First, the good news. Consumers say they can't live without their Internet service or their basic cell phone and cable/satellite TV service. Shopping for apparel at the local discount store appears poised for a comeback, and consumers will continue to keep up appearances with trips to the salon or the barber.

Now, for the glass half-empty perspective. Beset by today's brutal economy, shoppers say they're pretty sure they can live without luxury handbags, satellite radio, specialty apparel shopping and high-end cosmetics.

BIGresearch and STORES conducted exclusive customer research in mid-December to determine what shoppers consider to be untouchable (suggesting they cannot live without it) and what they perceive to be expendable (meaning they can live without it.) The results are both striking and sobering for retailers.

With American consumers struggling to pay bills, avoid foreclosure on their homes and hold on to their jobs, spending priorities have shifted toward more basic items and services. Shoppers appear willing to do without a lot of the stuff they regarded as "must-haves" as little as a year ago. Having a monthly facial — a treatment many women once considered essential — is a luxury they're willing to forgo. On the other hand, expect long lines at the local fast food restaurant as customers who traded up a few years back get reacquainted with quick service and drive throughs.

"Shoppers are making a conscious decision to be careful about expenditures," says Phil Rist, vice president of strategy for BIGresearch, headquartered in Worthington, Ohio. The fact that 81 percent of the more than 4,100 adults 18 and older who were surveyed considered their Internet service "untouchable" came as little surprise to Rist.

"With budgets tightening and consumers not eating out or shopping as often as they did in the past, the Internet takes on greater importance. It's not just about social connections and entertainment; it becomes the tool that provides information on how to manage expenditures. Shoppers will rely on the Internet to search for deals and to research how to do things for themselves that they may have paid someone else to do in the past – things like cutting the grass or brewing their coffee.

Looking for deals
Internet retailers could be winners in this tough climate, according to Rist. "Amazon.com reported its best holiday [season] ever, in part because people were looking for deals," he says. "They didn't want to spend money on gas or be tempted by promotions at the mall, so they sat at home, did their shopping, got some great deals and — in many instances — didn't pay sales tax."

"Cutting back, trading down, shopping in less expensive stores and putting less on credit cards is now a way of life," says Wendy Liebmann, CEO of WSL Strategic Retail. "The big worrisome shift for retailers and manufacturers is that shoppers are learning to say ‘no', as in ‘No, not today,' ‘No, I really don't need that' and ‘No, thank you, I'll do it myself.' … The longer shoppers … say no, the easier it is, and the longer it will take to return to the consumption of the early years of the millennium," she says.

What stands out in the research is the breadth of items and services considered expendable by consumers. Respondents were asked to consider whether they could or could not live without 32 different things. Twenty-three of those items were considered expendable by at least 75 percent of those surveyed. Additionally, 64 percent of the survey participants indicated that they had already cut back on many of the items listed, including gym memberships, casual dining and magazine subscriptions; another 5 percent planned to begin cutting back shortly.

The numbers are somewhat less menacing when the percentages are recalculated for the total group of respondents. For example, among those who said they had cut back, 52 percent claimed to be doing less department store shopping for apparel. If the percentage is recalculated to include all of the survey participants, 33 percent are shopping less at department stores for apparel.

Hard to swallow
It doesn't much matter how the percentages are sliced and diced when it comes to eating out. Hard as the news is to swallow, fine dining restaurants, fast-casual restaurants and casual sit-down restaurants appear to be in for difficult times in the months to come despite tweaks to pricing and menu offerings.

Nearly nine in 10 (89 percent) consider fine dining expendable in today's recessionary economy. Among those who have already cut back, 65 percent have given up this experience — for now. One demographic group that restaurant operators will continue to serve at their tables is people ages 18 to 34; that's particularly true of casual sit-down restaurants. And judging by the survey data, the big winners are likely to be fast-food restaurants: 37 percent of all adults say they consider spending at the local burger, pizza and taco shops to be untouchable.

It follows that if consumers are not eating out as much, home-cooked meals will take center stage. But don't expect shoppers to switch from higher-priced restaurant meals to organic foods. Eighty-five percent of survey participants consider organic food expendable and, among those who are already tightening the reins on the budgets, 32 percent say this is one area where they've chosen to cut back.

And it appears that spending on entertainment like movie and theater tickets — which often accompanies dining out — also is considered a top candidate for the budget chopping block. More than half (54 percent) of the respondents who are already reducing spending have cut out movie and theater tickets.

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