8 minute read 7 Apr 2022

Consumers are regaining control of their futures with evolving behaviours around the environment, affordability and managing uncertainty.

EY Person trying on hat

Why affordability and sustainability are key as consumers plan futures

Authors
Silvia Rindone

EY-Parthenon UK&I Retail Lead, Ernst & Young LLP

Strategic mind with a pragmatic spin. Intellectually curious. Mother of two. Passion for art, food and travel.

Ray MacSweeney

EY-Parthenon Associate Partner, Consumer, Ernst & Young LLP

Strategist with 20 years of experience, focused on the consumer products and retail sector. Passionate about sustainability and providing pragmatic strategies that help deliver results.

8 minute read 7 Apr 2022

Consumers are regaining control of their futures with evolving behaviours around the environment, affordability and managing uncertainty.

In brief    
  • Sustainability and concern for the environment are becoming embedded behaviours as consumers look forward.
  • Affordability and availability are key, with retailers and brands losing sales if they fail to meet these pressing needs. 
  • Fear of COVID-19 remains, but consumers are trying to regain control of their lives and plan their futures.

In the last Future Consumer Index (FCI) in October 2021, we saw that a new, more considered consumer was emerging. In this edition, which captures consumer thinking in the weeks before the war in Ukraine began, we see that this considered consumer is evolving into one determined to regain control of life after the constraints of the pandemic, and who is determined to live better both now and in the future.

Part of this is the influence of new threats to consumer confidence. The heightened worries at the peak of the pandemic may have waned, but the consumer has now emerged into a new area of perma-crisis instead. They are facing increasing inflation that will impact spending as it leads to higher costs of living, as well as geopolitical uncertainty and further supply disruption, which is also causing availability challenges and fuelling price rises.

How they react to these changes and the spending behaviour that results is something that brands and retailers will need to keep a close eye on.

Planet first is still front of mind despite the issues of affordability

Our last FCI was around the time of COP26. It’s therefore natural that sustainability and the issue of the environment was top of mind for many consumers. At that time 26% of UK consumers rated themselves as planet first. This concept of a more mindful consumption has been maintained as per our latest survey and is up significantly from 18% May 2021.

This is despite inflationary pressures and geopolitical instability driving affordability concerns and yet an affordability first mindset has fallen, coming in at 25% compared to 33% May 2021. This shift of concern for environment over affordability signifies the start of a fundamental long-term shift in values for consumers.

EY Future Consumer Index

49%

of consumers are more likely to repair than replace.

EY Future Consumer Index

53%

of consumers have become more used to cooking at home.

It’s reflected in behaviours too. Compared to before the pandemic, we are seeing more consumers cooking at home (53%), a reduction in the pressure they previously felt to keep up with trends such as fashion (46%) and a growing preference to repair rather than simply replace items (49%). Their shift in attitude is also reflected by the increasing growth of second life platforms.

Consumerism is changing as shoppers begin to reconsider their lives and their spending on physical items, instead a trend of owning less but doing more is emerging with 18% interested in spending more on experiences, 15% on digital alternatives and 6% looking to rent rather than own.

Taking control to plan futures

These planet first considerations could be the result of consumers being more forward-thinking than they were during the pandemic. More than half (56%) are now reappraising how they spend time on things they value the most and 42% are living more in the moment.

But, frustrated by variant outbreaks hampering plans, such as Christmas and international travel during much of the pandemic, they are also retaking control of their lives and looking to the future, with 60% reassessing the future and what’s important to them. For many that means moving forward with life changes that they may have either put on hold because of the pandemic, such as buying a house or getting married, or which have been instigated by the pandemic and their desire to be in the best physical, mental and financial health for the future. 

Preparing for future impacts – affordability and availability

The pandemic has taught consumers to be better prepared for the future. They realise they will face pressures but are putting strategies in place to deal with them. The fear of COVID-19 has lessened, but hasn’t disappeared, and amongst concerns around the current geopolitical situation come issues of affordability and availability as consumers witness increases in prices, costs and stockouts.

The issue of affordability is key, with 42% of UK consumers saying that the rising cost of goods and services is making it hard to afford things. More than half (57%) are trying to save more money than in the past.

At the start of the pandemic, affordability was a key worry as many consumers lost jobs or faced financial uncertainty. But the results of this index show that price is now a more important concern for more than half (57%) of consumers, up from 49% May 2021 as UK consumers face price rises across all categories, with gas and fuel (85%) and fresh food (75%) dominating.

Consumers are also now more aware of product availability, with a rise from 52% to 53% of consumers saying it is more important now than before the pandemic and listing it as a key purchase criteria for fresh food (39%) and packaged food (37%).

EY Future Consumer Index

50%

of consumers realise they have more clothes than required.

Changes in behaviour as a result

Consumers are reacting to these new pressures by reducing spending, with at least one in five customers doing so in all categories. The most severe cutbacks are taking place in discretionary categories such as clothing, where 57% of consumers are reducing how much they spend.

Such behaviour differs by age, with younger consumers cutting back more severely than older consumers, possibly because they have fewer obligations, such as family or mortgages, that older consumers may have.

We also see UK consumers switching to lower-cost alternatives, the latter a particular trend amongst Millennial and Gen X consumers. Despite this, we have not seen a significant increase in consumer willingness to purchase own-label alternatives.

The impact of the strain on finances, as well as the issue of availability, is fuelling stockouts, either because products aren’t available or consumers are stockpiling. More than one in four (28%) admit they are stocking up to avoid running short of groceries in the future.

When consumers encounter products that are not available, a third (34%) of the time consumers have bought an alternative brand or product. However, there is more abortive behaviour brewing too. 13% of the time consumers switch to a different store for the product, 16% of the time they delay their purchase and 15% of the time they simply don’t buy.

A lifeline comes from the consumer’s willingness to share data

Such challenges make engaging with the customer and convincing them to buy tougher than ever. But UK consumers want an easy life. For example, 1 in 4 (25%) of consumers are considering automatic subscription services, up from 20% year on year.

And they are willing to share their data to achieve that easier, healthier and cheaper shopping experience.

  • 68% will share data for cheaper product recommendations, up from 63% year on year
  • 60% will share data for automatic replenishment of their shopping cart, up from 48%
  • 60% will share data for easier or more efficient purchases, up from 56%

Tips for engaging with consumers regaining control

As consumers take back control of their lives, shopping more sustainably and with greater considerations of affordability and the world around them, retailers and brands need to be ready to meet their needs.

The emerging trend in our previous FCI continues. These are UK consumers looking to buy less but buy better quality. They want to own less but experience more. And they have more focused goals around sustainability and affordability. Almost half (48%) are buying less to save money, but 44% have realised they simply don’t need so many physical items. One in five (21%) will invest more in better quality items.

In order to deal with this changing consumer mindset and values, we suggest brands and retailers should focus on three key areas:

1. Refresh and strengthen value

Effective price architecture and tiering of ranges will be vital, with brands and retailers needing to reiterate their value messages and strengthen their value and own-label ranges in order to serve the needs of the more value-focused consumer.

2. Invest in differentiation

A customer who is less reluctant to spend will require convincing, so investing in differentiation that focuses on the continued growth in appetite for health and sustainability offers a key opportunity.

3. Accelerate new business models and user experiences

Whether it’s moving to a D2C model or introducing subscription models, consumers will appreciate any moves that make life simpler, cheaper and easier. They may be regaining control, but brands and retailers still have a role to play in helping them through the uncertainty ahead.

  • Methodology

    The ninth edition of the EY Future Consumer Index surveyed 18,000 consumers across the US, Canada, Mexico, Brazil, Argentina (new), Chile (new), UK, Germany, France, Italy, Spain, Denmark, Finland, Sweden, Norway, Australia, New Zealand, Japan, China, India, Indonesia, Thailand (new), Saudi Arabia, South Africa between 28 January and 15 February 2022.

Summary

After the pandemic put many consumers’ plans on hold, they are now determined to start living their lives again – not only in the moment, but also by planning bigger life changes. But they realise they need to do this in a new world. It’s one defined by a greater need to focus on sustainability and affordability as inflationary and environmental pressures bite. And it’s within an environment of geopolitical instability and uncertainty that is causing additional pressures and fears. Doing what they can to combat these challenges is crucial.

About this article

Authors
Silvia Rindone

EY-Parthenon UK&I Retail Lead, Ernst & Young LLP

Strategic mind with a pragmatic spin. Intellectually curious. Mother of two. Passion for art, food and travel.

Ray MacSweeney

EY-Parthenon Associate Partner, Consumer, Ernst & Young LLP

Strategist with 20 years of experience, focused on the consumer products and retail sector. Passionate about sustainability and providing pragmatic strategies that help deliver results.