Consumer confidence in the UK has risen four times faster than around the world over the last year, so is it time for retailers to start celebrating?
Consumer confidence in the UK has risen four times faster than around the world over the last year and is at its highest level for almost seven years, so is it time for retailers to start celebrating?
The fact that consumers are in their most bullish mood about purchasing since the summer of 2006, and that fewer people (six in 10) are changing habits to save money since we started measuring this metric over five years ago, would suggest an emphatic yes.
However, the bullish are still in the minority. Despite the large rise, only four in 10 think now is a good or excellent time to buy things they’ll want and need for the next year. Furthermore, nearly three in 10 Britons state they have no spare cash.
The way that people who have spare cash spend it neatly sums up the ‘cautious positivity’ mind-set of the consumer which retailer face. British consumers tell us the most popular destination for their spare cash is to put it into savings (cited by 37%), while paying off debts is the fourth most popular (21%). However, more encouraging for retailers, is that spending on holidays and spending on new clothes are nestled between these two ‘saving’ responses.
Clothes purchasing throws up what might seem to be an interesting paradox: they’re the third most popular destination for spare cash but also the second most common area for cutting costs (behind saving on energy bills).
Aside from boding well for low-cost clothing retailers (people want to buy clothes just not spend a lot of budget on them), this highlights just how the recession has taught people to better manage household budgets. Having got used to living on less, shoppers are far more selective in their choices as a result. Although consumers are cautious, they’re willing to buy as long as the value is clear. In this regard, the continual need for promotional activity such as price cuts and multi-buy savings is important - particularly for food retailers.
A good illustration of this increasingly savvy shopping is the rise of the discounters for grocery essentials – Aldi has overtaken Waitrose as the UK’s sixth largest supermarket. People are happy to shop around – aided by the internet in finding the best prices - to get what they need to stay within budget.
So, while retailers should be encouraged by the fact people are more positive than they’ve been for some time, it’s still too early to break out the champagne. Overall, confidence is still in the debit column (i.e. below the 100 index) and consumers are still showing signs of wariness as to what lies ahead. ‘Cautious positivity’ is today’s summary.
- Mike Watkins, Nielsen’s UK head of retailer and business insight