The rising cost of living is forcing consumers to rethink their spending habits and preferences, according to a new global survey by EY.
The survey, which polled more than 21,000 consumers across 27 countries, found that affordability is the top concern for 35 percent of respondents, up from 25 percent in October 2022. Moreover, 94 percent of consumers said they are worried about the increasing living costs, and 92 percent expressed concern about their country’s economy.Embed from Getty Images
As a result, consumers are becoming more frugal and resilient, and less loyal to brands. The survey revealed that 55 percent of consumers think brands are no longer important, and half of them would consider buying private label products for clothing, shoes and accessories. Additionally, 67 percent of consumers said they would rather repair their possessions than replace them, and 62 percent said they do not feel the need to keep up with the latest fashion trends.
“Consumers are remaining frugal and resilient to cope with cost-of-living pressures, leaving them no choice but to draw on lessons learned from the global pandemic,” said Kristina Rogers, EY global consumer leader. “They are seeing the value they receive from brands diminish due to price increases and shrinkflation. Consumers are responding by switching away from brands, reducing their list of essentials and canceling subscriptions to maximize their budgets.”
Shrinkflation is a phenomenon where brands reduce the size or quantity of their products without lowering the price, effectively increasing the unit price. According to the survey, 79 percent of consumers said they feel food prices have increased over the last three to four months, and 74 percent have noticed some brands have reduced their packaging sizes without price changes.Embed from Getty Images
Some brands are trying to help consumers cope with the cost-of-living crisis by offering discounts, loyalty programs, and price freezes. For example, Tesco, the UK’s largest supermarket chain, announced in August that it would freeze the prices of hundreds of products until October. Similarly, Morrisons, another UK retailer, launched a loyalty scheme that gives customers discounts on fuel and groceries.
However, these efforts may not be enough to retain consumer trust and loyalty in the long term. The survey found that trust in retail and consumer product companies has eroded across the board, with only 38 percent of consumers saying they trust these businesses to do what is right. Furthermore, 66 percent of consumers said they are willing to share their data in exchange for cheaper alternatives, indicating a willingness to switch to other providers that offer better value.
“Consumer attitudes toward technology are evolving just as rapidly as the technology itself, as people look for a fair exchange of value,” said Rogers. “Consumers are growing more comfortable with using digital technology to make life easier, save money, save time, work from home and reduce environmental impacts.”
The survey also identified four segments of consumers based on their attitudes and behaviors: value seekers (35 percent), who prioritize affordability and convenience; planet protectors (25 percent), who care about sustainability and social responsibility; health heroes (23 percent), who focus on wellness and quality; and experience enthusiasts (17 percent), who seek novelty and personalization.
Rogers said that businesses need to understand these different consumer segments and tailor their offerings accordingly. She also advised businesses to invest in innovation and marketing to differentiate themselves from competitors and win back consumer loyalty.
“With trust in retailers and consumer products businesses eroding across the board, businesses must be prepared to accept that decisions they make now could have long-term implications on consumer loyalty,” she said. “Brands will need to double down on innovation and marketing efforts to compete.”
- Top Consumer Trends and Behaviour Changes Amid the Cost of Living Crisis | Euromonitor International | January 20, 2023
- Consumers Are Choosing Affordability Over Brand Loyalty – WWD | Women’s Wear Daily | May 18, 2023
- The brands stepping up to help with the cost-of-living crisis | Contagious | August 30, 2022