Future Consumer Index: In crisis, but in control

Many consumers are responding to a world in crisis by using the values and behaviors they learned during the pandemic.

In brief

  • The pandemic experience has made consumers far more resilient to change and uncertainty.
  • People increasingly want to actively control and shape their lives, not just react to events.
  • Most consumers do not expect the economy to recover within the next 12 months.

For consumers around the world, the last few years have been an unwanted rollercoaster ride. When the COVID-19 pandemic first emerged, people put their health first, adopting very different behaviors and attitudes almost literally overnight. As the economic impact of the pandemic took its toll, they shifted their attention to affordability and the cost of living. And when it looked as though the clouds were slowly starting to lift, people started to prioritize a new set of “post-crisis” values, especially around sustainability.

But that post-crisis era is yet to arrive. The global economy is slowing down, interest rates are going up, inflation has returned on a scale not seen for decades, geopolitics is playing out on the global stage, and new variants of COVID-19 continue to emerge. It’s debatable whether this combination of factors is creating a new crisis or simply extending the one we were in already. In the minds of consumers, the distinction probably doesn’t matter.

This latest edition of the EY Future Consumer Index (Index) – the 10th in the series – shows that people have become used to living in a context of relentless crisis and uncertainty. They are worried about the future, with 63% not expecting the economy to recover within the next 12 months and 62% expecting their living costs to increase over the next six months.

Since the start of the pandemic, we’ve been tracking five different consumer segments. The percentage of consumers that align with each segment has been particularly volatile over the last year, as people react to a volatile world.

Instead of just passively reacting to endless waves of change and uncertainty, they are actively responding – or at least trying to. People increasingly want to control and shape their lives around their own needs and priorities, even as the world keeps throwing new challenges their way. Indeed, 58% say they feel in control of their life and this is something they want to both protect and extend.

Increased working from home has given consumers more autonomy over how they structure their time; they’d also like to be in the driver’s seat in other parts of their lives — notably, how they use their money and how they share their personal information. While they’re becoming more careful about their spending, they’re also feeling bolder about taking action to protect their values and lifestyles. Compared to previous financial crises, we think there are three fundamental changes at play:

1. The pandemic experience has made consumers more adaptable

People are growing used to uncertainty and volatility. More now live with what we call an “always on emergency mindset.” They have become used to making drastic changes to how they live – from daily choices to long-term plans – and are more open to abandoning long-established habits and forming new ones. They’ve found levels of resilience they didn’t know they had.

2. The digital world is giving them more options

At the time of the last global financial crisis – in 2008/9 – the online world was a remarkably primitive space. The smartphone was a rudimentary device and broadband was running at a snail’s pace. Today, it’s much easier for consumers to get information, find alternatives, share their experiences, work together and learn from each other. At the same time, the digital world can also amplify panic, exacerbate uncertainty and overwhelm people with information and opinions.

3. Consumer values have fundamentally changed

Previous iterations of our Index have shown how deeply the pandemic experience has changed consumer values. In particular, people are now far more committed to living sustainable lifestyles and their interest in material goods has waned. Our latest data show that they are not willing to simply abandon their new values as their household budgets come under pressure. Rather, they are looking to express them in new ways – which we explore in more detail below.

Cost of living concerns
of global consumer are expecting their living costs to increase over the next six months.

What are the implications for business leaders? Consumer-facing companies thrive when their values and actions are aligned with the people they hope to serve and suffer when they are not. When consumers think about which brands to buy – or whether to go private label or not buy the product at all – they want to see their concerns and priorities reflected back at them. Beyond the product, they increasingly look to the organization behind the brand: what impact is it having on the world, and is that impact aligned with their values? It’s clear that consumer values and behaviors are continuing to evolve fast on multiple fronts, which means leaders need to adapt. How relevant is a “sell more stuff” strategy when many consumers say they want to buy less?

There are four imperatives to consider at the end of this article. First, we want to highlight some of the key trends our latest Index has revealed.

Cutting costs: consumers are substituting but not sacrificing

The dominant consumer segment currently is “Affordability first,” but the cost of living is a worry for all consumers: 79% say their finances are a concern; 35% are worried about having enough money to spend on things other than living expenses; 66% are focused on value for money.

Many consumers (33%) are substituting their normal purchases with new brands or trading down to private label (21%). In many ways, consumers are turning back to what worked for them over the past two years – they were able to save money by working from home, spending more time at home, eating at home, and not feeling the need to buy new clothes. This creates a challenging context for many brands.

  • 49% would consider buying private label packaged food
  • 48% are purchasing cheaper alternatives
  • 42% expect to spend less on out-of-home recreation
  • 35% expect to spend less on grocery delivery

Typically, when finances are tight, people cut their spending in a narrow range of categories and still reward themselves with “treats.” But now we’re seeing consumers apply their money-saving tactics across all categories. In make-up, for example, there’s a vibrant social media culture around influencers sharing “dupes” – low-cost alternatives to luxury brands that, in their view, perform just as well and provide better value for money.

Our data show this isn’t just about saving money, but a continuation of behaviors adopted during the pandemic. Some of the brand characteristics that have traditionally conferred status no longer resonate as well with consumers. There’s an underlying desire to live and spend more “authentically.” More people are committed to repairing items rather than replacing them. Fewer people are interested in seasonal fashion trends – 79% of “Affordability first” consumers are ignoring them, but so are 55% of the more hedonistic “Experience first” consumers. People say they are more comfortable “in their own skin.”

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    Sustainability: consumers are holding on to their values

     

    Many consumers are finding it hard to square their need to live affordably with their desire to live more sustainably, especially as they feel sustainable goods are too expensive. However, resilient consumers are not simply giving up their aspiration for sustainable living; they are trying to find more cost-effective ways of achieving them.

     

    Many say they are making more of an effort to reduce waste and buy secondhand products. Consumers are taking control by optimizing for both economic and environmental benefits.

     

    • 67% say the high price significantly deters them from buying sustainable products
    • 87% are trying not to waste food
    • 36% say they will buy more second-hand products
    • 85% are trying to conserve energy
    • 24% have stopped purchasing (or purchased less) from a brand that isn’t doing enough to help the environment

     

    This wave of our Index also reveals that perceptions of sustainable goods and products have improved. A declining percentage of consumers view these goods as being of low quality and not durable. As importantly, they increasingly trust the information they get about sustainable products from the companies that make them.

    Consumers do not trust information from just any source. They seek insights they feel are credible and transparent, and they value ways of filtering and personalizing what they are exposed to. We’re seeing this broader trend play out with regard to sustainability, with almost a third of consumers having signed up to an app or service that tracks elements of their carbon footprint or environmental impact. Consumers increasingly want to make informed decisions about the products they purchase and are looking for trusted sources to support that.

    Consumer-facing companies are looking for trusted sources too – they’re using “sustainability tech” to improve their products. Many are already working with sustainability tech companies to access information and insights that get them closer to the consumer. These partnerships are generating new forms of consumer insights that help companies to engage consumers, drive sustainable innovation, and meet their sustainability goals.

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      Digital: Consumers increasingly value alternative experiences and products

       

      The Index shows that a small but growing group of consumers is interested in exploring emerging technology and digital channels. Nearly one in 10 consumers have used digital currencies, experienced the metaverse, or purchased a virtual product.

       

      Interestingly, this baseline level broadly reflects where e-commerce was five years ago. In 2017 it had a 10% share of retail, which has since doubled. That level of retail penetration was enough for some observers to predict the end of high street shopping. Is the consumer industry at a similar tipping point?

       

      The pandemic experience made significant parts of daily life “digital first.” As they look to take more control of their finances, consumers are again turning to digital. For example, they are hedging between digital and physical experiences – substituting rather than sacrificing their lifestyles.

       

      The adoption of newer forms of digital goods and services presents new opportunities for companies. Can they invest in digital in ways that differentiate their brand experience, drive innovation, capture more consumer data, test products digitally, or create digital product lines?

       

      Trust will be critical. When it comes to using and protecting their data, consumers are extremely concerned about who they share their data with and want to understand how it will be used and protected. They are adding a safety-first element to their post-pandemic, always-on emergency mindset.

      How EY can help

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      Four imperatives for business

       

      1. Review operations and portfolios to deliver on affordability
       

      Consumers are increasingly likely to trade down in order to get the products they want at the prices they can afford. In this inflationary environment, companies must consider how they can manage their product portfolio to optimize for better pricing outcomes.

       

      Previous waves of our Index have shown how the pandemic has made consumers more willing to shift to private label. This gives retailers a chance to expand their private label offering. But brands also need to find alternative sources of supply, ingredients or components and experiment with other product attributes, such as packaging and packages sizes, to ensure that they can optimize most effectively for price.

       

      This requires and enables greater supply chain and manufacturing resilience, but is also likely to be more than a short-term fix as price and income concerns linger.

      How EY can help

      2. Tailor sustainability strategies to provide cost-effective solutions
       

      Consumers are increasingly price sensitive, but they are not willing to abandon their growing resolve to live and buy more sustainably. Many companies will need to adopt a new strategy, approaching sustainable products and services as a cost-effective option for the consumer, not a premium choice.

       

      At the core of this mindset is a need to investigate models that keep products in circulation for longer, such as rental, reselling and repairing. This also forms a need to build scale into existing sustainability solutions, so they can become cost-effective from a procurement perspective.

       

      For example, the hike in energy prices related to fossil fuel inflation can drive greater investments in alternative energies that enable scalable and affordable green energy – innovation out of necessity creating an opportunity to make a more sustainable product.

      How EY can help

      3. Rebalance engagement investment to accommodate new digital opportunities
       

      The physical world will not suddenly become secondary to the digital realm, but the prominence of digital that spiked during the pandemic is likely to keep growing. This will give brands new ways to engage online and in the nascent, but developing, metaverse.

       

      Brands that typically cut marketing budgets during times of economic turmoil now face the risk of further disintermediation from consumers who are becoming less brand loyal in their purchase decisions. To counter this companies must instead double down on their efforts to sharpen and define a distinctive brand proposition by exploring new and targeted ways to meet and engage with consumers across multiple channels. This includes experimenting with digital innovation as well as collecting and leveraging consumer data in ways that add value to physical and digital customer experiences.

       

      But these efforts must be balanced against the consumer’s concerns around data privacy and cyber security. It’s not just important to safeguard consumer data; companies can build trust by showing consumers that they use their data in responsible ways that deliver tangible benefits.  

      4. Set KPIs that reflect changing consumer values
       

      This wave of the Index – and previous waves – underlines the extent to which consumer values are changing. People are less motivated by financial rewards; status is increasingly conferred by sustainable behaviors rather than wealth. Consumers are rethinking how they spend their time and are looking for ways to switch between saving time on the things they don’t like and spending time doing the things they love. Work needs are increasingly framed by flexibility and purpose rather than careers and salaries.

       

      To meet these emerging values, companies must reconsider what their purpose is and the KPIs they want to set to achieve their goals. Traditional financial metrics such as growth, profitability, share price and shareholder returns are increasingly making room for non-financial metrics such as emissions, diversity and innovation. Companies must consider and review these metrics in the context of the consumers they serve and the people they employ, and develop new KPIs that embed non financial values into their business culture.

      Summary

      When their finances are under pressure, people look to cut costs. And business may feel the same way too. It’s a natural reaction, and for many, it's the only possible reaction. But living through a pandemic has changed the way many consumers respond to crisis. Their values have changed, and they’re determined to live by them, as they seek to maintain a sense of control over their lives. They’re less interested in buying things they don’t need, and more interested in acting sustainably. For business, this means making different choices too if they are to stay aligned to their consumers.

      About this article

      Photographic portrait of Kristina Rogers
      Kristina Rogers
      EY Global Consumer Leader
      Global leader for consumer industries. Marketing strategist. Worked in 20 countries. Harvard MBA. Photographer. Scuba diver. Canadian fiction reader. Mother of two.

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