Nearly one in five (19%) of consumers intend to use more Buy now, pay later (BNPL) services in the coming months, as they tighten their belts and look for savings by spreading costs, downtrading their shopping habits and spending less on brands.
According to the latest UK Consumer Pulse Survey by McKinsey & Company, which has charted analysis of consumer sentiment – how they’re feeling, shopping, and spending – since the onset of the pandemic, almost half of consumers (43%) are negative about the UK’s current economic state more pessimistic today than during the Covid-19 lockdowns in March 2020 (30% were pessimistic) and November 2020 (31% were pessimistic).
Rising prices are the number one concern for UK consumers today regardless of age or income, with 69% citing rising prices as their top concern. Ninety-five percent of consumers perceived price increases across any category with 74% perceiving significant increases in energy costs, 66% in fuel prices and 49% in food and grocery prices.
According to the study, consumers intend to buy fewer non-discretionary items: Among those who plan to spend less on food, clothing and entertainment, consumers plan to buy fewer clothes (63%), food take-out and delivery (60%), out of home entertainment (61%) and books, magazines, and newspapers (60%).
Downtrading is also particularly evident in household products, frozen foods, and snacks and confectionary: 41% of consumers changed a groceries/essentials brand in the past three months. The categories where most consumers switched to private-label/entry-level-priced brands were frozen food (50%), household products (48%), snacks and confectionary (44%) and bread and bakery (42%).
More than half (57%) of consumers tried a new private label brand when shopping for groceries and other essentials. Gen Z and Millennials are most likely to switch to different brands and retailers in the last 3 months with 54% shopping from a different retailer/store than normal compared to only 27% of baby boomers.
Millennials and Gen X are most likely to scale down their lifestyle with 71% of Millennials and 79% of Gen X are concerned that the prices of everyday purchases have been increasing. As a result, 55% of Millennials and 61% of Gen X have had to scale back their lifestyles due to an increase in prices. 64% millennials and 65% of Gen X are planning to buy fewer products/services in the future if prices continue to rise
Gen Z most likely to postpone large purchases: One in seven (14%) of Gen Z delayed or cancelled the purchase of a new home and 23% delayed a pending trip/ vacation.
Consumers are now working from home, cooking at home, and using grocery delivery more often than before the pandemic. 44% of consumers work from home more, 33% cook at home more, and 32% use grocery delivery more often. Omnichannel shopping is also still reality for half of consumers in all categories, however there is an increasing use of in-store purchase and research .
Anita Balchandani, Senior Partner, McKinsey & Company comments: “In response to inflation and the squeeze on household income, we see consumers trade down, switch to private label, as well being very open to changing retailers and brands. Challenging times such as these, mean that market share is up for grabs for those who are best able to respond to this flight towards value.”