24th
August 2022
The Relationship Between Consumer Habits & Rising Costs
Introduction
The rising cost of living has left consumers feeling financially
uncertain about the next twelve months and less confident in their traditional
shopping habits. Due to the unpredictable rise of inflation, the impact of
consumer confidence has left people with little faith in the state of the
economy, inviting them to become more rational in their spending habits and
more conscious of the products they choose. Absorbing the rising costs of
living isn’t feasible which leads consumer confidence to depreciate as prices
continue to rise. A staggering 82% of global consumers in 2021 admitted to
making changes to their shopping habits alongside the steady rising costs,
compared to 70% in 2019.
Although inflation is nothing new, the pandemic has amplified the
impact on consumer confidence and spending patterns. Over one in four believe
prices have increased by at least 8% in the last 12 months- a figure higher
than the global average inflation rates.
The change in consumer attitudes
Grocery shopping is no longer considered financially habitual but
rather an unpredictable, expensive chore for most consumers. In 2021 65% of
consumers would agree shopping is an expensive chore, whereas 58% of consumers
agreed to this statement in 2019 – this means over the last two years there has
been a noticeable shift in the financial attitudes of consumers. Consequently,
the consumer begins their shopping experience more rational and money
conscious.
Consumers indicated the rising prices applies to both the cost of
core staple essentials and non-essential products, which defeats the argument
that consumers should be cutting back on products that are deemed non-essential
in order to keep financially efficient, as everything is on the rise. For
instance, data taken from a survey asking consumers which products they believe
had increased in price reported butter had increased from 59% in 2019, to 65%
in 2021. This steady rise has instilled an increased caution in consumers and
their shopping habits, essentially determining which products consumers pick up
in stores to minimize their spending and their overall shopping
experience.
Behavioral shifts in consumer shopping habits
As consumers shop around more consciously to make their money go
further, they are less likely to be brand loyal and more likely to look out for
promotional offers and other ways to get more for their money. This reduction
to loyalty during the pandemic could have been linked to the several lockdowns
and restrictions on movement of goods, meaning there was less choice available.
However, in 2022 this change is more likely attributed to the rapid rise in
living costs. Furthermore, these price increases will cause brand and retailer
loyalty to continue to drop significantly as consumers are more driven to make
efforts to search for the best possible deal. Offering value and affordability
is crucial in order to meet the needs of the current everyday consumer. 72% of
global consumers look for groceries that offer better value for money when
prices rise. It is important not to associate a “bargain” with the cheapest
price, but instead by offering consumers security in the fact they’re getting
good value for money.
Things to consider
Even
during times of reduced financial confidence, it is important to recognize
consumers’ choices will be governed by value as much as the affordability of a
product. Consumers will engage in a form of high-low consumerism; looking to
save money on certain products in order to compensate for spending more
elsewhere.
Brands
need to be more reactive and show that they are responsive to continuously
evolving need states and ensure the consumer’s best interests are at heart. People
are still attached to perks that offer moments of escapism from the pressures
of daily life but also want to be money efficient in doing so without feeling
guilty post-shopping trip.
Conclusion
The
key takeaway from this is that no one can be certain of the volatility of the
economy over the next couple of years as a consequence of the virus and the
continual rise in living costs. As a result, consumers who are aware of these
changes will feel uncertain about the next 12 months and this will have a direct
impact on their shopping habits and spending. We can expect high/low
consumerism to be more common with people justifying spending money on certain
products by saving elsewhere and an emphasis on the lookout for ways to
save.
