Shoppers may not be hitting the high street or splashing out on big-ticket items, but household spending has jumped sharply over the past year owing largely to price rises
Almost half (48%) of consumers in our survey have seen monthly household spend increase significantly year on year, while 34% have seen a slight rise. Just 6% report no change.
As one respondent says, while their “spend is the same, I get less for my money… council tax plus gas and electricity equals half my monthly income now”.
The baby boomer generation appears hardest hit by the soaring cost of living, with 56% reporting monthly household spending increasing significantly as of October 2023, compared with the previous year. More than half of gen X (52%) note a significant rise in household spending, as do 44% of millennials.
The message is clear: in 2024, consumers will have less money to spare and so retailers must work harder to ensure that people are still coming to them with their spend.
Time to surprise and delight
As the cost of living upends shoppers’ priorities, retailers need to be investing in innovative solutions.
”This research points to the Next retail battlegrounds, which will be won by those that can surprise and delight their customers beyond the simple transaction,” says Lars Pedersen, chief executive of nShift. ”We are seeing that, as consumers become more sophisticated, so they are demanding more from the brands they buy from.
”In deliveries alone, they want more choices of when and how their items arrive. They want to enjoy the benefits of a smoother post-purchase experience, whether that’s easy returns, checkout badges, which highlight more sustainable options, or clearer communications. The delivery is the link between brands and their buyers, so it is central to the brand experience.”
Innovation is also needed to drive fashion sales. With customers not prioritising clothing expenditure, many brands are expanding into the resale market.
Marks & Spencer launched a pre-loved school uniform initiative in June, asking customers to donate garments in exchange for 20% off selected children’s clothing, thereby nudging customers back towards their shelves.
The donated uniforms were sold on a dedicated pre-loved school uniform shop on eBay and in Oxfam stores. As part of the long-standing M&S/Oxfam Shwopping collaboration, the retailer also awards a £5 voucher when a donation that includes at least one M&S-labelled item is made to Oxfam.
Another example, relevant to cutbacks in larger items, is Mamas & Papas’ circular resale service, launched in May.
One of several sustainability initiatives from the brand, the Loved for Life scheme sees shoppers rewarded for trading in a Mamas & Papas pushchair with a voucher worth up to £150. The pushchairs are then refurbished, deep cleaned and repaired before being sold in the retailer’s outlet stores.
This is a smart move from a brand within a sector currently relying heavily on millennial spend. With just 15% of millennials claiming they will not slash their spending, implementing creative sustainable solutions such as this will help capture the spend of the 85% who are planning to cut back.
Retailers catering predominantly to older demographics may not be as hard hit as those attempting to attract younger consumers. The silent generation is least likely to tighten their budget in the six months to April 2024, with 43% saying they won’t be doing so. For the baby boomers, 18% won’t be cutting back either.
How retailers can take action
With price clearly the biggest hurdle for shoppers, Sales and discounts that offer good value for money could be the first port of call for many retailers compiling their 2024 strategies. Flagship discounts and well-signposted sales, bolstered by targeted marketing campaigns, can attract new customers.
However, discounting is not a wise strategy for all retailers, fashion in particular, as customers can become reluctant to pay full price.
Food and grocery retailers especially are making customer grabs via price drops.
In November, Morrisons announced it was investing £4m in price cuts across its Christmas range – its 10th wave of cost-cutting in 2023 – to reduce the price of 58 popular items by an average of 20%.
Meanwhile, Aldi has slashed the cost of more than 150 goods across its stores over the past few months and in October was confirmed by Which? as the UK’s cheapest supermarket for the 16th month in a row. In September, Tesco locked more than 1,000 prices until 2024, cut costs on hundreds of products and applied its Aldi Price Match initiative to hundreds more.
Marks & Spencer reduced prices by 11% on average across 200 lines at the start of the golden quarter, while Waitrose embarked on its third cost-cutting mission of the year in September, dropping the prices of 250 everyday items by an average of 10%.
As for retaining existing customers, loyalty schemes that offer genuine savings and unique rewards put retailers head and shoulders above the competition.
For example, at the end of 2022, Ikea redesigned its loyalty scheme so that customers are rewarded for simply logging into and interacting with its app, as well as for making purchases.
They can then choose how to redeem their rewards – there are standard product discounts, of course, but they can also select interior design and skills workshops or furniture assembly assistance. The brand’s goal is to “add value into people’s lives when they shop with us”.
Meanwhile, JD Sports rolled out its ew loyalty app, JD Status, across its store network in October.
As part of its ‘beyond physical retail’ customer experience approach, the app gives customers 10% cashback on their first purchase and 1% cashback on every additional transaction. The concept of rewarding customers with tangible cashback in store should strongly appeal to money-conscious shoppers, boosting sign-ups.
- Find out more about the real shopping priorities of UK consumers in the How They’ll Spend It 2024 report