Recently, Retail Economics and Grant Thornton launched their second annual Cut Back Economy report – which gives an insight into how recessionary pressures are continuing to shape UK shopper behaviour and what this means for retail, leisure, travel and hospitality businesses.
“But Heather, we’ve been talking about the cost-of-living crisis since 2021”, I hear you cry! We know households are worse off, and spending less – what more can we really say on this topic?
Granted, some of the scene-setting statistics aren’t a shock to the system. It’s no surprise that:
- The majority (88 per cent) of shoppers plan to cut back their spending to April 2024.
- Over half (55 per cent) of shoppers will cut back on discretionary purchases.
- One in three people has changed where they shop for regular purchases, trading down to cheaper brands or retailers.
However, what the report does show is the evolution of the crunch in our spending power.
Here are three out-takes from the report I believe it’s worth every brand knowing right now:
The impact of the crisis is widening.
What started out as an energy price hike affecting the least affluent has now widened to middle and higher-income households, ‘thanks’ to higher interest rates and persistent inflation. Both the ‘Comfortable Cautious’ and ‘Financially Immune’ spending cohorts have reduced over the past 12 months, and those earning £70k and above are 18 per cent more likely to have cut back intentions than last year. This is important as, while a smaller part of the population, higher earners are responsible for 40 per cent of spending.
Holidays take priority – but at what cost?
When it comes to our discretionary spending, shoppers of all ages are choosing to sacrifice non-essential shopping trips and big-ticket retail purchases instead of a holiday or trips away. The reported increase in usage of Buy Now Pay Later services also suggests shoppers are embracing different strategies to still enjoy certain luxuries. While a clear benefit to brands and shoppers, the jury is still out on whose responsibility is it to ensure people don’t over-extend themselves (and policymakers are expected to wade in on the debate soon).
Omnichannel is key to future success.
The assumption that there would be a permanent shift to online shopping post-pandemic was wrong, with cost-of-living pressures encouraging people back to stores to help better manage their expenditure. Yet while physical is currently eclipsing online at the point of sale, digital still plays a key role throughout the entire purchase journey. In fact, shoppers are dedicating an average of four hours per week to comparing prices and finding the best deals (something we saw echoed in a recent report for our client FreedomPay). Businesses must develop truly omnichannel operations if they want to capture the widest possible number of shoppers.
So, what does all this mean for the communications/ marketing departments across these businesses? For me, there are five overarching questions to can consider that will help them cut through:
What can you communicate beyond price?
Yes, price is the number one purchase consideration for all generations at this point in time. But only focusing on price/ discounts in communications is an evitable race to the bottom (it also doesn’t bode for interesting creative). So, what other elements can you speak to? From experience to convenience to quality, there will be other USPs you can elevate in your storytelling.
If you’re an online-only brand, what unexpected alliances can you create that bring you into the physical world?
Brand-to-brand collaborations amongst non-competing businesses are a brilliant way to tap into each other’s audiences and allow for reciprocal exposure at a lower cost.
For brands with a physical footprint, how can you use your store as media to entice people to join your wider ecosystem?
Utilising your in-store presence offers additional opportunities to demonstrate ROI for content and partnerships.
How can you utilise friends and family to help push people into your purchase loop?
Recommendations from those we trust are the most influential ‘channel’ in encouraging decision-making (after a brand’s website and search engines/ price comparison sites).
How can you demonstrate your sustainability claims are accurate?
Among those who have never consciously purchased a sustainable product, nearly a quarter (24 per cent) cited concerns about greenwashing. Ensuring your actions and communications are aligned will minimise your ‘Say-Do’ gap, thereby helping to build trust with your community.
Economic outlooks suggest that the UK will avoid a recession – but the pinch on our purse strings is far from over. Yet by having a deeper understanding of how the cost-of-living crisis is evolving, communicators can move beyond ‘vanilla’ messages and better demonstrate their brands’ value in a tough spending environment.
You can download the full report here.