According to a recent study conducted by McKinsey & Company, consumers in the UK are becoming increasingly worried about rising inflation and are planning to cut down on their fashion spending. The study, known as UK Consumer Pulse, found that the use of buy now, pay later (BNPL) services is on the rise, while the intention to shop during the festive season is dwindling.
In October, McKinsey surveyed over 1,000 UK consumers, revealing concerning results for retailers. A staggering 58% of respondents stated that they plan to do less Christmas shopping this year, with 8% claiming they won’t be doing any shopping at all. The decrease in shopping intention is particularly evident among Millennials and Gen X, with 64% of respondents from these age groups expressing their intention to do less holiday shopping compared to previous years.
The study also uncovered that 19% of consumers have the intention to use more BNPL services in the months ahead, representing an increase from 15% in April. This trend is especially prominent among Millennials (30%) and Gen Z (26%). Although retailers may still benefit from cash being spent in the lead up to Christmas, many consumers will be paying for their purchases in the months following the festive season. Consequently, this may result in reduced spending during the post-Christmas months when stores typically discount old-season products and introduce new collections.
Additionally, the study highlights consumers’ concerns about the current state of the UK economy. Approximately 43% of respondents expressed negativity about the economy, surpassing the levels of pessimism seen during the first and second lockdowns in 2020. Rising prices emerged as the top concern for 69% of respondents, irrespective of age or income. More specifically, the majority of consumers (61%) noted the increase in prices of clothing and footwear, up from 53% in June and 43% in April.
As a consequence of these concerns, consumers are saving less and reducing their spending on non-food discretionary items, while expenses for utilities, transportation, and food are increasing. Regarding fashion, 63% of consumers planning to cut their spending will be doing so in the clothing category. The intention to purchase clothing, footwear, accessories, and jewelry is universally declining.
Furthermore, Millennials and Gen X are the most likely to scale down their lifestyles overall due to the rise in prices. Over half of Millennials (55%) and Gen X (61%) have had to make adjustments to their lifestyles. This reduction in spending in other areas may impact their willingness or need to buy fashion products. For instance, decreased travel intentions in the next three months may result in reduced spending on travel-related clothing items. Specifically, 46% of consumers planning to spend less on travel will not be spending on international travel, potentially affecting the demand for beach holiday and ski clothing in the upcoming months. However, this scenario may also present opportunities for budget-friendly brands or those offering high-quality items at affordable prices.
Anita Balchandani, Senior Partner at McKinsey & Company, stated that consumers are resorting to trading down, opting for private label brands, and showing openness to switching retailers and brands in response to inflation and reduced household income. These challenging times create a market share opportunity for those who can effectively meet the demand for value.
In conclusion, the study conducted by McKinsey & Company unveils that worried consumers are looking to decrease their fashion spending due to rising inflation. This, combined with the growing popularity of BNPL services, poses challenges for retailers during the festive season. Consumers are also concerned about the state of the UK economy, with rising prices ranking as their top concern. Hence, they are saving less and cutting back on non-food discretionary items. The inclination to purchase clothing and accessories is declining, and Millennials and Gen X are the most impacted by price increases, leading to lifestyle adjustments. Nevertheless, these challenges also present opportunities for brands that can offer value to consumers.
Here are two links that provide further information on UK consumer spending trends and the impact of inflation:
1. BBC: UK Consumer Spending Falls as Inflation Bites
2. Financial Times: Rising Inflation Puts Pressure on UK Consumers
