- Significant change for consumers and the marketplace
- Better data and more analysis needed
- Good data and analysis are prerequisites for good public policy
- Our approach to examining consumer trends
- Who is a consumer?
The key to good public policy, particularly for something as complex as consumers in the marketplace, is the presence of good research and information. Without these, it is virtually impossible to develop appropriate policies, laws and regulations. The focus of this report is the need for better research and better data on the consumer and the consumer's place in the marketplace today.
Unfortunately, the current body of information and research is frequently not up to the task at hand, and often proves to be partial or out of date. More importantly, there are some important developments affecting –consumers and the marketplace for which there is virtually no information or research. As a result, not only does the existing body of information and research need expansion and improvement, but much new work must also be done.
Why is this important? Well, perhaps the short answer is that virtually everyone is a consumer, from young children who pester their parents to buy the latest toy they have seen advertised on television, to seniors who are trying to sort out whether a new cell phone might be something useful for them and something they can afford. One thing is certain: consumers are a key driver of the market economy. As illustrated in Figure I.1, consumer purchasing accounted for more than half of all economic activity in Canada in the past two decades. The degree of confidence consumers have in their ability to spend and manage debt can have a significant effect on overall demand in the economy, and in turn, on economic growth, job creation and investment.
In addition to their very important role in supporting economic activity in Canada, consumers play a key role in making the economy function in an efficient and innovative fashion. Companies, in their search to become more efficient and to develop the new products and services demanded by knowledgeable consumers, are forced to become more innovative and competitive in the areas of product design and manufacture and in how goods and services are marketed, distributed and sold. As we will see, the key to consumers playing this role, supported by existing consumer protection laws, is their ability to understand the information and apply the skills needed to make effective choices.
There can be little doubt that consumers are key players in the economy, but it is also clear that since the major innovations in consumer policy and legislation in the 1960s and 1970s, a great deal of change has taken place in both the marketplace for consumer goods and services, and in the circumstances of consumers themselves. For instance, consider the following:
- “Connected” consumers can use the Internet to equip themselves with detailed product and price comparison information well before they make a consumer purchase, an option that was not available prior to the 1990s.
- Increasing numbers of Canadians can now shop around to choose telephone and, in some provinces, energy suppliers; historically there existed only one choice offered by highly regulated public utilities.
- The retail marketplace has been transformed with a move to larger “big box” stores and the decline of the traditional department store, and a number of key retail sectors such as supermarkets and drugstores are dominated by a few large players.
- In the last decade, technology has revolutionized the way Canadians access and pay for goods and services. Automated banking machines have enabled Canadians to have access to their money, 24 hours a day, seven days a week, with no need to deal with a person.
Consumers are clearly interacting with a different marketplace than they were 20 years ago. But it is equally important to recognize that consumers have not remained static over this time. In fact, many important socio-economic trends have emerged within the population as a whole. Consumers' ability to take full advantage of the new marketplace is related to their socio-economic status, from possessing the right skills and resources, to having sufficient time, to make important decisions. Consider the following:
- While consumers' incomes (and wealth) have grown on the whole, they have also become more polarized over the last two decades, dramatically affecting the levels of discretionary purchasing power of various income groups.
- In today's marketplace, the ability to read complex documents, contracts and instructions is a key skill, but 40 percent of the Canadian population falls below the minimum desirable threshold of literacy.1
- Canadian households are more diverse and becoming smaller: the “married couple with two children” is less prevalent, with significant growth in the proportion of lone-parent families and senior households.
- Canadians are becoming much more culturally and linguistically diverse as a result of immigration.
Despite the vast quantity of economic data available in Canada, many gaps in consumer research exist. Comprehensive and authoritative information on what has happened to consumers over the last two decades is often lacking.
There are some significant information sources on consumers and their activity in the marketplace, but these are often limited in what they can tell us. For example, the Conference Board of Canada's Index of Consumer Attitudes (also known as the consumer confidence index) provides a useful, but very general, indicator of Canadians' optimism regarding current economic conditions. However, by its very design, the index has limited potential to provide information on the underlying factors that shape consumers' behaviour in the marketplace; for example, what they are spending their money on, which of their needs are being met and how well, and which are not.
Some consumer research gaps exist as a result of insufficient “consumer-centric” data being collected from any perspective. For example, one of the most significant consumer issues of the past two decades is the growing use of services. From 1986 to 1996, real average per-household consumption of goods dropped by 13.9 percent, but spending on services rose by 7.8 percent.2 Services pose significant challenges and opportunities for consumers. On the plus side, they can provide innovative solutions to time-consuming and difficult tasks. But because services are intangible by their very nature they can change rapidly and are difficult to judge until they are consumed. Nevertheless it is widely acknowledged that comprehensive and timely data on the quantity and quality of services offered in the economy are unavailable at anything like the level of detail we have for the goods-producing sector of the economy.
In addition to the need for more and better data, we also need to know more about the consumer research work that is actually being conducted in Canada. For instance, there exists no authoritative inventory of consumer research or analytical work conducted in the public sector (federal or provincial/territorial). The fact that analytical work is carried out by small groups in a number of disparate government departments and agencies means that the normal informal networks that exchange information and intelligence on research are not very robust. The same is true in the academic, public policy think tank and business research communities. Consumer non-governmental organizations are somewhat better organized, and are more aware of what each group is undertaking in the way of research, but their level of research effort is relatively modest by international standards.
Unlike in the U.S. or the U.K., there is no Canadian academic journal devoted to consumer research issues, so there are few opportunities to exchange or showcase the results of consumer research. Further, no academic research funding programs on consumer issues exist, and there are no institutes or think tanks devoted to the subject. According to one expert in the field, there were only about a half dozen departments or units in Canadian universities in 2000 that taught consumer studies, down from about 14 in 1988.3 The consequences of this situation for the training and development of analysts or researchers who could work in the field are obvious.
With virtually every Canadian being a consumer, there are good reasons why research on the state of the consumer should be of wide popular interest. Equally important from a governmental perspective is that an area that has such broad and direct implications for the population as a whole needs to have good evidence on which to base policy. Without good data and analysis, good policy cannot be constructed, and the potential for inappropriate measures being taken increases.
This latter point applies equally to the other main players, the non-governmental consumer movement and the business community. Without good data and analysis, consumer groups are less able to advocate consumers' interests in an effective and forceful way. Businesses have a direct interest in understanding not only changing consumer needs, but also the problems consumers encounter in the marketplace, in order to effectively offer the products and services consumers need, and to avoid business models and policies that are likely to alienate or disappoint their customers.
This initial Consumer Trends Report takes a fairly straightforward economic and demographic approach to researching consumer issues. More precisely, the report looks at economic and socio-demographic data through a “consumer lens” to highlight how changes in the economy and marketplace, and in consumers themselves, have affected how individuals interact with the marketplace. Its scope of analysis is hence restricted to the principal social and economic trends. This was felt appropriate for a “first time” document whose emphasis should be on providing baseline economic and social data of relevance to consumer issues and on identifying where gaps exist in available data and research (see the Afterword for a brief review of some other analytical options for research work in this area).
The report is in two parts. The first, “Canadian Consumers in a Changing Economy, “examines broad structural and technological trends that have occurred in the economy and the marketplace over the last two decades, in an attempt to answer the question “What marketplace changes are having a particularly significant impact on consumers?”
The second part, “Understanding Today's Consumer, “presents more detailed social, demographic and economic data, in an attempt to answer the questions “How have the socio-economic circumstances of Canadian consumers changed over the past 20 years?” “How are these factors affecting what products and services consumers need from the marketplace?” and “How well are consumers able to interact with the marketplace in a way that meets their needs and protects their interests?”
For the purposes of this report, a consumer is defined as an individual acquiring, consuming or using a good or service available from a private sector source, for personal use (individual or household). However, it is recognized that the scope of this definition is limited and that various stakeholders will approach the consumer interest within the context of their own mandates.
For example, focus group testing for the Canadian Consumer Information Gateway4 revealed that Canadians see themselves as consumers:
- all the time (“We're all consumers, 24/7.”);
- anywhere (using products at home or at the office);
- when purchasing something in the private sector (from everyday products, to utilities and renovations);
- when consuming government services (popular responses included health care and education); and
- even when they are not purchasing something (when faced with advertisements, when researching a product, when having to use a product warrantee, etc.).5
Furthermore, some definitions of consumer also include small businesses, since these individuals can face many of the same challenges as “ordinary” consumers.6
As we proceed through the report, two issues will become clear. First, many of the important changes taking place are not simply a function of what happens in the marketplace or in the socio-economic circumstances of consumers, but are a result of their interaction. Second, consumers are a diverse group and it is difficult to make generalizations about them. Their wants, needs and capabilities are often dramatically different, depending on their age, gender, social circumstances, place of residence and income. As a result, a marketplace opportunity for one group of consumers may be seen as a problem by another. Getting a fuller understanding of these differences will be one of the major challenges facing consumer research over the coming years.
1 See Section 4.2 for information on the International Adult Literacy Survey, which assessed literacy tasks along five broad levels of literacy. Level 3 is considered the minimum desirable threshold of literacy skills. Back to text
3 Reported in Sue McGregor, 2000. Status of consumer education in Canada, paper presented at the Inaugural Colloquium on Consumer Protection: Globalization, Deregulation and Impoverishment of Consumers (March 2000). Back to text
4 The Canadian Consumer Information Gateway was an online central gateway to consumer information and services offered by more than 400 partners from Canada's governments and non-governmental organizations. Back to text
5 “Concept and Needs Testing for the Canadian Consumer Information Gateway,” prepared by DELTA MEDIA INC. and its Vision Research Subsidiary, for the Office of Consumer Affairs, Industry Canada, 2002. Back to text
6 In 2000, one proposal in the then Ontario Ministry of Consumer and Commercial Relations' legislative consultations was to include individual small businesses in the definition of an Ontario consumer in some situations. Ultimately, however, this proposal did not have enough support and was not enacted. Back to text