Consumers opt for caution this holiday season to cope with rising cost-of-living and environmental concerns, new data finds
- 52% of respondents spending less on non-essential consumer goods
- 44% of respondents globally to use less festive lighting and decorations in their homes
- Health concerns for respondents relating to pandemic receding globally
Many consumer respondents globally are preparing for a more financially cautious and environmentally friendly holiday season as health concerns from the COVID-19 pandemic begin to fade while cost of living and environmental concerns deepen, according to the latest EY Future Consumer Index (FCI).
Consumers are optimistic despite economic challenge
The 11th edition of the global survey of more than 21,000 consumers conducted between 23 September and 14 October 2022, finds that respondents shopping with an ‘Affordability first’ and ‘Planet first’ mindset are jointly the largest spending cohorts, both representing 25% of all respondents. But despite affordability dominating global headlines, the study finds many respondents are approaching the holiday season and beyond with a desire to live sustainable or healthy lives, or to have rewarding experiences. Overall, consumers are optimistic about the future, and 74% are looking forward to getting “back to normal,” after so much disruption caused by the COVID-19 pandemic. While 58% of respondents feel very concerned about the rising cost of living, 59% feel in control of their lives and are eager to catch up on experiences they missed out on due to the pandemic (53%).
With environmental concerns rising, consumers are looking for ways to reduce consumption. Thirty-seven percent will purchase less food for celebratory meals to avoid waste this holiday season, and 44% plan to use less festive lighting and decorations at home. Sixty-seven percent of respondents say they are happy to repair their belongings rather than buy new, with 45% saying they care more about the usefulness of the products they buy. Notably, 63% of respondents globally don’t feel the need to keep up with the latest fashion trends.
But worries over inflation and the economy are still taking precedent for many consumers. 92% of respondents are extremely or moderately concerned by their country’s economy and 87% are concerned by their finances. 89% of respondents state they plan to spend less, or not increase their spending on their families this holiday season and 41% will spend less on gifts for friends. Only 10% won’t change any spending habits because “traditions are traditions” and (39%) plan to spend less on vacation travel. Household spending will most noticeably be reduced on take out and food delivery with 42% of respondents planning to spend less in the next three to four months.
Many consumers plan to celebrate this holiday season from home
With seemingly unrelenting cost-of-living challenges, “Affordability first” respondents – those that are cost led– are very concerned about the rise of living costs (62%). With 59% of this group only shopping for essentials, their holiday spending won’t be on the latest trending gifts but instead on gifts they feel are useful. Sixty percent of these respondents are spending less on fashion and cosmetics compared with 49% across other respondent consumer groups (“Planet first,” “Experience first,” “Health first” and “Society first”). Many cost-concerned consumers are planning to celebrate at home this year with 50% aiming to spend less this holiday season, reducing going out and cutting spend on food and drink.
“Planet first” consumers have fewer financial worries. These respondents are less likely to be cutting their spending — unless it’s in an effort to live more sustainability, with 41% intending to buy fewer physical goods for environmental reasons. Forty percent will make sustainable food choices for their celebratory meals this holiday season, compared with just 28% of other respondents. Thirty-seven percent of “Planet first” respondents will look to buy locally made gifts and 40% will purchase less food in a bid to reduce food waste.
The FCI also finds that respondents prioritizing societal issues also care for the environment; 70% are deeply concerned about the fragility of the planet and see the holiday season as an important opportunity for them to positively express their social values, in what they buy and how they bring people together. “Health first” respondents, will prefer avoid the holiday crowds - 74% of these respondents say they are more aware and cautious about their physical health compared with 67% in all other groups.
Experience led consumers spend more, yet worry more about debt
Unlike “Affordability first,” “Experience first” respondents (63%) are eager to catch up on missed experiences from the pandemic and one in three will spend more on vacations and activities outside the home (35% and 31%, respectively). But despite a less frugal mindset and a willingness to spend more freely, 41% of “Experience first” respondents are extremely concerned about their household debt. Their overall optimism overrules their concerns, with 50% of this tribe willing to buy non-essentials, services and experiences to bolster happiness. “Experience first” is the biggest of the four groups across Asia (28%), with fewer in Europe as the findings reveal the smallest group of these respondents are located in Sweden, (12%) New Zealand (12%), Finland (12%), the UK (13%), and Italy (15%).
Digital shopping divides consumers
Consumers now have a plethora of channels and destinations for their shopping but not all shop in the same way. As digital continues to grow in prominence, issues of trust, cost and the continued preference for physical channels remain. Thirty-six percent of respondents concerned with the affordability of products will prefer to shop in-store for the holiday period, while 52% have never bought groceries online and nearly half (48%) are not willing to share personal data for personalized recommendations for cheaper alternatives. In contrast, “Experience first” respondents have widened their quest for experiences, with more than a third (36%) purchasing virtual products such as digital skins or interacting with virtual multi-user platforms. Meanwhile, 43% have bought an item directly from social media.
“Society first” respondents reflect their spirit of connection and activism in their digital behavior. They are not more likely than other consumers to use digital technologies, but they are more likely to use them to interact with other people, with 55% reporting that they recently socialized with friends and family on video platforms. “Society first” respondents are the smallest group in all regions and most countries.
Commenting on the findings of the latest research, George Tziortzis, Partner, Head of Consulting Services of EY Cyprus stated: “As consumers’ fears about health appear to subside, affordability and environmental issues emerge as the key factors influencing consumer behavior. These consumers are likely to spend less during the holiday season and beyond, either to save money or to protect the environment. Companies must find ways to adapt to this new reality, saving consumers money and driving sustainable efforts, for example by extending product lifespans or offering to repair and resell, while also providing information on the environmental impact of their products. Meanwhile, a smaller, but growing, group of consumers see personal experiences as their key priority, meaning that companies must place increasing emphasis on their digital channels.”
The latest edition of the EY Future Consumer Index is available at: ey.com/FutureConsumerIndex11