Nova workboard

a blog from young economists at Nova SBE

Changes in consumer preferences as a fertile ground for entrepreneurial ventures

These days Economists, business leaders and politicians celebrate the renaissance of the theories of Schumpeter and do not tire highlighting the importance of “Entrepreneurship” and “Innovation. But what does it actually take to be an innovative Entrepreneur? One road to success can simply be a profound understanding of the dynamics of consumer preferences.

An excellent example is Catarina Portas, the founder of “A Vida Portuguesa”, a shop concept offering nearly forgotten, traditional Portuguese brands.

During Salazar’s regime the Portuguese domestic markets were largely shielded from outside. But with the end of the regime and the upcoming economic reforms accompanied by the increasing integration of the European markets imported products were flooding the consumer goods market. After centuries of relative monotonousness in the offering the upcoming diversity was highly appreciated by consumers, resulting in a high preference for imported products. The observant reader might picture the preferences for market baskets by the average consumer defined by the share of domestic (x-axis) and imported goods (y-axis) by an indifference curve: When looking at the shape of the curve it can be observed that the consumer is willing to give up considerable amounts of domestic goods for additional imported goods. To put it simple: It seemed that a small tube of back then fancy “Colgate” toothpaste brought the same satisfaction as a XXL tube of “Couto” toothpaste.  Of course, shopkeepers and international retail chains recognized the high demand for imported goods, moreover, they were enhancing the trend and by the end of the 90ies century traditional Portuguese brands were almost entirely vanished from the ordinary retailer’s storage racks.

Though, while conducting research for a book on 20th century domestic life Catarina Portas found out about several Portuguese brands still using their traditional logos and design. Hence, she discovered a customer segment possessing of indifference curves contradicting the one’s of the mainstream market. However, retail chains didn’t provide these goods, which left the manufactures struggling to survive and the consumers struggling to purchase them. As a consequence, in 2007 Catarina Portas created a store concept exclusively responding to this segment. The first shop located in Lisbon was named “A vida portuguesa” and became a huge success, and was soon followed by more shops pursuing a similar concept of selling Portuguese brands such as “Renova” toilet paper (9,90 €) or “Claus Porto” Lavender Soap (8,90 €).

One could assume that the nostalgic trend must have declined as the upcoming crisis caused increasing budget constraints and that these rather expensive goods inherited a high income elasticity in demand. However, it did not decline. Sales kept on growing steadily as more and more people showed interested into specifically buying products from Portuguese manufacturers. In 2009 “A vida portuguesa” opened a second shop as well as an online shop. Hand in hand with the increasing arising of nostalgic shops more and more products explicitly marked by signs “made in Portugal” appeared also in supermarkets attracting not just a specific segment of Portuguese suffering “saudades” for past times but also the average customer. Following that, it is to say that consumer’s indifference curves regarding domestic vs. foreign goods have changed while managers didn’t recognize.

There is no doubt that the crisis has had some influence in the changes of preference additionally politic and industry associations [1] are making use of this to strengthen the domestic industry, however, there is surely nothing bad about this development.

Hans Kaufmann


[1] E.g. the campaign “COMPRO o que é nosso”  conducted by the Câmara de Comércio e Indústria

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Author: studentnovasbe

Master student in Nova Sbe

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