Christmas costings: a sober affair as prices rise

Christmas 2022 is likely to be a more sober affair in more ways than one, with customers cutting back on discretionary spending, gifts, and celebratory food and drink as they become more conscious about the cost-of-living increase over the next few months.

It means that retailers and brands will need to work harder than ever for consumer attention, adapting their marketing strategies to win spend in a market where there is reduced demand, say consultants EY, whose Global Future Consumer Index suggested that during October, 28% of consumers surveyed had a worse future outlook compared to 26% of consumers back in June.

Data: EY

However, the consumer outlook in Malta seems to have improved marginally over this period, with 28% of consumers indicating a negative view compared to 31% in May.

In May, the cost-of-living crisis was concerning customers but not necessarily impacting them. Since then, consumers may have experienced price rises and an increasingly uncertain economic environment meaning sentiment could have shifted even further.

Research showed that 61% of local consumers are concerned about the impacts of the rising cost-of-living, up from 35% in May.

“They are implementing a raft of measures to cope, including cutting back on spending across certain product categories and increasingly focusing on price and value for money considerations,” said EY’s Gilbert Guillaumier.

“The challenges consumers face mean that their affordability first mindset, which was most evident at the start of the pandemic, but which fell back as the impact of COVID-19 started to recede, is now back with a vengeance. 90% of Maltese consumers believe that price will be the most important purchase consideration in three years’ time, while 87% say that they will be more focused on value for money in the future.”

Interestingly, personal health and well-being are becoming more important as the majority of consumers say they will be more aware and cautious about the impacts of consumption behaviour on their health (82%) and mental well-being (78%).

Conscious consumerism

This desire for sustainability is also reflected in the continued growth of a more conscious consumer who is considering purchases more deeply than ever before.

Although driven by the desire for sustainability when the trend first emerged earlier this year, it is now also reflective of the affordability first mindset since a consumer who is consuming less will also be spending less. Over 63% of consumers say that they will pay more attention to the environmental impact of their purchases 28% will be more aligned with organisations that share similar values.

This shift towards more considered shopping behaviour will have profound implications for brands and retailers, as the shopping items that don’t match the increasing value that consumers place on sustainability will fail to raise profits, compared to durable and high-quality options. As consumer priorities change, brands and retailers must also change their offerings, so that supply can match the demand.

Rebalancing of online and offline

Physical retail experiences remain important to consumers as the majority of customers indicate a preference to in-store shopping for all product categories, ranging from purchases of fresh foods (88%), home and household items (74%) and clothing/accessories (55%). We continue to see a trend towards spending on experiences with 49% of local consumers willing to increase spend in this area.

For retailers and brands, this is indicative that consumers are looking for flexibility in channels and the critical importance of the right omni-channel experience. But the role of online as a shopping tool, as well as for buying itself, will continue to be vital for shoppers looking for bargains or wanting the convenience of immediate price comparisons even if they are in-store at the time.

The survey was carried out between August and October 2022 across a stratified random sample of 491 participants.