EY published the results of its UK Future Consumer Index and said inflationary pressures and economic uncertainty are widening the gap between low and middle-income consumers, who are preparing to tighten their grip on their finances, and high-income consumers who are able to maintain spending levels.
The survey found that consumers are taking decisive action when reacting to price rises on discretionary purchases. Nearly half of consumers (49%) are buying less clothing, shoes and accessories, while in the consumer electronics category, 41% are purchasing less and 14% have stopped purchasing altogether.
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The tenth edition of the survey of over 1,000 UK consumers found that 37% of low and middle-income consumers are only purchasing the essentials, compared to 26% in the last survey in February 2022. A third of these consumers (32%) are now switching brands to try cheaper alternatives, up from 26% in February.
Affordability has also risen in importance since February 2022, with 27% of all UK consumers now adopting an ‘affordability first’ mindset, an increase of 8%.
The EY research also found significant levels of pessimism among low-income consumers, with nearly half (46%) saying that they feel financially worse off compared to February this year. Almost half (44%) expect their financial situation to be worse in 12 months, while only 39% feel in control of their lives, which is half of the 79% of high-income consumers who feel the same.
A significant minority of middle-income consumers are also bracing themselves for tough times with a third (33%) expecting their financial situation to be worse in 12 months. Conversely, just 15% of high-income consumers expect to be financially worse off in the next 12 months with 61% of this income bracket saying they are excited about spending money on things that will improve their lifestyle.
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By GlobalDataSilvia Rindone, EY UK&I Retail Lead, comments: “Our research reveals that instead of consumer behaviour staying relatively consistent, we are seeing consumers drifting towards two extremes. At one end are cash-strapped consumers who are watching every penny, at the other are those who are willing to spend and want retailers and brands to excite and entice them to do so. Navigating this K-shaped profile in consumer behaviour is key to surviving and thriving in the new economic landscape.”
On the sustainability front, shoppers across all income groups revealed they are making more economical and sustainable choices. Of those surveyed, 90% said they are trying not to waste food and 55% are paying more attention to the environmental impact of what they purchase. Almost three quarters (70%) also said they prefer to repair rather than replace.
Three quarters (75%) of UK consumers surveyed said they are less interested in the latest fashion trends whilst 64% said they feel less pressure to buy the latest technology.
Silvia Rindone added: “Although affordability is key, sustainability and more economic and sustainable consumer behaviours are here to stay. Consumers learned new skills during the pandemic, such as scratch cooking and repairing things, and brands and retailers will have to work much harder to create truly differentiated offers that entice consumers to spend on new items and experiences.
“Ultimately, consumers are looking for value and values. Brands and retailers need to find new and innovative ways to deliver affordability and sustainability to win over the K-shaped consumer. Successful companies will be those who can navigate this landscape and find the pockets of opportunity in a rapidly changing market.”
According to GlobalData’s monthly UK consumer survey conducted in April 2022, a third of UK consumers (32.1%) stated they will buy fewer clothing and footwear items as a result of consumer price inflation and 13.1% of respondents said they will stop purchasing these products altogether.
GlobalData apparel analyst Pippa Stephens says clothing brands targeting young females could be hardest hit as discretionary incomes will force them to cut back on non-essential purchases.
