Second of three parts
The most recent edition of the EY Future Consumer Index reveals how accustomed people are to living in a constant state of crisis and uncertainty. As consumers continue to express concern about the future, they prioritize ideals that focus on more control over their finance and sustainable practices.
In the first part of this three-part article, we discussed three key shifts in play that differentiate the current crises with previous ones. Consumers now have greater control over how they organize their time due to the rise in remote working, but they also want more control over other aspects of their lives including how they spend their money and disclose their personal information.
In this second part, we discuss the key trends in consumer behavior that were identified in the Index.
KEY TRENDS IN CONSUMER BEHAVIOR
Leaders must adapt since it is obvious that consumer beliefs and habits are continuing to change rapidly on many fronts. How effective is a “Sell more items” strategy when many customers claim they wish to make smaller purchases? There are four imperatives that leaders will have to take into account, starting with some of the key trends that the most recent Index has shown.
Cost cutting: Consumers are substituting but not sacrificing
Currently, the “Affordability first” consumer category is the dominant one, but the cost of living is a concern for all consumers: 79% of respondents express concern about their financial situation; 35% worry about having enough money for expenses other than basic necessities; 66% are concerned with getting value for their money.
Many consumers would consider buying private label packaged food (49%), while 48% are purchasing cheaper alternatives. Consumers are, in many respects, returning to what worked for them in the last two years when they were able to save money by working from home, spending more time at home, cooking their own meals, and not feeling the need to buy new clothes or use cosmetics regularly. For many brands, this creates a challenging environment.
People typically reduce their expenditures in a limited number of categories when money is tight while still rewarding themselves with “treats.” However, customers are now using their money-saving strategies in all areas. For instance, there is a thriving social media culture in the cosmetics industry where influencers share “dupes” — cheaper versions of luxury goods that, in their opinion, perform just as well and offer better value.
The findings from the study demonstrate that this isn’t only about cutting back on spending; rather, it’s a continuation of pandemic-era habits. Some of the brand attributes that have historically conveyed prestige no longer appeal to customers as much. A deep-seated yearning to live and spend more “authentically” exists. Instead of replacing things, more people are committed to mending them. Seasonal fashion trends are less popular, with 79% of “Affordability first” shoppers and 55% of the more hedonistic “Experience first” consumers ignoring them.
Sustainability: People are clinging to their principles
Many consumers struggle to balance their desire to live more sustainably with their need to live more inexpensively, especially as many believe sustainable goods to be expensive, with 67% of consumers claiming that the high cost considerably discourages them from purchasing sustainable items. However, resistant shoppers are looking for more affordable ways to achieve their goals of sustainable living rather than simply giving up on them.
Many claim they are working harder to reduce trash and purchase used goods. By maximizing for both economic and environmental benefits, consumers are taking charge. As much as 87% are attempting to reduce food waste and 85% are attempting to reduce their energy use. Meanwhile, 36% report increasing their use of used goods, while 24% have either ceased buying or have bought less from a company that is not doing enough to protect the environment.
This shows that attitudes toward sustainable goods and products have changed for the better. Not as many consumers still believe these products to be of poor quality or lacking in durability. Importantly, people place more and more faith in the information they receive about sustainable products from the manufacturers.
Customers do not believe information from just any sources. They look for information that they believe to be trustworthy and transparent, and they value ways to filter and personalize the information they are exposed to. This broader trend can be seen playing out regarding sustainability, with over a third of customers having registered for an app or service that tracks aspects of their carbon footprint or environmental impact. Consumers are increasingly seeking reliable sources to help them make informed judgments about the things they buy.
Consumer-facing businesses are also searching for reliable suppliers because they are applying “sustainability tech” to enhance their products. Many already collaborate with sustainability tech firms to gain access to data and insights that bring them closer to the consumer. New consumer insights are being produced by these relationships, which aid businesses in interacting with customers, promoting sustainable innovation, and achieving sustainability objectives.
Digital: Customers value alternative experiences and products more and more
A small but expanding segment of customers is interested in investigating cutting-edge technologies and digital platforms, according to the Index. The metaverse, digital currency, or buying virtual goods have all been used by almost one in 10 consumers. It’s interesting to note that this baseline level roughly corresponds to where e-commerce was in 2005. Its 10% retail market share from 2017 has since doubled. Some analysts predicted the demise of high street shopping at that level of retail penetration. Could the retail sector be reaching a similar turning point?
Due to the pandemic, many aspects of daily life are now “digital first.” Consumers are once more turning to digital as they want greater financial control. For instance, people are substituting lifestyle choices rather than making lifestyle sacrifices by balancing digital and physical experiences.
The use of more recent digital products and services opens up new business options for firms. It becomes a question of whether they can invest in digital in ways that distinguish their brand experience, foster creativity, gather more customer data, allow for digital product line creation, and promote innovation.
Trust will be a critical factor, as consumers express great concern about who they share their data with. They want to know how it will be used and protected, expanding their post-pandemic, always-on emergency posture to include a safety-first component.
In the last part of this article, we will discuss four imperatives that consumer companies must consider to meet the needs of consumer values that have shifted during the pandemic experience.
Maria Kathrina S. Macaisa-Peña is a Business Consulting Partner and the Consumer Products and Retail Sector Leader of SGV & Co.