The Greening of the U.S. Consumer

Consumers today are reducing their carbon footprint and their spending. The trend could offset the government's stimulus plans

by Pallavi Gogoi

With 80,000 consumer and business drivers around the world, Zipcars offers commuters an eco-friendly alternative to car ownership. Scott Barbour/Getty Images

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Lisa Goodson, a 38-year-old mother of three children 5 and under, reuses printer paper by flipping every sheet over when she's done using one side. She wears a sweatshirt to keep warm during the day when she dials down the heat in her house in Greenville, S.C. These small gestures are part of Goodson's personal crusade to reduce her carbon footprint. "I think twice before buying anything for the kids, and I've even talked to my parents about holding back on gifts," says Goodson, who thinks her house is already loaded up with too much stuff and has lately been cleaning out toy boxes and donating toys to charity.

Goodson is part of a small, but growing, tide of consumers who have started shifting their spending patterns because of their concern about global warming. They want to contribute in any way they can to help reduce greenhouse gases. This kind of consumer behavior is starting to pick up steam nationwide. Consumers are choosing to drink tap water over bottled water, carrying reusable bags into supermarkets and eschewing plastic grocery bags, and buying locally produced, in-season foods, rather than purchasing fruits and vegetables that have traveled thousands of miles on carbon-emitting trucks.

"You know there's a shift, when drinking tap water is cooler than drinking Pellegrino or Evian," says Faith Popcorn, founder and chief executive of trend forecasting firm.

End of the Sub-Zero Fridge?

All this runs counter to the spending patterns of the last few years. And some economists and retail experts say the trend could exacerbate an already slowing consumer spending outlook. The days of easy credit (the U.S. Federal Reserve cut a key short-term interest ratefrom 6% to 1% in a two-year period after 2001) that freed up cash and engendered high-speed consumption are over for now (BusinessWeek.com, 1/10/08).

And so apparently is the kind of freewheeling spending that saw Americans replace kitchen stoves, refrigerators, and washers and dryers because they wanted to acquire the Viking stove which cost between $3,000 and $10,000, or a brushed-steel Sub-Zero refrigerator for $2,000, though similar appliances were available from mainstream brands like Kenmore or Maytag for a fourth of the price. Kitchen and Bath Business magazine reported the number of home renovations tripled in the last five years to over $100 billion.

Newspapers and magazines reported people were installing walk-in closets that were larger than their bedrooms. And to fill those fancy closets, middle America chose to shop at higher-end stores such as Nordstrom (JWN) and Saks (SKS) and started buying luxury items such as Coach (COH) handbags. "It was a time of laddering up, and people were buying the more expensive car or the extravagant vacation, but now they are doing the reverse of that," says Brian Bethune, retail economist at financial analytics firm Global Insight.

Pressures on Consumers Mounting

From the recent swoon of retailers as varied as J.C. Penney (JCP) and Saks, Kohl's (KSS) and Coach, all of whom reported negative or slowing sales, there is no doubt people are pulling back on all fronts. The U.S. Commerce Dept. reported on Jan. 31 that consumer spending, which accounts for two-thirds of the economy, rose by just 0.2% in December, down from a 1% gain in November. It was especially worrisome because December is generally one of the best consumer spending months, with people buying gifts during the peak holiday season.

There are many pressures on consumers—not only is there no additional free money, since the home equity loan market has dried up, but mortgage payments are on the rise, even as home prices continue to fall across the nation.