The cost-of-living crisis has significantly impacted consumer behaviour, as people struggle to maintain their standards of living and, in many cases, just to meet their basic needs.
Budgeteers and Eco Economic—two of our top 10 global consumer trends in 2023—are a direct result of the cost-of-living crisis.
Budgeteers are—you guessed it—budgeting. Saving is top of mind, and consumers want to get the most for their money. That could mean trading down or cutting back on purchases. Eco Economic focuses on how this decreased consumption or switching to sustainable, often cost-effective, alternatives (think second-hand or renting) impacts the environment.
Understanding these trends and behaviour changes can help your business adapt products, pricing and marketing strategies to stay relevant and competitive. Because recessionary habits are likely to stay as consumers prepare themselves for the next dip.
Let’s look at three behaviour changes underpinning the Budgeteers and Eco Economic trends that have emerged and are expected to continue in 2023 and beyond.
- Choosing a discounter as a first-stop shop
With stagnant income and rising prices, consumers are increasingly turning to discounters as a retailing channel. A prime example of the Budgeteers trend.
31% of global consumers planned to increase visits to discount stores in 2022
As traditional supermarkets remain stagnant in their strategies, discounters are expanding their outlets and increasing the number of products offered in the value range. This has led to more consumers choosing discounters as their primary shopping destination.
In the UK, for example, according to the chief executive of Aldi UK and Ireland, Aldi gained over 1.5 million new customers in summer 2022, making it the fourth largest supermarket in the country. Globally, discounters are expected to account for 10.6% of total sales by modern grocery retailers in 2022, an increase from 8.9% in 2016.
Share of Global Sales by Modern Grocery Retailers: 2022
Although not previously well known for providing good customer service, discounters are increasingly striving to boost customer satisfaction, which is becoming a point of differentiation and a way to retain new customers especially amid growing price competition from traditional supermarkets. For example, Aldi’s “Twice as Nice” guarantee offers a product refund and replacement if the customer is unsatisfied with the product.
- Loyalty no more
The cost-of-living crisis has caused a shift in consumer priorities, with more people prioritising value over brand loyalty. This means that consumers are more likely to choose products that offer the best value for money, even if they are private label rather than branded goods. Another illustration of the Budgeteers trend in full force.
24% of global consumers regularly seek out private label and low-cost goods in 2022, up from 18% in 2021
Source: Euromonitor's Voice of the Consumer: Lifestyles Survey (Jan-Feb, 2022)
The growing interest in private label is being seen across all categories. UK retailer Asda, for instance, had to place a purchase limit on its revamped Just Essentials private label range as demand exceeded supply.
However, value for money is only one of the several value components for today’s consumers. Quality, convenience, innovation and authenticity, among others, all comprise the value perception.
Consumers switch brands as soon as they find, or are informed of, better value elsewhere. They actively and critically engage with brands but do not hesitate to abandon brands that are neither value for money nor aligned with their values. Therefore, understanding what consumers value is key, but clearly communicating brand values is also very important in order to retain customers.
- Embracing the alternatives
Tight budgets have led consumers to search for substitutes and affordable alternatives for products and services. This includes options such as sharing, repairing, reusing or DIY, which can be both sustainable and cost-saving. Here’s the Eco Economic trend at play.
According to Euromonitor’s Voice of the Consumer: Lifestyles Survey, fielded in January-February 2022, nearly 54% of consumers bought second-hand items at least annually in 2022.
Second-Hand Buying and Sharing/Swapping Habits: 2019-2022Purchasing behaviour regarding how frequently and how much one buys is also changing. Consumers tend to shop around, choose outlets closer to home so they do not have to drive, search for bargains, buy in bulk but less frequently or buy more often but smaller consumer baskets, and use discount cards and cashback apps. Batch cooking, home cooking, budgeting, and less healthy eating options such as dollar menus and fast food restaurants are also coming into play and moderating the consumption patterns.
However, there are few alternatives for substituting rent, mortgage and utilities. Despite the marginal effect, in response to roaring inflation and the cost-of-living crisis, consumers are lowering thermostats and heating, turning off excessive lighting and substituting hot showers with cold ones.
Overall, the cost-of-living crisis has directly shaped two of the 10 biggest consumer trends in 2023—Budgeteers and Eco-Economic. Three habits—shifting towards discounters, focusing on value over loyalty and embracing alternatives—will influence purchase decisions as a result.
Understanding these changes can help businesses adapt and stay competitive in the current economic climate and beyond.
Click here for more analysis on how the cost-of-living crisis impacts companies and consumers.