Nearly one in five consumers (19%) intend to use Buy now, pay later (BNPL) services more in the coming months, as they tighten their belts and seek savings by spreading the costs, reducing purchasing habits and spending less on brands.
According to McKinsey & Company’s latest UK Consumer Pulse Survey, which analyzed consumer sentiment – how they feel, shop and spend – since the start of the pandemic, almost half of consumers (43% ) are negative about the current economic situation in the UK is more pessimistic today than during the Covid-19 shutdowns in March 2020 (30% were pessimistic) and November 2020 (31% were pessimistic).
Rising prices are now the number one concern of UK consumers, regardless of age or income, with 69% citing rising prices as their main concern. Ninety-five percent of consumers saw price increases across all categories, with 74% seeing significant increases in energy costs, 66% in fuel prices and 49% in fuel prices. food and groceries.
According to the study, consumers intend to buy fewer non-discretionary items: among those planning to spend less on food, clothing and entertainment, consumers plan to buy less clothing (63 %), take-out and delivery (60%), out-of-home entertainment (61%) and books, magazines and newspapers (60%).
The downgrade is also particularly evident in household goods, frozen foods, and snacks and confectionery: 41% of consumers switched grocery/essentials brands in the past three months. The categories where most consumers turned to private label/entry level were frozen foods (50%), household products (48%), snacks and confectionery (44%) and bread and bakery (42%).
More than half (57%) of consumers have tried a new private label when shopping for groceries and other essentials. Gen Z and Millennials are the most likely to switch to different brands and retailers in the past 3 months, with 54% buying from a different retailer/store than normal, compared to just 27% of baby boomers.
Millennials and Gen Xers are the most likely to downsize their lifestyle, with 71% of Millennials and 79% of Gen Xers worried that prices for everyday purchases have risen. As a result, 55% of millennials and 61% of Gen Xers have had to downsize their lifestyle due to rising prices. 64% of Millennials and 65% of Gen Xers plan to buy fewer products/services in the future if prices continue to rise
Gen Zers are most likely to put off major purchases: One in seven (14%) Gen Zers have delayed or canceled buying a new home, and 23% have delayed an pending trip or vacation.
Consumers are now working from home, cooking at home and using grocery delivery more often than before the pandemic. 44% of consumers work more from home, 33% cook more from home and 32% use grocery delivery more often. Omnichannel shopping is also still a reality for half of consumers across all categories, but there is an increasing use of in-store shopping and search.
Anita Balchandani, Senior Partner, McKinsey & Company, comments: “In response to inflation and pressure on household incomes, we are seeing consumers lower their prices, switch to private label, while being very open to changes in retailers and brands. Tough times like these mean that market share is up for grabs for those best able to respond to this flight to value.