Fighting the urge to splurge in the cost of living crisis
SCROLL FOR MORE
As inflation rises, many consumers face a new dilemma: deciding where to cut back on spending. Making decisions is tough, as there’s a clear tension between wanting to go out and enjoy the post-pandemic world, and saving money by staying in.
Fears about the future of national economies are up for the first time since Q2 2020, when we felt the initial impact of Covid lockdowns.
Personal finance concerns are also rising, with the biggest increases in Hong Kong, Israel, Japan, Sweden, and New Zealand. Of all markets tracked in our Zeitgeist data, UK consumers are the most likely (44%) to say they’re spending less compared to two years ago.
In the US, there’s a stark reverse trend to the carefree spending we saw back in November’s Connecting the dots report. Thriftiness is back in, while optimism, rebelliousness, and daringness are all down.
But not everyone is feeling the pinch. In fact, some consumers are unlikely to experience this financial dilemma at all, and may well spend more.
of consumers think the cost of living has increased over the last 6 months
If inflation wasn’t enough to contend with, fuel and energy shortages are wreaking havoc with consumer finances.
This may explain the recent rise in eco-friendly intentions. 44% of consumers plan to walk or cycle more, and 38% plan to reuse more products. But just 10% plan on buying secondhand clothes.
It’s more likely this shift is driven by the need to conserve cash, rather than the desire to save the planet, but it’s driving more sustainable changes nonetheless.
Our Zeitgeist data shows consumers are most concerned about the cost of food, utilities, and transport. This comes as no surprise, with rising fuel and energy prices chipping away at income.
% who say they’re most price-conscious about the following
However, fewer consumers think they’ll spend less on groceries. Instead, they’re cutting back on certain treat purchases like alcohol, nights out, and vacations - so retail, travel, and hospitality businesses may feel the impact.
The price of home entertainment is of less concern. With many consumers choosing to stay in to save money, these brands are set to benefit. But it’s worth noting not everyone can afford subscription services to begin with.
The luxury commodities people consider worth their hard-earned cash may indicate a post-Covid transitional period, as those who can afford to are treating themselves and spending less time at home. While consumers say they’re spending less on vacations, it’s clear they’re not ready to give them up entirely.
This desire to get out the house and make up for lost time also aligns with the decline in purchases of home goods and furniture, suggesting the home refurbishment trend we saw during lockdown has come to a halt.
Today’s consumers are more likely to report feeling unwell. The physical and mental health prioritization seen during Covid lockdowns has encouraged more of us to be open and honest about feeling sick, or having an ‘off’ day.
Compared to the last 2 years, 70% of consumers agree mental health awareness has become more important to them, and 52% are exercising more.
This may have incentivized more consumers to splash out on smart wearables (e.g. fitness watches), as they look for ways to keep healthy habits on track post-pandemic. Those who can afford it will pay their way to a better quality of life.
While consumers are price-conscious, our Core Plus data reveals another side of the story. Whether achieved through brand marketing, or word of mouth reviews from friends and family, the perception of cost-effectiveness can be just as important for brands as price.
People want to buy from brands they believe offer longevity and value for money, meaning brand names don’t matter as much, and consumers are willing to switch to alternatives that offer greater perceived value - even if they aren't actually any cheaper.
This may explain why more people are flocking to discount stores to buy ‘basic’ household goods over premium range products. Switching to cheaper broadband deals is also on the up, with sweeteners like freebies and flexible contracts luring consumers in.
There are some exceptions to the trend. Brands like Waitrose, Levi’s, and Victoria’s Secret are still popular despite their premium price tags. While consumers are making cutbacks, it seems brand loyalty isn’t dead.
Shopping is becoming more of a functional experience. In the US, we’ve seen an increase in consumers hunting for the best deals - but actual coupon usage has declined. While consumers are buying more own-brand products for basic essentials, they aren’t straying from their usual stores. Fewer consumers say they enjoy browsing for new products, preferring to seek out the best prices or most reliable brands.
That said, impulse purchases haven’t been affected by the rising cost of living. Consumers are still choosing to treat themselves, pushing financial worries aside and shedding a little sunlight despite the gathering clouds.
Jump into the GWI platform to explore our latest Zeitgeist data for yourself.
Show me the data
Inflation is here to stay, so don’t miss your chance to understand the trends and issues set to impact consumers and businesses worldwide in our free webinar.
Back to top
