Worried consumers to cut down on fashion spend as inflation soars
There’s more bad news about the state of consumer finances and what they intend to buy in the vital festive shopping season with a new study showing times will be tough for retailers.
McKinsey & Company’s UK Consumer Pulse shows that buy now, pay later (BNPL) is on the rise and festive shopping intent is down.
The company surveyed over 1,000 UK consumers last month and 58% said they plan to do less Christmas shopping this year with 8% planning on doing no shopping at all. This lack of intent to spend is highest in key age groups with 64% of both Millennials and Gen X planning on doing less Holiday shopping than previous years.
Additionally, 19% of consumers intend to use more BNPL services in the coming months, compared to 15% when asked in April. This is highest among Millennials (30%) and Gen Z (26%).
What’s particularly significant about this is that while retailers will still be able to benefit from cash being spent in the lead up to Christmas, the fact that consumers will still be paying for many items in January, February and March means they may be less likely to spend during those post-Christmas months as stores mark down old-season product and inject newness into their offer with spring drops.
As many as 43% of consumers are negative about the UK’s current economic state with consumers more pessimistic now than during the first lockdown in March 2020 (when 30% were pessimistic) and the second one in November 2020 (when 31% were pessimistic).
They’re most worried about rising prices, regardless of age or income, with 69% citing rising prices as their top concern. And price rises in clothing and footwear are being seen by the majority of consumers (61%, up from 53% in June and 43% in April).
It all means consumers are saving less but also spending less on non-food discretionary items as spending on utilities, transport, and food increase.
Some 63% of consumers who plan to cut their spending on key areas will be cutting back on fashion in the months ahead and purchases intent for clothing, footwear, accessories and jewellery is heading universally downwards.
Meanwhile, Millennials and Gen X in particular are most likely to scale down their lifestyles overall with 55% of Millennials and 61% of Gen X having had to do this due to an increase in prices.
That means cutting back on other spending areas that might also affect their willingness or need to buy fashion. Travel plans, for instance, tend to be one of the biggest reasons for consumers buying new clothes, but they’re unlikely to spend on travel and leisure in the next three months.
Among those consumers who plan to spend less on travel, 46% will stop spending on international travel, which could hurt spending on both beach holiday items and ski clothing in the months to come.
Of course, that could also mean opportunity for budget brands or simply those offering quality items at lower prices.
Anita Balchandani, Senior Partner at McKinsey & Company, said: “In response to inflation and the squeeze on household income, we see consumers trade down, switch to private label, as well being very open to changing retailers and brands. Challenging times such as these, mean that market share is up for grabs for those who are best able to respond to this flight towards value.”
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