Be it Covid, climate or cost of living, the world is in crisis. The UK Government Autumn statement last week forecast a third of the global economy will fall into recession this year or next.[1]
Only very recently has China marginally eased its strict zero-Covid policy in response to economic pressures[2]. The UK and wider European markets are absorbed with rising energy and grocery costs, partly because of another crisis: the war in Ukraine. More positively, the agreement with poorer countries on climate finance with a loss and damage fund ground out at COP27 has been welcomed and is due to start running in 2023[3].
In the UK, through WindowOn, we have been tracking attitudes on financial wellbeing since 2009. In more recent times, following a stable period through 2020, it’s no surprise given the surge in energy prices that now in 2022, the proportion of those who define themselves as Strong Reactors (Struggling financially) has risen sharply (35%) and is almost 1.5 times higher than in the last credit crunch in 2009 (24%). The share of those struggling financially has risen in all age brackets and it’s women and those with children in the household who are most likely to be making changes.
Our report shows a strong correlation between anxiety/ distress and financial stability. Again, it is the Strong Reactors that are more than six times as likely to say they are ‘Extremely/ Very anxious’ than those who are ‘Unaffected financially’. Rising rates/ bills are most top of mind for all groups – but much more the Strong Reactors. Rising rates/ bills first overtook Covid concerns back in April 2022. While Brexit is 4th ranking among the Planners (Cutting back just in case) as a reason for anxiety/ distress, there is a growing expectation that ‘Brexit’ will increasingly be called out as a cause for UK economic instability and lack of growth.
It feels like a lifetime ago now but spending on food and non-alcoholic drinks rose by 9% (Apr 2020-March 2021) during lockdown and the pandemic[4]. Our WindowOn category tracking data also reflects this upward trend, where food staples such as tea, meat or fish, cheese, cream, butter, milk, coffee, yoghurts/ desserts have all increased alongside pet food and household staples such as haircare products, pain relief, cold and flu remedies (2020 vs. Feb 2022). During that period, food spend increased while spending on culture, hospitality, recreation, and travel all declined.
Since then, retail sales have fallen as shoppers rein in spending against soaring food prices[5] and no doubt rising food prices would now be the top cause of anxiety/ distress across all groups. But what about the next few months and beyond into 2023?
Our WindowOn trend report reveals shoppers are adopting a range of shopping strategies. Being more price sensitive is the top ranked shopping habit, with at least 75% of the Strong Reactors, Soft Reactors and Planners all being more price aware than they used to be. This is expressed for all groups through higher ratings of promotional preferences rather than more of the same to save money. Strong Reactors are ahead of all other groups on going out of their way for best deals/ splitting shopping across different websites.
Almost 3 in 5 of all but the Unaffected groups agree they buy own label products mainly to keep costs down. Retailers, like Asda, have reacted by introducing a Just Essentials line in May 2022. Data suggests the range is performing well despite the bright yellow packaging being reminiscent of “Value” ranges brought out in the late 1970s: there have been reports that shoppers wouldn’t want to be seen with a bright yellow pack in their baskets, but recent sales appear to give the lie to that assertion.
While buying own label has often been explained as a coping strategy in the face of price rises, prices of the cheapest items have also risen at least in line with inflation: even the lowest priced grocery items rose by 17% in the year to September 2022[6]. Shoppers are likely to continue to trade into own label and shift to discount retailers: this is clearly a challenge for brands, to retain their purpose and ensure shoppers switch back.
Alongside the shopper strategies of store switching (on-line or off-line) and economising by trading down through own label; two other core approaches that shoppers use are ‘avoidance’ and ‘prudence’. Avoidance poses the largest risk to many categories, whereby shoppers miss out whole categories or products because they can’t afford them, or worst of all that don’t have access to them because of where they live. The cost-of-living crisis for some will force the choice of certain food types because they are cheaper and more accessible – making choices for instance between take aways versus fresh fruit and veg. Also, arguably not a shopper strategy – but driven by consumer behaviour - is the behaviour of prudence – avoiding waste and making purchases go further. Eventually, this this will impact on products chosen.
Other ways to help shoppers spread costs (Iceland being the first to introduce) include the introduction of interest free loans to help with food shopping back in August 2022[7]. Grocers are doing their bit to help, with free meals for over-60s, Healthy Start vouchers and targeted discounts. As we approach Christmas, retailers have announced sales and bonus points on their loyalty schemes [8]. There has also been a drop off in non-essential food shopping, big ticket items such as furniture, and jewelry.[9]
To get the best view of 2023, we need to look back to look forward.
Data from the 2008/9 recession and pandemic strongly supports the argument that investment in communication should not stop. The case is made across hundreds of businesses that there is benefit to continue some form of communication. But the question of course is how and where to invest: this is where staying tight to shopper/consumer understanding is essential. The challenge is all the more important when we see rapid changes in the face of the double act of retraction in growth while inflation is at an incredibly high level.
The case for investing is clear. The brands that invest in ESOV saw 5 times as many very large business effects (such as profit, pricing, share, penetration etc.) and 4.5 times the annual market share growth (source: Peter Field IPA DataMine on 2008 recession, IPA’s Seminar on Advertising in a Downturn).
The assessment of long-term profit growth (measured in these case studies mostly after the end of the recession) clearly shows why taking the short-term hit to profitability through investing in advertising during the depths of recession, ultimately delivers better long-term profit. So, how can we understand what is going on in the market, at the consumer / shopper level, to ensure we invest wisely? Which will in turn enable you to properly review your marketing strategies. The voice and understanding of the consumer will enable insight led decisions around all the necessary readjustments (targets/positioning/new objectives/distribution etc). But the big one here (perhaps more so than ever) is on price as it needs to consider what is valuable to the consumer and then work out how to frame it.
As always, there will be winners and losers, but one thing remains true for any form of brand presence: if you are out of sight on the shelf, when the final decision is being made, you are probably out of mind. But don’t be fooled: physical visibility in-store won’t solve all your woes. It’ll help, but you have to add meaning to the visual assets you are flaunting. Understand your consumer, activate your shopper. Many brands will lower their efforts, meaning your visibility could get even better: make sure you know how to maximise what you have.
Here at Shoppercentric, we will continue to monitor evolving shopping and consumer behaviour.
– Expert in Shopper – Consumer – FMCG - Leisure and culture –
If you’d like to work with us on this, then get in touch - hello@shoppercentric.com
[1] 17 Nov 2022 https://www.gov.uk/government/publications/autumn-statement-2022-documents/autumn-statement-2022-html [2] 11 Nov 2022 https://www.theguardian.com/world/2022/nov/11/china-covid-rules-quarantine-periods [3] 20 Nov 2022 https://www.theguardian.com/environment/2022/nov/20/we-can-do-the-impossible-how-key-players-reacted-to-end-of-cop27-climate-summit [4] https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/expenditure/bulletins/familyspendingintheuk/latest [5] https://www.theguardian.com/business/2022/oct/21/retail-sales-fall-in-great-britain-as-shoppers-rein-in-food-spending [6] https://www.ons.gov.uk/economy/inflationandpriceindices/articles/trackingthelowestcostgroceryitemsukexperimentalanalysis/april2021toseptember2022 [7] https://www.bbc.co.uk/news/uk-wales-62560997 [8] https://www.which.co.uk/news/article/what-supermarkets-and-shops-are-doing-to-help-with-the-cost-of-living-aNpUU5E5AbYr [9] https://www.theguardian.com/business/2022/oct/21/retail-sales-fall-in-great-britain-as-shoppers-rein-in-food-spending