According to the EY UK Future Consumer Index, shoppers in the UK are expected to decrease their spending for the upcoming Christmas season. The survey, which gathered responses from over 1,000 UK consumers, indicates that 43% of respondents anticipate spending less this year compared to only 22% who felt the same way during the same period last year.
A noteworthy finding from the survey is that 12% of shoppers plan to scale back on celebrations and organize smaller events for the festive season. This change in plans may also dampen their interest in purchasing new clothes. Moreover, 67% of respondents expressed great concerns about the rising cost of living, leading to a significant decrease in spending on gifts. Specifically, 43% of shoppers will be cutting back on gifts for friends, while 34% will be doing the same for family members.
The survey also revealed a shift in consumer behavior, with an increase in the number of consumers who prefer to do their bargain-hunting in physical stores. However, e-commerce remains crucial, as 41% of shoppers plan to do most of their deal-hunting online this year.
EY highlighted that consumer confidence in the UK is currently at an all-time low. Following a mini-budget in October, only 26% of respondents felt positive about the future, a significant decrease from the 50% recorded in June. Additionally, 69% of consumers do not anticipate economic recovery within the next 12 months, a stark contrast to the 31% who held that view in June. Furthermore, 43% of consumers expect to be financially worse off in a year’s time.
The report also noted a trend identified in June, indicating a growing divide between financially constrained consumers who are tightening their budgets and those who are willing and able to spend, given the right incentives from retailers. High-income consumers are much less likely to believe that they will be financially worse off in the future (14%) compared to low-income consumers (51%).
As a result, it is expected that 47% of those surveyed will spend less on clothing. However, this decrease in spending can also be attributed to sustainability concerns rather than solely the cost of living. A majority of consumers (79%) expressed that they do not feel the need to stay up to date with fashion trends, and a significant portion (68%) would rather repair items than replace them.
Silvia Rindone, EY UK&I Retail Lead, emphasized the importance for retailers and brands to understand the price sensitivity of their customers and adjust their strategies accordingly. Rindone suggested that retailers should cater to financially resilient high-income consumers while also appealing to mid- and low-income consumers with value-focused ranges and pricing that aligns with their budgets.
In response to changing consumer preferences, retailers and brands should ensure that they have the right products in stock for smaller, more intimate events and prioritize thoughtful gifting. While affordability remains a major concern for consumers, sustainability is also becoming a priority. As a result, consumers are shifting towards more considered shopping behavior, placing importance on durability and quality over trendy fashion items. This shift will have significant implications for brands and retailers, requiring them to align their offerings with consumers’ evolving values.
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