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Consumers Rethinking Spending As Cost of Living Soars

The rising cost of living means consumers are rethinking their spending habits with hospitality and clothing the focus of purchasing cutbacks, writes Keith Watt, Head of Retail at KPMG Ireland.

KPMG’s latest independent retail survey shows that more than 4 in 5 (84 percent) of consumers have already started tightening their belts when it comes to eating out and almost 8 in 10 (78 percent) have reduced their spend on clothing, while 74 percent are cutting back on DIY budgets.

The survey showed that:

  • Getting best price continues to be number 1 priority for almost two-thirds of consumers (64 percent).
  • Price is driving buying decisions to the detriment of socially conscious shopping, with 40 percent of customers ranking buying Irish it as the least influencing factor. Over half of consumers (53 percent) also rejected introducing additional charges for excess packaging from goods purchased online.
  • The trend towards online shopping is also slowing with pandemic restrictions removed. However, younger customers are still more likely to shop online, with 43 percent of 18–24-year-olds buying clothes more online, compared with just 26 percent of the general population. 

Inflation & Purchasing Patterns

Keith Watt, Head of Retail at KPMG Ireland, said, “inflation is changing consumer behaviour and purchasing patterns and we expect to see a growing emphasis on price promotion and the marketing of special offers in some sectors as consumers shop around for deals.”

Commenting on the challenges being faced by business, Watt said, “the findings will give food for thought to business leaders in many sectors including hospitality and leisure, already facing its own challenges in terms of staff availability and rising input costs.”

Non-essential retail is also being hit by reduced spending, with over three quarters of customers stating they are spending less on clothing (78 percent) and household DIY budgets (74 percent). Meanwhile, getting the best price continues to be the number one priority for almost two-thirds of consumers (64 percent).

Consumer Spending

More than half of consumers older than 45 are shopping around more often for motor fuel. Meanwhile, women & those in rural areas are shopping around more for better value on clothing. Conversely, younger consumers were more likely to report increased spending on subscription services such as Netflix and Disney Plus, with many hiking their prices in recent months.

Commenting on the varying impacts by sector and demographic, Watt said, “these consumer trends vary depending on whether customers are in rural or urban areas, and by age, so understanding your customer base and focusing on demographics where there are still opportunities will stay vital as price pressure is felt across the economy.”

Socially Conscious Shopping Gets Slashed By Price Factors

Price is also driving buying decisions to the detriment of socially conscious shopping factors, such as buying Irish and sustainable buying. 40 percent of customers ranked buying Irish as the least influencing factor, an increase from 36 percent when surveyed in December 2021. Over half of consumers (53 percent) also rejected introducing additional charges for excess packaging from goods purchased online.

However, while only 3 in 10 (29 percent) are looking for sustainably sourced and/or produced goods, this was this was more important to gen-z consumers aged 18-24 (33 percent). Even more strikingly, younger consumers were far more likely to be positively influenced by retailers that support good causes, with 50 percent aged 18-24 ranking it as important, and 39 percent for 25-24-year-olds, compared with only 36 percent on average across all age groups.

Switch to Online Stalls as Pandemic Restrictions Disappear

With the lifting of COVID-19 restrictions, consumers have adopted a mix of online and offline shopping, except for groceries which remains mostly offline. Gift shopping online has seen the largest decline. Younger cohorts continue to purchase more online than their older counterparts.

Consumers’ expectation of their levels of online shopping over the next 12 months has decreased. This is likely resulting from the practical elimination of pandemic restrictions and the improving weather over the summer months. However, despite a clear move towards physical shopping, 46 percent are still avoiding big shopping centres and city centres because of COVID-19, although this is a significant reduction from 61 percent in December. 

Source: KPMG Ireland

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