Consumer pessimism continues to spiral in the UK, with the cost-of-living crisis and rapidly rising inflation coupled with geopolitical uncertainty leading to downtrends in overall spending. Unsurprisingly, people are adopting an affordability-first mindset when it comes to their finances, particularly in terms of shopping. Indeed, ONS data highlights that 57% of Brits are splashing out less on non-essentials.
And now, as we head into autumn and thoughts move to Christmas, the situation is likely to become more fraught. With that in mind, how will consumer behaviour change this festive season, and what can retailers do to attract budget-conscious customers?
Festive shopping patterns
Recession and inflation won’t stop people from buying presents altogether, but there’s no doubt that for many of us, Christmas will feel different compared to 2021. Why? The majority will spend less money and be more careful about what they purchase. As part of that, consumers may veer away from buying single items with a high average selling price – electronics, for example – and purchase a bundle of lower-priced products like clothing instead.
Moreover, as costs climb and individuals think more about budgeting, they may shop for a smaller number of people. Backing that up is data from our benchmarking survey, revealing that 33% of consumers will only give gifts to their immediate family, and 47% will significantly limit who they buy for.
Meanwhile, named brands may lose their shine, with consumers buying cheaper private-label presents instead. Indeed, two in three Brits said they’d opt for generic or store-brand clothing in a bid to cut costs, meaning merchants must work harder to keep their customers coming back.
For retailers with private-label relationships already in place, they can make hay while the sun shines: it’s never been a better time to be ‘that company’. For retailers that don’t fall into that category, it’s not too late to take action. This year’s festive shopping window will be longer and more unpredictable – merchants have from now until Christmas Eve to attract customers – so marketing drives should be a priority.
There’s also still time to cultivate customer loyalty, before shopping starts in earnest and people consider moving to private-label. That involves personalising touchpoints using data from consumer wishlists to create custom recommendations or promotions. When budgets are tight, these are often more effective than general sales or deals.
Value as a driving factor
Meanwhile, with the majority of UK consumers (61%) estimating they’ll spend under £500 this Christmas, people are more focused than ever on value. But finding the ‘best’ price isn’t the only factor budget-conscious customers consider: 27% seek a high-quality digital experience.
Rising costs are somewhat out of retailers’ control, but they can attract festive shoppers by improving the customer experience (CX). How? Ensuring online journeys are fast, smooth and intuitive across browsing, searching, checkout, and post-purchase support.
To achieve that, it’s about using technologies like AI or ML to understand how customers engage with websites, and then experimenting with design to enhance the customer experience (CX). The end goal? Frictionless digital shopping journeys with features like one-click purchases that compete with private-label brands like Amazon Essentials.
But it’s a tricky balancing act: rolling out meaningful CX changes too regularly can lead to consumer confusion and frustration unless they’re accompanied by clear and effective communication.
With that in mind, consistent improvement via small iterations may be the best way forward – these updates are rarely noticed by shoppers, yet they take the experience one step closer to being friction-free. However, that’s only possible if there’s a company-wide understanding of CX, where everyone from support centre employees to the C-suite can empathise and act on behalf of the customer.
Hunting for deals
Mindful shoppers will place greater emphasis on Black Friday and Cyber Monday this year. Our data shows that 80% of consumers plan to buy items on those days; 57% of that group have never done so before or just a few times. The majority of sales will happen online: the most traffic is expected on mobile, while purchasing will take place predominantly on desktop.
As a result, a consistent and coordinated omnichannel retail strategy is crucial. All channels must work in tandem, with data insights leveraged to audit cross-device journeys and identify friction points that need fixing.
There’s also delivery to consider during this busy period. With packages more likely to be ‘ghosted’ – severely delayed or lost – retailers should stay connected with customers by offering easy access to post-purchase support. That type of engagement minimises holiday stress and can foster long-term loyalty.
Coping with uncertainty
With the UK in an economic downturn, consumers are cutting spending and the Christmas shopping season becomes more personal, emotional, and stressful. To attract customers and remain competitive, retailers should implement one-click purchases where possible and ensure every step of the digital experience exceeds expectations.