Cost of living crisis | Fashion | Hospitality | Retail | Sustainability | Rachel Cristofoli
The last three years have been a period of great disruption. Covid, the war in Ukraine and the cost of living crisis (COLC) have left consumers in a much-changed world compared to three years ago. Covid-19 accelerated the move to online shopping, the war in Ukraine has meant prolonged issues with food and fuel supplies and, with inflation reaching a 40 year high in July 2022, households are having to make hard choices about how to keep their homes warm and food on their plates.
To understand more, Market Measures spoke to a nationally representative sample of over 1,000 shoppers to see how the COLC was impacting them. Despite the real changes to household energy bills not expected to arrive until October (the monthly outgoing with the largest impact on finances according to our respondents), 42% of people are already struggling to meet the cost of household bills and a whopping 81% say they have less disposable income right now.
So where are people cutting back? In short, everywhere. But the details are more nuanced.
Looking at fashion first presents a bleak picture. 59% of people are simply going to buy less clothing and footwear and we are already seeing this reflected in the market with Primark, ASOS and Boohoo all announcing weaker-than-expected trading figures for August. Of those who are planning to continue buying 29% are going to trade down to cheaper retailers and 26% will seek out second-hand goods in hopes of a deal.
Next up is food which is an area of focus for many people when working out how they can combat the COLC. Eating at home rather than going out (40%), ordering less takeaways (37%), meal planning (33%) and scratch cooking (25%) all feature in the top 5 methods people are planning to implement to save money. Combined with increases in fuel bills and inventory costs for pubs and restaurants, it is clear that the hospitality sector will be a casualty of the COLC. 40% of people are prepared to forego fun and social events in order to save money which, although it sounds slightly trivial, would seriously affect their quality of life – 66% of people are concerned about life having to become more limited in order to save money and 45% agree that their mental health has suffered with the pressures of the cost-of-living crisis.
This focus on food is playing out against a changing retail landscape as the discounters encroach on the Big 4 – with 91% of people believing that shopping for groceries has become more expensive it is easy to see why. 39% of people claim to be trading down for cheaper like-for-like alternatives and 38% are looking to alternative retailers for cheaper options creating a great deal of mobility within the market.
For many, however, this “trade down” behaviour is not an option. For households with incomes less than £30k they are focusing on reducing basket sizes, over-indexing on “buying less of what they used to buy” (47%) and “going without” (25%). At present 47% of people are concerned about being able to feed themselves and their families. This jumps to 69% with middle-stage families (youngest child between 6 and 11), 17% of whom say they are planning to use food banks in order to bridge the gap between what they can afford and what they need.
This presents a stark picture of the choices families are having to make, including the difficult decision of remaining committed to environmental causes or simply focusing on what is cheaper. The number of people who say the environment has dropped down their priority list has increased by 20ppt to 54%. Similarly, twice as many people are placing less emphasis on sustainable choices when shopping. It is not hard to understand why. Purpose-driven shopping will have to take a backseat when shoppers are struggling to afford even the basics. This is all against the backdrop that we are, potentially, only at the start of the real pain point for the COLC – this burden is set to become greater.
Recent history has taught us that there are winners and losers in downturns and times of turbulence – the brands that arm themselves with the right information are going to be the ones to weather the storm.