Despite rising debt UK shoppers still committed to 'experience spending'

With a host of pressures impact peoples’ spending power; the Bank of England warned that consumer debt growth is becoming unsustainable. While consumer behaviour has become more reserved in some aspects, however, a new report has revealed that many are considering increasing spending on ‘experience’ consumption.

As political and economic uncertainties including Brexit and stagnating wages continue to bite consumers in the wallet, British shoppers are being left increasingly frustrated, as they are unable to plan for an ambiguous future. This has seen numerous surveys suggest that consumer confidence is likely to have an impact on luxury and leisure spending in the near future, as households tighten their belts at the start of 2018, in anticipation of turbulent times.

In a bid to better understand the current state of sentiment among shoppers in the UK, RSM recently surveyed 2,000 people about their buying style and intent for the coming year. While only a quarter of shoppers have cut back on spending in retail, leisure and hospitality, travel and tourism over the last 12 months, pressure is mounting on those who have not done so, even amid Brexit woes, rising inflation and low wage growth,.

As consumer debt escalates while wages stand still – in conditions similar to those which led to the 2007 credit crunch – most shoppers now exhibit a growing unease regarding their personal finances. 60% would use a £1,000 windfall to chip away at their debt, rather than spend on shopping, travel or eating and drinking out.

Further to this, RSM’s research found that there were four broad categories of shoppers, with varying degrees of shopping attitude. The biggest group among them (51%) are the ‘cost-conscious’. This group, which tends to be older, female, and with relatively middle-class incomes – 37% earn between £25,000 and £49,000 – is out to find a bargain price, hunting for the best value deals, where possible, although, in certain contexts, willing to invest in quality.

The second largest group (18%), the ‘needs-only’, has a relatively lower income – 48% earn less than £24,000 – while also tending to be older, 48% at 55+, with few in the millennials group (11%). This group does not engage in impulse purchases and is unlikely to be swayed by discounts or coupons. The ‘trust’ group, meanwhile, accounts for around 13% of shoppers and is largely made up of millennials (20%), has the highest earners, and tends to focus on status symbols. Their loyalty to a brand is relatively strong, although they will be influenced by reviews. Finally, the ‘impulse’ group tends to be young, relatively high earning and impulsive – leveraging online channels to acquire goods at a whim.

The research also sought to identify peoples’ spending intentions for the coming 12 months, finding that, across various categories, older consumers are likely to reign in spending, while millennials are set to increase their spend. For instance, in the clothing / shoes segment, 24% of non-millennial consumers say that they will spend less, 9% more, and 64% the same amount. For millennials, 28% say that they will spend more, 17% less and 52% the same amount.

A similar trend is noted for the technology and homeware segments. For homeware, 28% of all non-millennial generation respondents say that they will spend less, while 20% of millennials say that they will spend more. For technology, 29% of non-millennials say that they will spend less and 9% more, while for the millennial group, 26% say that they will spend more and 21% say that they will spend less.

While online shopping continues to see strong demand, traditional shops also see heightened footfall. In terms of the proportion of consumers that book or shop in-store, eating out, beauty products, homewares and clothes and shoes continue to see in-store activity.

The areas in which dominant platforms have taken hold include hotels and weekends away at 17% of respondents, holidays at 19% of respondents and technology, at 42% of respondents. The former two, in particular, have heavily impacted the traditional industry, cross-border players often take out the local competition – with a large number of bankruptcies in the industry. All Leisure Holidays fell last year.

Researchers also found a significant generational gap. Shopping behaviour has shifted among millennials in particular, and reviews have an impact on peoples’ buying behaviour. 81% of respondents, for instance, said that they looked at a review prior to a purchase, while 72% said that they change their plan on finding a bad review. Word of mouth remains a key impact for purchase decisions, cited by 68% of respondents, while 51% said that a lack of reviews would mean that they would not trust somewhere enough to spend money in it.

Commenting on the results, Ian Bell, Partner and head of travel and tourism at RSM said, “We’re seeing the rise of the experience economy. Whilst our research illustrates the emergence of cost-conscious consumers as the economic squeeze on living standards intensifies, today’s consumers still want to spend big on brag-worthy experiences whilst showing more restraint on everyday necessities.”