Political, economic, social, and climate uncertainty will continue to affect the world in 2023. Despite these uncertainties and disruptions, the global population continues to grow, and is set to surpass eight billion this year. There has also been a shift in the makeup of families and households, with an increase in childless couples and single-person households. Moreover, the rising costs of necessities, combined with stagnant wages, are leading consumers to change their spending habits and focus on the pursuit of value.
Euromonitor International’s report Consumers in 2023, highlights some of the most important trends from the perspectives of population, households, income and expenditure, and lifestyles for the year ahead.
Global population surpasses eight billion, with Gen Alpha becoming the biggest cohort
Despite slowing growth, the global population is expected to expand by 0.9% in 2023, surpassing the long-awaited eight billion threshold. The Asia Pacific region leads the way, with China and India contributing 35% to the total population in 2023. This acts as a catalyst for business growth, providing opportunities for expansion. However, on the flipside, this could also put pressure on the available resources, increasing the cost of doing business.
Furthermore, in 2023, Generation Alpha (population born 2010-2024) will establish itself as the biggest demographic globally, overtaking Gen Z. Despite being young and having no funds, Generation Alpha is the most influential cohort due to their digital savviness and strong values. Getting to know and connecting with Alphas early on will be an important strategy for success for businesses in the future.
Global Population by Generation 2020-2040Globally, consumers are in the process of embracing digital lifestyles, and this trend is particularly relevant to Generation Alpha. Alphas are born into the digital world: they are used to vast amounts of information being available in seconds, and they do not hesitate to search for and research goods and services. As a result, transparent and efficient communication and quick reactions are essential in tailoring offerings to this generation.
Generation Alpha additionally differentiates itself as a generation with strong orientation to values such as sustainability and diversity. Alpha is the most diverse cohort that has ever lived and, naturally, as diversity is considered as a given, consumers expect brands to embrace inclusion and fairness for all, unquestionably. Acknowledging and respecting differences is important to Alphas; therefore, companies are expected to formulate their corporate strategies accordingly.
Consumers to be more frugal in their purchases
The rising cost of living is making consumers more frugal in their spending habits. Factors such as geopolitical and economic uncertainties, new pandemic variants, rising inflation, and rising interest rates will shape consumers’ decisions in 2023. An increasing number of consumers are turning to saving, and preparing for a potentially lengthy financial squeeze.
As a result, growth in consumer spending in many key economies is set to slow, or even enter negative territory, in 2023. In the UK, for example, consumer expenditure, which accounts for around 58% of GDP, is expected to fall by 1.9% year-on-year in real terms in 2023, from the 1.5% real growth forecast for 2022. Rising interest rates in many countries, as central banks try to combat high inflation, will put further pressure on household finances, pushing up the costs of mortgages (that is, the cost of housing) and eroding discretionary spending power. High interest rates also discourage consumers from borrowing to finance purchases of big-ticket items. Moreover, the appreciation of the US dollar against many currencies will make imported goods and services considerably more expensive in many countries.
Companies need to align with new consumer values
High inflation and rising prices are forcing consumers to focus on managing their budgets and to find ways to curtail their spending. Purchasing decisions are increasingly based on finding the best value for money and seeking alternative purchase channels. As value becomes multi-layered and goes beyond value for money, consumers are increasingly searching for quality, convenience, as well as social and environmental values, among other traits. In this environment, businesses will need to align with new consumer values and adapt to changing spending patterns. Companies that can effectively address issues such as sustainability and diversity, as well as provide quality, transparency, and authenticity, will be better positioned to meet the needs of consumers in 2023.
For more analysis, please read our full report, Consumers in 2023.