Digital natives are now less wowed by the capabilities of online and will drive the future of stores, says PwC UK industry leader for consumer markets Lisa Hooker
There’s no getting away from the fact that many people are experiencing a significant strain on finances.
With rising costs on fuel, food and electricity, inflation hitting 7% and the cost-of-living crisis starting to bite, PwC economists suggest the average UK household will be £900 worse off this year.
As a result, it is not surprising that we have seen an acceleration in the month-on-month decline in retail sales volumes as consumers begin to seek value and trade down in an effort to tighten wallets.
“There is very much still a future for the store – and it is being driven by our youngest consumers”
With the increase in bills, I know I have certainly started to be a bit more careful when spending in more frivolous areas.
While I believe pent-up demand for certain categories will remain, particularly as people plan for the summer and a return to holidays, the squeeze on incomes will obviously impact spending.
Given the latest view that inflation will stay high across the year and into 2023, there will be further reductions in spending in certain sectors. The affected sectors will need to work hard to win their share of people’s wallets.
It may seem counterintuitive but companies that can reduce costs and find the capital to invest in a downturn will put themselves in a strong position when consumer confidence increases and spending returns.
But where should you invest? While it will differ by sector and individual business, it is critical that you truly know your consumer base first. Because assumptions can be dangerous.
Think again
Take younger shoppers. We are regularly told that they want convenience and fast fashion but care deeply about social and environmental issues. Or that they are looking for new online experiences – likely as part of the metaverse – and that they have no interest in the high street.
Our new report, The Consumer Reconsidered, which looks at consumer attitudes to big-ticket purchases, shows that some of these claims do not hold up. In fact, what it shows is that there is very much still a future for the store – and it is being driven by our youngest consumers.
While online has largely won the battle for price, range and convenience, the under-25s, as digital natives, are used to it. They now have higher expectations and are less wowed by its capabilities.
As a result, they are more enthusiastic about stores with 65% of under-25s and 63% of 25–to-34-year-olds telling us they love going to physical shops. A similar number would also prefer to shop in-store than online if they had the time.
While there is increasing preference for online in many non-food categories, it is less so among the oldest and youngest age groups. Younger shoppers clearly relish the experience of shopping in stores.
“This is not to say it is not worth investing in things like the metaverse or more conscientious products, but any decisions you take must be based on an understanding of your customers”
Anecdotally, this is something I have witnessed with my daughter. One of the ways we like to spend time together is to go out for lunch and then spend an afternoon shopping.
For us, it is a social activity. That whole experience of browsing different shops, visiting our favourite retailers and enjoying some food and drink while being able to catch up cannot be replicated online yet.
While, like many older teenagers, she is a confident and regular customer of online brands such as Asos and Depop, she still has an affection for what physical stores offer.
But back to assumptions. This is not to say it is not worth investing in things like the metaverse or more conscientious products or even offering greater value for consumers.
However, any decisions you take must be based on an understanding of your customers. With the younger age groups – your future consumers – now just as likely to enjoy shopping in-store as online, understanding their preferences and where they look for information and inspiration during the purchase journey will become ever more important.
Only then can you invest in what really matters and be ready for when we come out of the downturn.
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