Cost of Living Crisis and the Impact on Consumer Behaviours

Bravada Summary

• May 2024 - Inflation down to 2%, but consumers are still worried about the cost of living and reluctant to make big purchases or take on debt (source).
• UK consumers have restricted non-essential spending over the last few years (source).
• Consumers are prioritising experiences, such as travel and entertainment (source).
• Brands should market their goods as investment pieces, which are durable and lasting through times of uncertainty.
• Brands need to tap into the second-hand market place, which is booming as consumers try to find high-end goods at a reduced price.
• Growing spending power of Gen Z and millennial consumers - luxury consumers can increasingly be reached online and through social media.

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‍Cost of Living Crisis

• The cost of living crisis refers to the impact of growing levels of inflation, which acts to drive up the cost of food, energy and essential items (source). Inflation peaked at 11.1% in November 2022 (source), the highest since October 1981 (source).
• Inflation is now back down to 2%, as of May 2024 (source). However, UK consumers are still facing struggles with the cost of living; between 22nd May and 2nd June 2024, 54% of adults reported an increase in their cost of living when compared to the previous month (source).
• 58% of those who reported a rise in the cost of living reported spending less on non-essentials (source).

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Consumer Behaviour in 2024

• Consumers are still being careful with their money and cautious about their purchases; they are less likely to make big purchases and remain reluctant to take on debt (source).
• The consumer mindset is increasingly focused on value for money and there has been a trend towards purchasing in-store, to find the best deal, and a shift away from online-only retailers (source).
• Retail spending fell by 2.4% in June 2024, when compared to the previous June (source).
• Spending on in-home experiences has increased, as consumers seek out what Barclays describe as ‘insperiences’ (source). For example, spending on takeaways (growth of 4.6%) and digital subscriptions on Netflix, Sky and other platforms similarly experienced growth (source). Spending on ‘insperiences’ increased by 5.3% in June 2024 (source).

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Recommendations

• Consumers are increasingly concerned with getting good value for money and making intelligent, considered purchases.
  • Emphasise luxury items as investment pieces - can be reused again, and are stable, durable investments in uncertain economic times. Consumers are investing in high-quality and good value products that do not need to be purchased again (source).
  • Bundle deals - consumers feel like they’re getting more value for money.
• Growth in second hand markets - people looking to buy luxury goods second hand, at a cheaper price (source) on platforms like Vinted (source).
  • Tap into the second hand marketplace; provide verification for used goods or a space for customers to view and purchase second-hand goods. Registered businesses can, for example, sell with Vinted Professionals.
  • Repair service/recommendations - allow customers to reuse or maintain their goods, as investment items.
  • Zara Pre-Owned is the brand’s own resale platform. It is a great example of a brand seizing on the desire to buy and sell used goods at a cheaper price, allowing more people to access the brand and shop sustainably.
• Consumers are continuing to move towards more ethical and sustainable practices and consumption habits (source).
  • Create ethical/sustainable guarantees and certification for goods.
• Growing spending power of millennials and Gen Z in terms of luxury goods.
  • Investment and durability - younger buyers interested in investing in high-quality sustainable products, rather than unsustainable fast fashion.
  • Technology - consumers are spending more time indoors and online; bolster digital presence and outreach.

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