Ikea reckons consumers have hit “peak stuff”. Next’s Lord Wolfson says there’s a “continuing trend towards spending on experiences”, and Dixons Carphone’s Seb James thinks “shoppers are now only grazing on ownership”.

This trend, it is said, is led by millennials, more than half of whom say they prefer to spend on an experience rather than a possession.

There’s no disputing the figures that retail sales are declining as a percentage of consumer spending, but is it all doom and gloom for the retail sector? Do physical stores need to be turned into experience-led flagship showrooms in order to survive?

Reports of the death of ‘stuff’ are greatly exaggerated, and the combination of a squeeze on consumers’ disposable incomes and the emerging preferences of the post-millennial Generation Z, born from the late 1990s onwards, may tilt the balance back in favour of retailers.

Leisure looks more vulnerable to cutbacks than retail

In PwC’s latest consumer sentiment survey, we asked more than 2,000 adults about their spending intentions over the coming year.

The only category where more people thought they would spend more in the next 12 months was grocery, albeit primarily due to price inflation.

By comparison, the top two areas for cutbacks were eating out and going out, with 30% of adults saying they expected to spend less on these categories in the next 12 months.

Even if you don’t believe that there will be a long-term renaissance in scratch cooking and home entertaining, we know from the last recession that leisure spending was one of the earliest casualties.

Although it’s also true to say that it bounced back quickly, and spending on some categories such as cinemas and gyms didn’t decline at all.

Quite simply, experiences can be expensive and easy to forego.

Take, for example, Saturday night out at the cinema followed by dinner and drinks at a mid-market casual dining chain. That could set you back £50 per head, which is the same price as four (yes, four) party dresses from Primark’s Autumn/Winter 2017 collection.

Generation Z leading the charge back to stuff?

While some retailers have lamented the end of stuff, others continue to produce result after result of sales growth.

For example, little seems to dent the stratospheric rise of Boohoo, Asos, other young fashion retailers and even Primark, in spite of its firmly store-based channel approach.

Indeed, while grocery was the category most consumers of all ages thought they’d spend more on, it was a different story among 18- to 25-year-olds.

Fashion was the top answer for this age group, with 37% saying they’d spend more on clothing and accessories in the next 12 months.

In fact, in contrast to older adults who were pessimistic about their spend across the board, there was only one category where more 18- to 25-year-olds thought they’d spend less: eating out.

And if you believe that many trends hitting UK consumers start in the US, last year our US colleagues found that Generation Z was the age cohort most well disposed to tangible gifts over the holiday season, rather than experiences.

Not surprisingly, 90% of this group admitted to their gifting decisions being influenced by social media, and no doubt also by what they could show off on their own social media feed.

That’s not to say that retail will be immune to a consumer spending slowdown, even if parts of leisure might be the first to see spending cutbacks.

Our UK survey found that roughly one in four consumers thinks they’ll spend less on categories such as fashion, home, big-ticket and technology in the coming year, with only one in 10 saying they’ll spend more in these areas.

Meanwhile, holidays remain sacrosanct for many – in terms of spending priorities, they consistently rank ahead of every category except grocery.

The ‘stuff’ that shoppers’ dreams are made of?

However, there will be pockets of retail outperformance in the near future, all of which will be helped by any trend back from experiences to stuff:

  • Retailers targeting the post-millennial generation, who are emerging as the biggest fans of “stuff” over experience
  • The grocery sector, where consumers are seemingly resigned to spending more, and perhaps more so if they can capture any spend diverted from going out
  • ‘Spending on me’, with beauty, personal care and health being the other categories least cited by consumers for spending decreases

So while spending on leisure and other experiences has eclipsed retail spend for the past few years, perhaps the tide will turn as wallets are squeezed and generational attitudes evolve.

Will tomorrow’s debate shift from ‘peak stuff’ to ‘peak experience’?

  • Kien Tan is director, retail strategy, at PwC