Consumers’ behaviors and attitudes aren’t straightforward. Sometimes they do the opposite of what you’d rationally expect. The more, every crisis brings its own unique challenges. GWI, an audience insights technology company, explains that despite the rising cost of living, many consumers will still be making room for ‘must-have’ treats. Taker | Maker has highlighted the key insights and predictions where consumers’ spending might be headed in 2023.
Vibe check on financial confidence
North America and Europe have seen the biggest decreases in financial and economic confidence since mid 2021, regions where confidence is significantly lower generally compared to others. Confidence in the economy has dropped by 40% in North America and 24% in Europe during this time.
However, outside of China, two-thirds of consumers say their current financial situation is secure
It’s important to remember that not everyone will feel the brunt in the same way, and while many consumers will no doubt make cutbacks and re-prioritize spending, many others - particularly higher earners - will continue to spend, and spend big.
It’s called fashion, darling
We know from previous recessions that products and services can quickly shift from essentials to treats, or even expendables, in consumers’ minds. So, which categories look set to make it into consumers' "treat" list in 2023?
Clothing ranks top for budget treats. When it comes to treating on a budget, clothing is the only category to appear in the top 3 choices across all generations and genders.
Some retailers are seeing sales slow, but others, like Zara owner Inditex, are seeing sales soar.
Globally, purchases of clothing haven’t fluctuated significantly. For Gen Z in particular, they’re in line with pre-pandemic levels.
We can see “luxury for less” retailers are among the fastest-growing ones, with purchases from retailers like Marshalls and T.J.Maxx up 13% and 12% since mid 2021.
Consumers aren’t only focused on getting the cheapest product when it comes to clothing, they’ve got their eyes set on quality – something that’ll stand the test of time.
Quality ranks ahead of cost when deciding which brands to buy from. The research shows that quality is the top purchase driver overall, so brands should hone their messaging around the quality and durability of their items, as consumers look to make their money count.
Look good, feel good
During the 2001 recession, the phenomenon known as the “lipstick index” was born, when Estée Lauder observed increases in lipstick sales. In 2023, we can expect to see a similar story.
Ulta Beauty smashed its Q2 earnings expectations across all major categories. Coty’s cosmetics sales are up, with “prestige” sales rising by 20% during the beauty brand’s financial year.
In the research, younger women are more inclined to prioritize buying skincare and beauty/cosmetics as treats when on a budget. For female millennials, beauty/cosmetics and skincare nabs second and third place in their list of treats, just behind clothing.
Beauty’s resilience is likely down to a combination of factors: more socializing, affordability, and emotional connection. The last one is important. Consumers are often reluctant to give up on little treats or indulgences that ultimately make them feel good, which is arguably even more important during hard times. It’s really the emotional connection that keeps consumers hooked, and something brands need to emphasize more in their campaigns.
Revenge travel is back with a bang
The number purchasing vacations or travel tickets has increased by 19% since mid 2021 outside of China. People have been cooped up for so long, so many aren’t willing to scrap getaways again anytime soon.
When consumers were asked what would bring them joy in the future, 55% said travel/taking vacations – ranking second behind spending time with their family. Gen X and baby boomers also ranked travel within their top 3 priority purchases when on a budget, suggesting there are other cutbacks they’d rather make instead.
In fact, millennials are more likely than everyone else to say they’d spend extra on flights/travel. They’re also willing to treat themselves at various stages of the vacation journey. The takeaway for brands? Expect millennials to be a key market for premium upgrades.
For many, breaks away are key to maintaining their wellbeing, so these are qualities that travel brands should lean into to catch consumers’ attention.
Price isn’t the only lever to pull
Consumers are increasingly aware that prices are rising - outside of China, two-thirds say the cost of living has increased compared to 3 months ago. So, as prices inevitably increase, how can brands keep consumers engaged?
Trust for the brand ranks third out of a list of 14 purchase drivers, coming ahead of discounts, good customer service, and purpose-driven factors. As we’ve seen in previous recessions, the trust gap can widen during times of uncertainty.
Businesses can build trust by being open and transparent about how price changes are impacting their business, and focus on building direct relationships with their customers to keep their loyalty even as they raise prices. At the same time, reassuring messages and actions that demonstrate empathy can also have a similar effect.
