The rising cost of living is wreaking havoc with consumer spending habits. People are torn between wanting to go out and enjoy life post-pandemic, and needing to slam the brakes on spending to combat inflation.
And as food, transport, and energy prices continue to rocket in what some are calling the “bad vibes” economy, consumers aren’t the only ones cutting back. Mass tech layoffs and the collapse of Silicon Valley Bank are also rocking the boat, fueling the uncertainty that people, businesses, and the Federal Reserve are all feeling right now.
But interestingly, not everyone’s behaving how you’d expect in a cost of living crisis. Here are the top 10 consumer spending trends worth knowing:
1. Most consumers have a positive economic outlook
To be clear, we’re not saying the effects of inflation aren’t being felt. They absolutely are. Since March 2022, the number of consumers saying inflation’s had a dramatic impact on their finances is up 24%, while the number saying they’re spending less is up 27%.
But despite many feeling the pinch, economic outlook among consumers remains largely positive.
55% think their personal finances will actually improve in the next six months.
Those scary media headlines aren’t shaking people up as much as you’d expect. As it turns out, consumers’ views of their country’s economy are most influenced by changes in their daily life, rather than news from the government or central banks.
2. Gen Z have their eyes on non-essential buys
Some short but sweet insights for you here. 32% of Gen Z and millennials say they’ll end up spending more on non-essentials in 2023, compared to 20% of older consumer groups.
With many young shoppers still living at home (and often rent-free), they’ve found a way to prop up their disposable income. 49% of Gen Z in Western markets say they live with their parents, rising to 72% in APAC.
That’s a huge household spending pool of opportunity, and exactly the kind of financial optimism budget-strained brands need to be tapping into right now.
3. Holidays are hot, hot, hot
The travel boom rages on. Buying vacations abroad is the fastest-growing major purchase, seeing a 36% rise in Europe and North America since Q4 2021.
It’s no wonder pent-up demand for travel is sky high. In the peak of the pandemic, half of consumers delayed buying vacations.
With Covid restrictions now a distant memory, those with disposable income are making up for lost time and treating themselves to a much-needed getaway.
While 30% of consumers say they’ve cut back on travel spending in the last 12 months, some travelers are more willing to push the boat on vacations. Our data shows those looking to spend extra on pampering while on vacation are 37% more likely to look for top-range options. Very fancy.
4. Luxury brands are still thriving
On that note, some premium brands are still popular with consumers. Purchases of fragrances and cosmetics are up, and when it comes to clothing, saving on style is big right now.
In the United States, more people are buying from “affordable luxury” retailer brands like TJ Maxx and Old Navy. And it’s a similar story across the pond.
Since Q4 2021, we’ve seen year-on-year growth in UK consumers buying high-end weekly treats from Häagen-Daaz (+33%) and Starbucks (+21%).
While budgets are tighter than usual, consumer behavior makes it clear people aren’t willing to give up their little luxuries just yet.
5. Quality matters more than cost
You wouldn’t be the first to wonder why luxury retail sales are up in a cost of living crisis. Changing consumer spending habits reveal the most influential purchase drivers, and they give us a big clue.
The most important thing brands should know? Across 12 markets, 53% of consumers say quality is the most important purchase factor, while cost is a secondary consideration at 36%. That explains last year’s record Black Friday sales in spite of price hikes.
Other rising purchase factors include brand trust, good reputation, and positive customer reviews – proof it’s not a race to the bottom to stay competitive. Focus on building consumer confidence instead.
As the de-influencing trend takes hold of consumer spending, trust and authenticity play an increasingly important role in positive brand perception. Over half of Americans most want companies to be honest.
6. Grocery price worries are waning
Looking back at last year’s Zeitgeist data, the rising cost of food was consumers’ biggest inflation concern. Now, it’s becoming less of a worry as people adjust to price hikes.
19% of consumers say they’ve reduced spending on groceries in the last 12 months, and only 16% are looking to spend less on them in the future.
It’s debatable whether this consumer trend is due to the weekly shop costing more, or people being unable or unwilling to cut back on essentials. Either way, it’s a key lesson for brands concerned about the impact of price rises.
And so is this: generally speaking, seven in ten want to be informed of a price increase at least a month in advance, so give shoppers plenty of notice and tell a clear, concise story. Older consumers most want to know when a price rise will happen, while younger consumers want to know why.
7. People won’t pull the plug on home entertainment
Some consumers are choosing to make cutbacks to their social lives to save money, with two in five saying they’d spend less on nights out or eating out moving forward.
Desire for “cheap nights in” may explain why the cost of home entertainment isn’t an issue for most.
Just 11% of consumers are planning to cancel their TV subscriptions in the near future.
Though they’re spending more time at home, fewer people are buying furniture, tech, and white goods – a stark reversal of the refurb trend we saw in lockdown.
8. Cooking is cool, but eating out is growing again
When it comes to food, consumers are becoming more frugal. But it’s good news for grocers and those in the meal kit delivery market, as 44% say they’re planning to cook at home more.
HelloFresh is going down a storm in the United States right now, with the number of Americans buying meal kits up 17% year-on-year. Clearly, convenience matters when it comes to home cooking. Just look at how mad people are going for air fryers right now.
That said, the number of consumers eating out at restaurants has grown 6% since Q4 2021. It seems people still can’t resist the odd treat meal out.
9. The secondhand market is super trendy right now
Thrifty shoppers are falling in love with pre-loved goods. The number of Americans who say they’re comfortable with buying secondhand items is up 7% year-on-year, with 26% of Gen Z and 24% of Gen X most likely to say this.
There’s even been a slight increase in those saying they often make impulse purchases of secondhand items – and 1 in 4 US Gen Z say they do.
Meanwhile in the UK, 15% say they’ve used Vinted in the last month, and a further 21% want to sell things or buy pre-loved goods.
Clothing is one of the most popular treat purchases, so it’s no wonder people are looking for affordable ways to stay stylish and sell stuff they no longer wear to make a little moolah.
10. Even savers can’t resist feel-good treats
Looking closely at consumer spending trends, there’s a clear pattern of saving behavior unfolding. We see it in the growth of secondhand buying, home cooking, and cozy nights curled up in front of the TV.
And with one in five saying their savings would only cover their expenses for a month or less, it’s no wonder people are turning to fintech budgeting tools like Revolut’s “savings vault” to manage their money.
Across 12 markets, 34% of consumers plan to set a personal budget.
But even in a financial crisis, impulse buys are still sneaking into shopping baskets. It’s the “lipstick effect” we’ve seen in past recessions, where discreet treats like makeup and barista coffee serve as mini mood boosters.
As people try to rebalance their lives with everything going on in the world right now, who can blame them?