The rising cost of living is wreaking havoc with consumer spending. And as food, transport, and energy prices continue to rocket, consumers aren’t the only ones cutting back. Tesla recently announced mass layoffs, while buy-now-pay-later giant Klarna has cut 10% of its staff.
We see a clear consumer dilemma in our Zeitgeist data – between people wanting to go out and enjoy life post-pandemic, and needing to slam the brakes on spending to combat inflation. But interestingly, not everyone is feeling the pinch.
Here are the 8 most bizarre consumer spending trends to come out of the cost of living crisis.
1. Holidays are hot, hot, hot
How’s this for a paradox: while consumers are spending less on vacations, more people are buying them. In fact, just 36% of consumers say they’re price-conscious about travel.
Indicating a post-pandemic return to normality, those with disposable income are making up for lost time by treating themselves to a break.
2. Grocery carts are stacked high
The rising cost of food is the biggest inflation concern tracked in our data, shared by 59% of consumers. Fewer people say they’ll spend less on groceries – but it’s debatable whether that’s due to the weekly shop costing more, or people being unable or unwilling to cut back on essentials.
In the United States, consumers are staying loyal to their usual stores, but buying more own-brand products for basic essentials.
3. ‘Basic’ never looked so cool
Buying habits are changing. From ditching branded goods, to shopping at discount stores where deals are all the rage, consumers are making smart swaps to get more for their money. Or at least, to feel like they are.
Brands should bear in mind that the perception of cost-effectiveness is just as important as price. Factors helping to sway shoppers towards alternative brands include:
- Trusted recommendations from friends and family
- Product size (think jumbo-sized goods and multipacks)
- Freebies and extras
Consumers want to buy from brands offering greater perceived value. Even if technically, they aren’t any cheaper.
4. Luxury brands are still thriving
Conversely, some premium brands are still popular with consumers. Purchases of fragrances and cosmetics are up, and just 40% of consumers say they’re cost-conscious about spending on clothing.
Saving on style is big right now, with more people buying luxury goods from price-conscious labels such as TJ Maxx and Nordstrom Rack.
Other fast growing premium retailers include:
- Waitrose (UK)
- Victoria’s Secret (US)
- Sephora (US)
It’s clear there are some luxury commodities consumers aren’t willing to give up just yet.
5. Thrifty behavior is boosting sustainability
Higher prices are also having an effect on consumer lifestyle habits.
More people are making eco-friendly, money-saving changes, such as:
- Being more energy-efficient (50%)
- Walking or cycling more (44%)
- Reusing more products (38%)
Our US sustainability report shows the number of Americans cycling weekly has grown 27% in the last year, and a quarter of Gen Z consumers feel comfortable buying pre-owned items. A big win for the planet.
6. There’s no place like home (even after Covid)
Many people are making cutbacks to their social lives, spending less on alcohol and nights out. Desire for ‘cheap nights in’ may explain why the price of home entertainment is of little concern to consumers – or at least, why those who can afford it shell out on subscription services.
Consumers are spending more time indoors, but they’re less interested in doing their homes up. Home goods and furniture purchases have fallen – a stark reverse to the lockdown refurb trend we saw in Connecting the dots.
7. Health is wealth
36% of consumers are price-conscious about healthcare, and 52% are exercising more. The rise in smart wearable purchases like fitness watches suggests more people are happy to invest in their long-term health.
Our US health report reveals a growing number of consumers across all age groups now own smartwatches, as more people are self-managing their wellbeing to dodge costly medical bills.
8. Retail therapy is losing steam
Shopping is becoming a more functional experience centred around deal hunting and specific buys. Fewer US consumers enjoy browsing for new products, preferring to look for the best prices or most reliable brands.
Impulse buys, however, haven’t been impacted. Financial crisis or not, it seems people are still happy to treat themselves once in a while.
Who can blame them?