No Match Found
Consumer Survey December 2022
Retail companies are faced with new challenges after the onset of the COVID-19 pandemic in 2020. The ever-decreasing purchasing power of consumers has manifested in savings and different spending behaviours. Some retailers may experience a decline in customer loyalty as consumers make more conscious decisions how to spend their money. However, this period of uncertainty and changing consumer behaviour also presents new opportunities, according to PwC’s Milo Hartendorf and Bruno van Bennekom. Earlier this month they conducted a survey among over 1,500 consumers in collaboration with retail expert Q&A, to measure current consumer sentiments – this article summarizes the most important findings.
About 63 per cent of participants to the survey saw a decrease of their spending power, while this whole group expects a further decline in the future. At 53 per cent, Generation Z, the youngest group surveyed, is most concerned about their personal financial situation. However, these concerns tend to subside as the relevant participants grow older. Of the eldest group of participants, the ‘boomers’, 39 per cent indicated to be concerned.
‘Next to general purchasing power, younger generations often grapple with specific long-term financial challenges’, says Milo Hartendorf, who leads the Retail and Consumer markets team at PwC. 'How do they find an affordable house to rent or purchase? What impact does long-term student debt have on their personal finances? This group has their greatest financial steps still ahead of them. As a result, retailers may find it harder in the current environment to steer the younger generations towards greater, more durable spending in comparison to their elder contemporaries.'
What are the main reasons for the decline in purchasing power according to the survey participants? Eighty percent indicate they have seen the prices of groceries increase. For over half the survey participants, this is the main reason for their decline in purchasing power.
If we look a bit closer at the different age groups, we see that for only 42 per cent of the youngest groceries negatively impact their purchasing power. This could be due to the fact that some of them may still live at home with their parents or are part of smaller households - often still without children - in groceries area smaller portion of the overall household budget. For this generation Z, increased fuel prices are a more prominent cause for their decline in purchasing power than it is for other age groups.
Second among the reasons for the decrease in purchasing power, as identified by thirty per cent of the survey participants, is the cost of energy. More than half of the participants indicated to have experienced either an increase in energy expenses over the course of the past few months or expect an additional payment to be made when they receive their annual bill. For the coming months, forty per cent expect energy costs to have the biggest impact on purchasing power.
'The annual energy bill will result in a higher monthly payment for many. There are new, higher energy tariffs on the way and a group of consumers will see they fixed energy contract expire,' says Bruno van Bennekom, Retail and Consumer Market specialist at PwC. 'And although the announced price ceiling will take effect, it will not yet be clear to everyone how this will impact their personal energy bill.'
In addition to the price increase for groceries, almost eighty per cent of the survey participants experienced a sharp incline in prices in the hospitality industry. Consequently, more than half find themselves spending less, in cafés, restaurants and hotels. Boomers in particular are cutting down on eating out.
Another important cost-saving category is that of non-essential products which purchase can be deferred: home furnishing products, clothing, and electronics. A small majority of consumers have indicated their vast reduction or complete discontinuation of purchasing non-essentials.
Hartendorf: 'Retailers of home furnishing products, clothing, and electronics have undoubtedly noticed a drop in consumer spending. And the looming recession means that, for the time being, they cannot expect a major increase in demand. Specifically in the hospitality industry, it seems that the pre-corona heydays will not be returning anytime soon. However, for certain hospitality businesses, a reduced hospitality landscape may offer new opportunities. We may see a return of the creativity we saw during the lockdowns, with menus for home delivery and takeaway options.’
How do consumers try to save on their shopping expenditure? For their day-to-day shopping, participants opt for the offers (67 per cent) and for larger pack sizes (sixty per cent). Almost sixty per cent consider, more often, to not buy a product, or actually leave it on the shelf. 62 per cent of the survey participants more often choose a retailer own brand to save money. If we take a closer look at the income groups, the survey reveals, as expected, that consumers with an income up to €30,000 are more likely to leave products on the shelves, whilst those in the next income group, up to €50,000, are more likely to select alternatives.
Another way to cut down on grocery costs is to forego buying more expensive, fresh, sustainable, and healthier products. Among all of the survey participants, 38 per cent reach less for fresh, durable and healthy. Of those consumers who bought these products frequently in the past, half of them now buy sustainable products, such as organic food, less often. A quarter forego fresh products to save money and almost a quarter leave healthy products to gather dust on the shelves.
Search of the best prices has led to a decline in loyalty towards certain retailers. 44 Per cent of the participants to this survey indicated that they go to a different or to several other stores - for groceries as well as non-essential products. Second-hand items are an alternative to cut the costs for more than a quarter of the consumers.
Van Bennekom: ‘More conscious spending behaviour provide retailers with opportunities to win new customers. Now that customers are comparing prices more than before, having the right value proposition is important. And if customers manage to find you, a new or improved loyalty program may help win them over.'
How are the baker, the vegetable shopkeeper, the butcher, the florist, and the liquor store doing? After a rise in popularity during the coronapandemic, speciality shops witnessed a decline in the number of visitors over the course of the last few months. The consumers who usually shopped at speciality stores (65 per cent), now have almost half say that they either buy less or not at all from these stores. Only some consumers make an exception for special occasions such as Christmas.
What is the effect of a reduction in purchasing power on Christmas spending? 45 Per cent plan to spend less on Christmas or to do no Christmas shopping at all. Savings are specifically focused towards cutting down on Christmas presents. Furthermore, consumers are also saving on eating out, Christmas decorations, and the Christmas dinner. In respect of the Christmas tree, only 35 per cent expect to save on its costs.
A final noteworthy finding is that the youngest group of participants actually want to unpack this Christmas in a bigger fashion. More than half want to celebrate this festive day in a bigger way, although only two-thirds revealed that they hold the necessary funds to do so. Hartendorf: 'Last winter's lockdown measures meant that Christmas was celebrated on a smaller scale. According to our survey, it is Generation Z who feel the strongest need to make up for that. The "catch-up spending", or “revenge spending”, hold for some retailers and businesses within the hospitality industry a possible additional source of income in an uncertain period.'
This survey was carried out in collaboration with retail experts Q&A.
Bruno van Bennekom
Consumer Markets Director, PwC Netherlands
Tel: +31 (0)68 300 07 02
Senior Manager, PwC Netherlands
Tel: +31 (0)62 022 51 16