Whether filing up at the pump or stocking up the fridge, households across the country are feeling the squeeze as a hike in inflation increases the cost of everyday items. And the outlook isn’t very bright. Just this month the UK government appointed a ‘cost of living business tsar’ to advise businesses on schemes to help those struggling with rising prices.
Cardlytics UK’s latest State of Spend report analyses the impact of the cost of living on UK consumer spending and how people are shifting their behaviours as a result. With energy bills, petrol, and grocery spending seeing some of the biggest increases, the report finds that UK consumers expect to spend at least £2000 more on essentials this year. The impact is stark: Total UK consumer spend on essential items rose by 7% between 2020 and 2022, with the average transaction value increasing by 10%.
But with three quarters (74%) of UK consumers saying they are spending more on day-to-day outgoings than a year ago, how are they responding to increased cost pressures? Here are three trends we’re seeing:
1. Non-essential spending takes a backseat
As prices on day-to-day essentials like food and fuel rise, consumers are looking to claw back spend on luxuries, such as leisure activities, eating out and travel. In fact, two in five (42%) consumers are planning to cut back on the number of holidays they take in a bid to curb their annual spend.
2. Comparison sites are increasing in popularity
Three quarters (73%) of consumers plan to shop around for the best deals and more than half (58%) plan to use price comparison sites more frequently.
3. Supermarket switching
Consumers are shifting spend away from the big four and toward the discounters, as every penny on the weekly shop counts. Total spend across the big four supermarkets fell 7% in the last year whilst discount supermarkets managed to uphold their market share.
But what is the impact on brands and what strategies can they use to engage customers and gain ground against their competitors?
There’s no doubt that brands across all categories are caught in the middle of the cost-of-living crisis and faced with a difficult question: should brands pass increasing costs onto consumers or protect their bottom lines?
But there is a third option. If brands can invest in their customers now, they are likely to reap greater rewards down the line.
With the cost-of-living crisis eroding brand loyalty and competition at an all-time high, keeping customers happy and giving them a reason to spend with you should be a top priority.
Whether it is through tailored rewards, cash back, or loyalty offers, brands can create long-term brand affinity with their customers and support them when they need it the most.
Download the UK State of Spend report here.