Recent Searches
In brief:
In October, EY teams surveyed more than 22,000 consumers in 28 countries, including 1,000 in Australia. The research provides extensive insight into consumer behaviour, with a deep dive into spending intentions around the end-of-year sales season.
The headline data shows four in 10 Australians (43%) are expecting to participate in Black Friday and related events. However, 33% of those planning to take part expect to spend less than they have in previous years. A higher proportion of consumers also say they are going to spend less in the festive season (41%) than last year.
Given the economic conditions, it’s not a surprise that consumers are focused on savings and finding the best value.
Future financial outlook of consumers
According to the OECD1, Australia has recorded the sharpest falls in household disposable income in the developed world in 2023. Interest rates have hit a 12-year high, with mortgage repayments as a share of Australian household disposable income at a record level of 9.5%.
The data is confronting, with Reserve Bank analysis showing $100 million2 extra is being pulled out of the economy in interest each day compared to the same time last year.
It’s little wonder that FCI 13 research shows close to four in five Australians remain worried about the cost of living (80%) and nearly half of Australian consumers (48%) say they are purchasing just the essentials.
History shows some companies came out of the global financial crisis in stronger shape. LEGO’s profits grew by 63% during that period as it expanded into Asia3. Domino’s changed its signature pizza recipe to boost sales and profits4.
Australians are still making purchases – they are just being more selective about where, when and how much they are prepared to spend. To ride the roiling economic conditions with success, brands must remain relevant – and that means consumers must be front-and-centre of strategic thinking.
We know consumers are looking for value in a wide range of categories to get the products and services they want at the prices they can afford. Their decision hierarchy has changed, and they aren’t shopping by rote. Instead, they are looking in their peripheral vision at new options, including where they shop and what they buy. It is critical that brands tap into this new value paradigm and continue to evaluate ranges, pack sizing, bundling, and pricing. Immediate discounts and rewards, from free shipping to vouchers, are highly compelling. In fact, nearly three-quarters of consumers surveyed for the CommBank Consumer Insights Report5 said these incentives were purchasing triggers.
Of consumers planning to engage in sales events, 38% said they’d shop equally online and in-store. Another 32% said they would take part mostly online. We know customers are often using a range of sources to undertake research before making a purchase, with search engines their first choice. The message here is clear: you need to be ready to engage with customers across a range of channels as they explore, research, and transact
It can be tempting for companies to be conservative and to pare back on programs that drive loyalty and underpin personalisation. However, the opposite is critical to building rapport and maximising both consideration and conversion. FCI 13 finds 35% of consumers globally are willing to pay extra for brands they trust — and this is up 10% from February 2022. Loyalty programs abound, but when done well, they provide a powerful competitive edge in difficult conditions. Consideration needs to be given to better use of data and exploring a wider range of targeted and unique reward types, from time-sensitive incentives to exclusive online events, early product releases to personalised experiences.
We are seeing brands6 use generative AI (GenAI) to streamline CX and underpin content creation to deepen engagement. Some global brands are employing GenAI to create and refine new product formulations; others are integrating it into consumer campaigns.
In a time of consumer constraint, there is a need to protect margins and drive efficiency across a portfolio. The opportunity for brands lies in optimising trade promotions, maintaining a clinical focus on the end consumer pricing strategy and taking a hard-nosed review of the portfolio.
Not every consumer experiences an economic downturn in the same way, nor does every brand. The most powerful competitive edge is having a better understanding of consumer behaviour than your competitors.
While it is tempting to look at the FCI 13 data and see consumers in a holding pattern, the truth is more nuanced. Consumer behaviour is continually shifting, not stagnating. The near-term conditions will be challenging, but by prioritising the consumer and thinking differently, brands and retailers can come out on the other side stronger.
The better the question
2023
Feelings compared to three-four months ago
How EY can help
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