The consumer dilemma Save or spend?

The world of retail is moving faster than Usain Bolt on a travelator. Luckily we’ve got bags of consumer insight at the ready to help you work out what’s next for the industry.

Big questions are swirling around the consumer retail trends of 2023:

  • What are people spending more on? 
  • Which generations are cutting back most?
  • What does the future of luxury look like?
  • Do consumers really care about brand sustainability?

Navigate the uncertainty and make better strategic decisions with these top 10 consumer retail trends worth adding to your basket.

1. Hybrid shopping: 47% of consumers predict their online shopping behavior will increase in future

The surge of online retailing has somewhat leveled out since the Covid-19 pandemic, with total retail sales settling at around 25% in the UK and 13% in the US. That said, digital purchases are likely to climb in 2023. 

When it comes to in-store vs ecommerce trends, our May Zeitgeist data offers a look at where the retail sector is headed. Almost half of consumers think they’ll do more online shopping in the future, while just 12% expect this behavior to decline. 

At the same time, our global data suggests physical retail will continue to be a major contender. Over 2 in 5 Gen Z say they prefer to shop in a retail store than online, a figure that’s risen 5% since Q3 2020. It’s a firm reminder that the in-store experience still holds a lot of value for younger shoppers.

We’ve seen many brands moving to brick and mortar stores, especially within the clothing and grocery sectors – Ralph Lauren, Dollar General, Screwfix, and Aldi all plan to open new stores in 2023. This change is also reflected in the recent actions of “pure player” brands who sell products entirely online, with many of these companies moving away from digital channels and pulling the trigger on physical expansion. Take Walby Parker, a once online-only eyewear brand who are rolling out over 200 new stores in the coming years, capitalizing on the experience economy and meeting consumers face-to-face. 

While physical stores saw heavy losses through the pandemic, their value remains steadfast when used in the right way. In a shift toward what some are calling “phygital retail”, businesses are combining the best bits of a physical store and digital retail to create the ultimate hybrid shopping experience for customers. 

2. Treat purchases: 56% of consumers think their personal finances will get better in the next 6 months

While it’s true people are becoming more price-conscious, financial optimism isn’t as low as you might expect given the current cost of living crisis

In July, 70% of consumers said they were very or somewhat financially secure. And many are still treating themselves to everyday luxuries.

“Treat purchases” bought by internet users in the last six months include:

  • Clothing (37%)
  • Accessories (28%)
  • Technology (28%)
  • Beauty products (22%)

Despite all the negative news surrounding inflation and rising prices, this consumer retail trend proves people are still willing to make room for affordable luxuries. 

More on this next.

3. Product trends: Year-on-year, there’s been a 8% rise in people buying hair styling tools

There’s something in the hair. Compared to this time last year, consumers seem to be going out more often – with more people outside of China buying travel tickets (+27%) and concert tickets (+55%). 

With that in mind, it’s no wonder purchases of fragrances, shoes, and hair styling products have all risen slightly too. We’ve seen this consumer behavior in earlier recessions; in times of hardship, people turn to smaller, more affordable treats like cosmetics. Economists dub this “the lipstick effect” – or as Coty redefined it: “the fragrance effect”.

On the flip side, bigger and more expensive purchases like white goods and home furniture are in for a tougher time.

Not only are consumers spending less time at home than a year ago, they’re also buying less home exercise equipment (-13%), garden furniture (-4%), and home furniture (-10%). 

4. Luxury goods: 40% of luxury clothing buyers describe themselves as price-conscious

The difference in behavior between “aspirational” luxury buyers and the ultra-high earners keeps on growing. With challenging living costs in mind, both high and low earners are cutting back on luxury goods – but a few are actually splashing out and spending more on big ticket items.

If you ask Milton Pedraza, CEO of the New York Luxury Institute, 40% of luxury sales are driven by the top 5% of customers. In nearly all cases, these are individuals with substantial wealth whose earnings are largely undented by economic contractions. Their custom is one of the reasons luxury brands continue to report record profits, while mass retailers are trimming their outlooks for the new year.

We see examples of this in our data too, as the highest income earners are most likely to be planning major purchases. In the next 3-6 months, 32% plan to buy a domestic vacation, 24% plan to buy new jewelry, and 21% plan to buy a new handbag – all much higher than other income segments.

Lamborghini is reporting record total retail sales, while Ferrari is raising its full-year forecasts. In fact, since Q3 2020, the number of US consumers interested in buying a Ferrari or a Lamborghini has jumped a whopping 93%. It’s safe to assume post-Covid revenge spending from high rollers is responsible, and will continue regardless of inflation in 2023.

5.  Cost of living: In 11 markets, 46% of Gen X/baby boomers are worried about the price of products & services

When it comes to the cost of living crisis, baby boomers are 20% more likely to be concerned about the price of products, while Gen X are 13% more likely. Their buying behavior is shifting, as they’re on the lookout for increased value from the products they buy. In September 2022, both generations were more likely than their younger counterparts to say quality and cost are the most important factors when deciding who to buy from. 

While everyone is feeling the pinch of rising costs, consumer trends suggest older generations are rapidly seeking more value from the retail brands they buy from, and are most likely to jump ship if the price isn’t right. 

In this search for value, reliability and trust go a long way in today’s retail landscape. It’s something every brand or retailer needs to deliver.

6. Sustainable shopping: 57% of consumers would rather pay more for an eco-friendly product

On the surface, this sounds like a positive trend for the retail industry, but let’s look at the bigger picture here.

The majority of consumers would rather pay more for an eco-friendly product than less for one that isn’t – but that figure’s dropped 8% in the last two years. What’s more, the desire for brands to be eco-friendly has also declined. 

One important caveat – this is uneven across the population. Among high-income earners, the number who say brands should be eco-friendly has declined by 2% since Q3 2020, while for low-income earners that number is down 11%. 

As the cost of living crisis escalates, sustainability is becoming more of a luxury; people will only make eco-friendly choices if they can afford to. There’s a big difference between what they’d rather do, and what they’re actually doing – and consumers in the United States are a prime example.

Our Core Plus research sees a similar downward trend across four key European markets. When choosing an energy provider, the number of consumers saying environmental credentials are the most important factor has plummeted 19% since Q3 2021. 

Customers still want to be sustainable, but it’s become harder to prioritize this with everything else going on. 

7. Augmented reality: 29% of Instagram users use filters every month

Beauty and fashion industry brands led the way with AR retail technology during the pandemic, allowing customers to try on new products via a virtual experience and boosting ecommerce sales. Good examples came from Burberry and Maybelline – leaning into the high-tech social media space to promote new products online and engage consumers through a digital shopping experience. 

Now an integral part of social commerce, AR is expanding; catering to hybrid shopping experiences, and fast becoming a solutions provider for home goods industries. 

Early adopters like Ikea and Currys led with their own “Point and Place” AR tech, and 2023 should see this technology rapidly become commonplace for online retail brands. The more personalized, interactive, and frictionless you can make the virtual shopping experience, the more effective it’ll be. 

Alongside AR, businesses should look to embrace AI (artificial intelligence) for creative purposes. Our data shows Gen Z are 40% more likely to strongly approve the use of synthetic media (AI-generated media), while high earners are 27% more likely. 

It’s clear this tech is a hit with younger and wealthier audiences, so it’s worth every retailer reflecting this in their creative processes going forward. Why? Because it’s crucial to keep experimenting with social media marketing to find ways to engage today’s customers.

8. Impulse buying: A third of Gen Z/millennials would sacrifice other spending to buy a product sooner 

Younger shoppers are more likely to ditch the saving plan and jump for products on their wishlist sooner. They’re also more likely to impulse buy, likely because they’re using social media much more for product research.

If you’re worried about the effect this could have on your supply chain and returns logistics, rest assured – 65% of impulse buyers say they’re satisfied with these purchases every time or most of the time.

That doesn’t, however, rule out supply chain disruption and future challenges. Going forward, every online retailer should focus on improving this figure by giving product information plenty of TLC. Making descriptions more reliable and offering a personalized experience will go a long way with younger consumers and help balance out declining trust in online reviews. Customer loyalty is, after all, built on retail brand trust.

Impulse spending is a big opportunity for ecommerce, and retailers that can best target the needs and desires of these customers will reap the rewards.

9. Social commerce: Outside China, the number of Gen Z watching live streams on TikTok has grown 8% since Q3 2021 

The rise of live streaming goes hand-in-hand with an increase in social commerce, which continues to gain traction. There are, however, some regional differences when it comes to s-commerce; consumers in Europe and North America are less swayed into buying something if they can do it through a social network, while APAC consumers are much more likely to buy products as a result of this feature (+22%). 

Despite Instagram’s recent decision to remove in-app shopping features, retail trends show being able to browse items and check out in a few taps is driving consumer engagement with social commerce. Watch out, as this is going to become a highly contested field in the retail industry. 

Amazon looks to supercharge its app with a new social shopping feed, while TikTok quietly builds its s-commerce strength in America with Shop features and TalkShop live streaming. With retail and social technology blended into platforms, it’s almost too easy for today’s shoppers to go on a spending spree.

The takeaway here? Make customer journeys as smooth as possible, and you’re onto a winning formula.

10. Seamless shopping: The importance of quick and easy online checkout has grown 15% for US Gen Zers since Q4 2020

Free shipping continues to be the most important purchase driver for US Gen Zers shopping online (56% say this), but there’s also been a spike in interest for features aside from saving money at the checkout. 

Right now, these consumers are looking for more seamless shopping experiences online. Makes sense to us – time is money, right? Our data backs up this growth, as the importance of digital functions that make life easier has jumped for this generation. Customer experience is key.

Since the end of 2020, the following factors have grown in importance among Gen Z consumers in the US:

  • A live chat facility to speak with support (+24%)
  • Guest checkout (+22%)
  • Same-day delivery (+19%)
  • Clear product descriptions (+18%)
  • An easy to navigate website (+14%)
  • A fast app (+16%)

Gen Z are increasingly seeing the value in smooth digital processes, beyond just delivery and returns. They’re surrounded by online giants like Deliveroo, Uber, and Amazon where they can search, pick, and pay for goods in a few quick clicks. The bar’s been raised even higher for other retail brands, as consumers now expect this level of ease elsewhere. To remain competitive in 2023, retailers face the challenge of streamlining the customer journey on their platforms.

Looking forward, expect to see frictionless retailing take center stage as physical and digital journeys become more interlinked. Simplicity, speed, and flexibility will be key to enticing online shoppers.

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