Nearly half (43 percent) of UK consumers expect to spend less this Christmas, according to EY’s latest ‘Future Consumer Index,’ as the cost-of-living crisis intensifies.
The research, which surveyed more than 1,000 UK consumers between September 23 to October 14, found that falling consumer confidence due to the cost-of-living crisis will have an impact on a number of Christmas spending habits. This will mean spending on gifts will be “significantly lower,” with 43 percent of consumers planning on cutting back on gifts for friends, while 34 percent plan to reduce spending on gifts for family.
EY also added that nearly 7 in 10 consumers (67 percent) are now “extremely concerned” about the rising cost-of-living and that consumers are increasingly likely to do their bargain hunting in-store this year, although online shopping remains key with 41 percent of shoppers planning on doing most of their shopping online this year.
Silvia Rindone, EY UK&I retail lead, said in a statement: “In the face of rising inflation, rising energy prices and rising interest rates, consumers are being cautious in the run-up to Christmas. Our survey shows that consumers are concerned about saving and affordability and are making more considered choices about what they spend their money on.
“This year, consumers are likely to delay spending as late as possible to manage increased uncertainty about their finances. But with heavy discounting from major retailers starting very early, retailers are trying to tempt shoppers to bring forward their Christmas spending. Consumers are going to be focusing less on indulgence and more on usefulness, so retailers and brands will need to ensure they have the right products in stock for smaller, more close-knit events and thoughtful gifting.”
Low consumer confidence ahead of the festive season
It also notes that consumer confidence is at an all-time low, with just 26 percent of respondents saying they are confident about the future, down from 50 percent in June. Sixty-nine percent of consumers added they did not expect the economy to recover in the next twelve months, up from 31 percent in June, and 43 percent expect to be financially worse off in 12 months.
Findings also reveal there is a widening gap between cash-strapped consumers watching every penny and those who are willing and able to spend if retailers can entice them to do so. This is affecting low-income consumers, with 51 percent seeing themselves as being financially worse off this time next year, compared to only 14 percent of high-income consumers.
Rindone added: “As consumers look to cut back spending, retailers and brands will need to understand the price sensitivity of their customers and react accordingly if they want to continue to win spend in the run-up to Christmas.
“Navigating this K-shaped consumer profile will require retailers to cater to financially resilient high-income consumers, while also appealing to mid- and low-income consumers with value-focused ranges and pricing that reflect their budgets.”
Consumer shifting shopping habits due to the cost-of-living crisis
EY’s research also states that nearly seven-in-ten consumers (67 percent) are “extremely concerned” about the rising cost of living, up from 60 percent in June. Shoppers are implementing a raft of measures to cope, including cutting back on spending across all categories and increasingly shifting to private own-label alternatives, and 47 percent added that they will spend less on clothing.
In addition, it found that responsible consumerism is still a key consideration for shoppers, with more than three-quarters (79 percent) saying they don’t feel a need to keep up to date with the latest fashion trends and 68 percent saying they would prefer to repair than replace.
Rindone added: “While affordability is a major concern for consumers, they still want to do the right thing from a sustainability perspective and responsible consumption ticks the box for both priorities. This shift towards more considered shopping behaviour will have profound implications for brands and retailers, as consumers start to prioritise durability and quality over fashion.”