonstrate a lower rate of foreclosures and job losses and there will be signs of solid recovery in the USA. All countries, except perhaps China, are coming out of the recession with excessive new deficits and debt loads which will take decades to rationalize. Taxpayers will feel the subsequent pinch on depressed incomes. Therefore, personal, business and government financial experiences have created a new consumer moving forward. Credit will still be an important resource for essential life cycle assets and emergencies, but the consumer will shop and assess purchases more thoroughly as well as be less ready to acquire additional spontaneous debt especially with products such as credit cards which pushed many into bankruptcy. Understanding the full costs and implications of debt and related agreements is an important education value to the new consumer. Concurrently, savings for contingencies will improve and these cushions will be managed by the consumer from safety and income perspectives. People want a balanced financial position which protects them from sudden changes in their life styles and income prospects.
All retailers, especially financial institutions, will need to understand the value propositions which will now be needed to retain and attract consumers to them. Continuous research through various techniques is required to evolve with marketplaces' preferences and behaviours. You must know where you need to transform your organization to retain business and grow in the new consumer economy.

Pat Palmer | Sunday, November 15, 2009 | Comments (0) | Trackbacks (0) | Permalink