Christmas 2022 is likely to be a more sober affair in more ways than one with customers cutting back on discretionary spending, gifts and celebratory food and drink as they look to cope with the cost-of-living crisis bills over the next few months. It means that retailers and brands will need to work harder than ever for consumer attention, adapting their marketing strategies to win spend in a market where there is reduced demand.The 11th edition of the UK Future Consumer Index, which surveyed UK consumers just after the mini-Budget in October, shows that consumer confidence is at an all-time low, with their faith about the future almost halving, down from 50% in June to 26% now.
Meanwhile, the share of consumers pessimistic about economic recovery has more than doubled with 69% saying they don’t expect the economy to recover in the next 12 months, compared with 31% in June. 43% of consumers expect to be financially worse off in 12 months.
However, the resilience of higher-income consumers means that whilst capturing the spending of low- to mid-income consumers will be a challenge for retailers and brands, there remain opportunities for capturing the spend of those who earn more.
How worries about the cost-of-living are impacting spending
In June, the cost-of-living crisis was concerning customers but not necessarily impacting them. They knew energy price rises were coming, for example, but they hadn’t seen the impact on their finances at that point. Since then, they have experienced price rises as well as an often-changing political and economic environment with a mini-Budget, its reversal, and last week’s full fiscal event, meaning sentiment could have shifted even further.
The Future Consumer Index shows that 67% of consumers are now extremely concerned about the rising cost-of-living, up from 60% in June. They are implementing a raft of measures to cope, including cutting back on spending across all categories and increasingly shifting to private label alternatives.
Consumers are reducing discretionary spending the most, with cutbacks in big ticket items, consumer electronics, holidays and home improvement, as well as clothing. More than half (52%) of consumers say they will spend less on big ticket items such as furniture, up from just over a third (39%) in February. 47% say they will spend less on clothing and the same amount will spend less on consumer electronics. 42% will reduce spend on holidays and 41% home improvement products and services.
However, spend is being maintained across household products and hygiene post-pandemic, with 68% spending the same; as well as across fresh food (56% will spend the same), canned and dried goods (65%) and frozen food (62%).