The cost-of-living crisis will put more pressure on shoppers than COVID

COVID drastically changed shopping habits. Lockdowns, isolation and illness led variously to panic buying^[1], a surge in online deliveries^[2], and some impulse purchases^[3].

Many households were also hit by a serious fall in income^[4] as businesses closed and jobs were lost. But our research^[5] shows that, on the whole, consumers in the UK have coped relatively well with the pandemic so far.

We found that while some people remained mindful of price, they were generally not inclined to make sacrifices on quality. They continued to buy the products they like from brands they trust at the shops they prefer.

This response, known as a “positive coping behaviour” was at least in part made possible by several widespread measures^[6], including furlough schemes and business-rate relief, which protected the incomes^[7] of employees in sectors including retail, travel and hospitality.

But what about the challenges coming next? Rising inflation, higher energy bills, stagnant wages and tax rises have led to 2022 already being described as the “year of the squeeze^[8]”, which could leave households on average £1,200 worse off.

Our research suggests that consumers will react more negatively to these economic events. In this context, a negative approach means households deliberately reducing their spending and being more cautious about the things they purchase.

They are also likely to become more price conscious, switching to cheaper brands and buying less. Such coping mechanisms are typical^[9] and to be expected when consumers face serious financial difficulties.

We also expect consumers to become less likely to buy environmentally friendly products^[10], such as plastic-free razors or organic cotton clothing, and prioritise affordability over sustainability. This idea is supported by a well-known motivational theory^[11] which suggests that basic financial needs – paying for energy and food – must be fulfilled before proceeding to other altruistic needs, like caring for the environment.

But while consumers may cope with income pressures more negatively and more selfishly, retailers from many sectors can mitigate some of this change – with benefits for customers as well as the companies themselves.

For example, larger chains can develop and expand their “private labels”, also known as a “store brands”, such as Sainsbury’s Taste the Difference range or No.7 at Boots.

These brands generally comprise three levels^[12]. There is “economy” for the most price-sensitive consumer, “standard” for those seeking higher quality at lower prices, and “premium” for the most quality sensitive seeking good value. When disposable incomes are squeezed, price-conscious consumers may be more inclined to switch to store brands, while others may decide to trade up a level.

This strategy means shops can create new products to attract customers, without resorting to heavy discounts and engaging in direct price wars with rivals. Marks & Spencer have done this with their popular Percy Pig brand of confectionery, which has now been expanded^[14] to cushions, plates, socks and pyjamas.

Retailers should also consider holding special events or pop-ups that allow consumers to discover new ideas and experiences. When incomes are under pressure, anything that takes widely felt financial challenges into account is likely to be particularly appreciated by cash-strapped customers.

For example, shoppers may be attracted to an in-store event that shares ideas on how to cook different dishes with fewer or leftover ingredients. A social media campaign that combines this with themes like “shopping smarter” or “healthier eating” could add further appeal.

It is unclear how long the cost-of-living crisis will last. But it is likely that consumers will adapt their shopping habits, very likely negatively, in response. Retailers that show imagination and understanding, and support consumers with their spending will be appreciated by customers old and new. At the same time, they will help shoppers feel that they do not have to make significant lifestyle changes or forego environmental responsibility^[15] to ensure their own financial survival.

References

1. ^{^} panic buying (theconversation.com)
2. ^{^} surge in online deliveries (theconversation.com)
3. ^{^} impulse purchases (theconversation.com)
4. ^{^} serious fall in income (theconversation.com)
5. ^{^} our research (doi.org)
6. ^{^} widespread measures (www.gov.uk)
7. ^{^} protected the incomes (www.bbc.co.uk)
8. ^{^} year of the squeeze (www.bbc.co.uk)
9. ^{^} are typical (doi.org)
10. ^{^} environmentally friendly products (earthfirst.org.uk)
11. ^{^} motivational theory (www.bbc.co.uk)
12. ^{^} three levels (doi.org)
13. ^{^} Shutterstock/Pixelbliss (www.shutterstock.com)
14. ^{^} been expanded (www.you.co.uk)
15. ^{^} environmental responsibility (theconversation.com)