Executive summary
Rising inflation is being felt by consumers around the world. Two thirds have noticed an impact already and more than half have seen living costs increase in the last six months.
Consumers are noticing price increases across multiple categories – from home energy to apparel. But it’s the rise in grocery prices that are of most concern.
Pay close attention to consumer behaviour in your category to determine the best course of action. Consider ways you could stay competitive, such as tweaking your marketing to enhancing your customer service.
The Covid-19 pandemic brought about some seismic shifts in consumer buying behaviours. Now those new practices are evolving again as fresh challenges – such as inflation and a rising cost of living – impact the way people are spending and the affect that has on businesses.
Two thirds (67%) of consumers globally say inflation has had a moderate or dramatic impact on them.1 Similarly, research by PwC found that increases to grocery prices are a top concern for 65% of consumers when shopping in person.2
Here, we’ll take a look at the latest figures on consumer behaviour, and find out what it could mean for businesses.
Choose an inventory forecasting method
Proportion of consumers who say inflation has had a moderate or dramatic impact on them1
Proportion of consumers who say their cost of living has increased in the last six months1
According to McKinsey research of consumers in France, Germany, Italy, Spain and the UK, price increases have been felt in:3
Grocery
94%
Petrol/diesel
93%
Home energy
91%
Eating out
80%
Cleaning and personal care products
75%
Apparel and footwear
64%
(By percentage of customers)
Proportion of consumers who say rising grocery prices are a top concern when shopping in store2
Proportion of consumers who say rising grocery prices are a top concern when shopping online2
56%
of consumers are spending less compared to two years ago…
…while
29%
of consumers are spending more1
Consumers are most price conscious about:1
Food and groceries
59%
Utilities
56%
Transport
49%
Housing
44%
Clothing
40%
(By percentage of customers)
Three more things to consider
1
Inflation can have a complex impact on consumer spending
While many consumers will feel the effect of inflation on their finances in the coming months, how they respond to rising costs will vary depending on a host of factors. To develop a strategy, take a close look at the categories you operate in and your products’ positions in the market. Could you sell in larger, more economical sizes, or could you offer smaller quantities or even a cheaper product? These are all alternatives that, experts say, consumers may be exploring in order to cut back.4
2
Significant, discretionary purchases are unlikely to disappear
Consumer purchasing decisions are often emotional as well as rational.4 Even in tough times, people typically try to make room for discretionary purchases. So far, purchases of lifestyle products such as jewellery, handbags and headphones are slightly down, year-onyear, but they haven’t ceased altogether.5 To capture more pressurised spending, businesses may need to work harder on messaging and positioning to convince consumers to buy. Consider speaking to some of your customers to get a sense of their attitudes to their discretionary spending; your findings could help guide your marketing.
3
Look beyond price cuts to stay competitive
Consumers may well look for ways to cut back in some areas, however in others, they may be inclined – or required – to hold on for as long as possible before reducing their spending. As such, businesses could put themselves in a stronger position by looking for ways to add value. Lowering prices may not be an option for your business, but consider things like elevating your customer service or, in e-commerce, your delivery and returns options, which could improve your customers’ experience. Alternatively, look for add-ons that could offer additional value.5
Disclaimer: The information provided on this page does not constitute legal, tax, finance, accounting, or trade advice, but is designed to provide general information relating to business and commerce. The FedEx Small Business Hub content, information, and services are not a substitute for obtaining the advice of a competent professional, for example a licensed attorney, law firm, accountant, or financial adviser.
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1. The consumer dilemma: spending in the cost-of-living crisis | GWI, 2022
2. Global Consumer Insights Pulse Survey | Pricewaterhouse Coopers, June 2022
3. European consumers increasingly react to the stress of rising prices | McKinsey, July 2022
4. How Does Inflation Change Consumer Behaviour? | Yale Insights, August 2022
5. How consumers are living with rising costs | GWI, August 2022
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