Consumer Confidence Shrinks as Expectations of Living Costs Rise
For the first time since the mid-pandemic period, consumers are prioritizing affordability over sustainability, according to EY’s Future Consumer Index.
Overall, the company’s index, which surveyed more than 18,000 consumers from 24 countries, found a pessimistic economic outlook — more from the Western markets compared to emerging markets — with consumers increasingly taking control of spending and readjusting priorities to maintain lifestyles. Nearly 80 percent of respondents say their finances are a concern with 62 percent expecting living costs will increase in the next six months.
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These expectations are present in the majority of all income levels from 87 percent of low-income respondents and 77 percent of middle-class respondents to 64 percent of high-income respondents. Consumers from the U.S. (54 percent), the U.K. (65 percent), Germany (84 percent) and France (85 percent) told the company they believe life will remain the same or worse over the next three years. Calling it an “always-on emergency mind-set,” EY authors said the sentiment was learned in the pandemic and will lead to a continued shift in behavior and priorities in the face of disruption.
“As talk of a looming recession increases in many markets globally, consumer businesses are bracing themselves for further economic pressures,” said Kristina Rogers, EY global consumer leader. “Much like during the pandemic, consumers are quickly pivoting their priorities and adapting to disruption, but are now increasingly pessimistic about the economic outlook, in particular among European markets.”
With affordability top of mind as living costs increase, EY’s survey shows that 35 percent of consumers are worried about having enough money to spend on things other than living expenses. Not only will these consumers trade down on essentials to cut costs but 33 percent say they will try new brands while 21 percent say they will try switching to private label or “owned brands.” This shift, said EY’s researchers, will expose a third of a brand’s addressable market to risk.
Consumers also said they will need to shift priority away from sustainability, despite pressures to live more environmentally friendly, as a way to save. Sixty-seven percent of global respondents told EY the “high price of sustainable products is significantly putting them off from buying them.” Still, consumers are getting creative and seeking new methods of conscious consumption. Eighty-seven percent of consumers said they are trying not to waste food and 36 percent reported they will buy more secondhand products — up from 30 percent in February 2022.
At the same time, 64 percent of global consumers said they no longer feel the need to keep up with seasonal fashion trends and 69 percent say they are attempting to repair their belongings rather than replace them. This will likely present a challenge for fast-fashion retailers as they target those conscious consumers.
“Despite consumers finding ever more creative ways to adapt to rising living costs, businesses must not become complacent with their sustainability efforts,” Rogers said. “Consumer businesses need to offer new opportunities to retain customers, such as by offering lifetime repairs to reduce the number of replacements and the brand’s environmental impact. Businesses must maintain momentum — consumers aren’t compromising on sustainability but finding alternative ways to live their values. When economic challenges ease, consumers will align with businesses they trust and who share the same values.”
Looking at how priorities will shift in the beauty market, EY’s data shows that 60 percent of consumers are now relying less on beauty and cosmetics to boost confidence, saying they “are more comfortable in their own skin.” This finding is up 7 percent from October 2021.
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