Consumers remaining frugal and resilient to cope with cost-of-living pressures
Consumers are continuing to reign in their spending amidst a challenging cost-of-living environment globally, with 94% of consumers now worried about the rise of living costs as they continue to navigate inflation.
Affordability is the leading concern for consumer respondents to the 12th edition of the EY Future Consumer Index (FCI) increasing by 10% (to 35%) since October 2022, with increases in the cost of groceries, energy, and fuel areas of significant concerns to consumers.
Technology is intrinsically part of consumer life
The EY Future Consumer Index reveals almost half (46%) of consumer respondents rely on technology to manage their daily lives.
In light of this, it said it is not surprising then that data theft and security breaches are an issue of concern for a majority of respondents, most notably ID theft (55% very concerned), data/security breaches (53% concerned) or downloading a virus (52%). Consumers are also wary about what it happens to their data, with 53% concerned that companies may sell their personal information to a third party.
Somewhat paradoxically, however, they are also willing to share personal data if it provides value for them, with two thirds (66%) willing to exchange their data for personalised recommendations for cheaper alternatives to a product, and six in ten (60%) are willing to share data for a completely customised online experience.
This growing reliance on technology and its outputs and recommendations are also shaping purchase decisions and overall consumption. Across mainstream technologies, the data reveals almost half of consumer respondents (46%) have used online grocery delivery services in the last three months, a 12% rise since June 2022.
Indeed 53% of respondents have socialised with friends and family over video platforms, a significant 14% rise since June 2022, and 62% now listen to audio streams, a huge 17% increase from June 2022. Emerging technologies also saw a sharp uptake, with more than double the number of consumer respondents globally now using virtual multi-user platforms when compared with June 2022.
Colette Devey, EY Ireland partner and consumer products and retail lead, said: “This latest edition of the EY’s Future Consumer Index reveals that cost of living and financial and health pressures are taking precedence with consumers, while more altruistic concerns for the planet or society are not being prioritised to the same degree.
“Value for money emerges as the key areas of focus for consumers from the report, something we know is a significant issue of concern here in Ireland also. Consumers across all income bands are more frugal in their spending, with almost two thirds reporting that private label products satisfy their needs just as well as branded products (65%) or can help them save money (63%). While customers continue to focus on value and are cost-conscious, we are also seeing that some groups are continuing to prioritise holidays with almost four in ten (38%) higher income consumers intending to spend more in this area over the coming months.
“The focus on affordability is also helping to drive sustainable behaviours, with large majorities of consumers indicating that they prefer to repair rather than replace items (67%), are recycling or repurposing products after use (79%,) and are switching to sustainable alternatives in the products they purchase (60%).
“We are seeing the prioritisation of affordability and health being reported by consumers irrespective of age, income profile or location, demonstrating that these are wider macro-trends as consumers globally continue to deal with the lingering impact of the pandemic, supply chain disruption and inflationary issues and ongoing geopolitical uncertainty.”
Colette continued: “Consumers have become habitual users of digital technology, becoming incrementally more reliant on it to provide them with ways to make life easier, save money, save time, work from home and reduce their environmental impact. Consumer attitudes toward technology are evolving just as rapidly as the technology itself, as people look for a fair exchange of value. Businesses must foster a relationship with their customers around technology based on trust, respect and value. Failure to do so will damage relationships in the long term.”
Consumers turn away from brands in search of affordability
With today’s economic uncertainties showing slow signs of easing, 92% of respondents are concerned with their country’s economy currently. Consumers are somewhat more positive about the longer-term outlook, however, with almost half (48%) expecting to feel more positive in three years’ time.
Consumer respondents are taking action to reduce spending in many areas of their lives, with more than a third (36%) planning to spend less on clothes, 44% expecting to buy less take-away food and nearly half (49%) planning only to spend on essential products. Affording the essentials also remains a challenge for many consumers. More than three quarters (79%) feel prices for food have increased in the past three to four months and 74% have noticed some brands have reduced their pack sizes without reflecting changes in the price, otherwise known as “shrinkflation”.
The data indicates brands are no longer the only way to communicate status for the majority of consumers as 62% of respondents globally don’t feel the need to keep up with the latest fashion trends and half would now consider private label for clothing, shoes and accessories. A large proportion (67%) now prefer to repair rather than replace their possessions, challenging the traditional consumer desire of having to always own the latest things. 55% of consumers globally say brands are no longer important and 29% of respondents say that they have switched from brands to private label.
“Consumers are remaining frugal and resilient to cope with cost-of-living pressures,” said Devey. “They are reporting the value they receive from brands diminishes due to price increases and in some cases shrinkflation. Consumers are responding by switching away from brands, reducing their list of essentials and cancelling subscriptions to maximise budgets. While many Irish households may feel that there are many factors outside their control, they should recognise that there are a number of ways in which they can take control of their spending, including exploring private label offerings, seeking to take advantage of on-the-floor and at-the-till discounts and to shop around and across channels for the best value.”
The latest edition of the EY Future Consumer Index is available at: ey.com/FutureConsumerIndex12