As inflation rose to 2.9% this week, many households are feeling the pinch as their wages are not stretching as far as they did a few months ago. As a result, retail sales fell in May as shoppers reined in spending particularly in non-food stores where annual sales fell by 1.2%.
With Brexit, an uncertain economy and political instability as a result of the recent general election, it is pushing inflation higher and above the estimates given earlier this year from the Bank of England and other economists.
Less money to spend and a reluctance to part with cash has seen consumers shift their focus from buying products such as clothes, footwear and electronics to purchasing a range of experiences. Experiences can offer the consumer a memory that lasts forever, some escapism from the everyday or time to relax away from the world of work and the consuming online world.
Four main factors have been identified as having an influence over a customer’s choice in this area, these include: education, environment, entertainment and escapism. Consumers are seeing an intrinsic value in experiences which they see as an advantage to themselves and their wellbeing which for many justifies the bigger cost.
Richard Lim, chief executive at Retail Economics, who conducted the research into this consumer spending shift commented on the findings, saying; “A behavioural revolution is taking place through a transformational shift in what people value most… and in this new paradigm, experiences are taking prominence over products.”
Lim’s research found that a quarter of people would willingly pay more for the same product if they would receive a meaningful experience when they purchased it. For retailers, there was some positive information to consider from this research as 43% of people surveyed said they would be likely to spend more with them in future if they offered a meaningful shopping experience in-store.
Customer demand is requiring retailers to “engineer seamless experiences that envelope the consumer in beautiful retail environments that entertain, provide escapism and relevant education” says Lim.
Technology could also be helping to drive this shift in attitude as people not only expect more from businesses but they are also striving for a more human element to their shopping experiences in a world where you can order anything you like online in just one click.
For retailers, their challenge now is to use technology and this evidence of a change in customer attitudes, to develop and offer a shopping experience which consumers are looking for. It is understandable why consumers would be cautious with their money at the moment but this shift shows a move to making purchases of much more meaningful things when it comes to non-essential spending.