How festive shoppers are reacting amid a cost-of-living crisis

The festive season isn’t just the biggest time of year for Santa and his elves; retailers are typically run off their feet, too. In fact, the period between October to December is often described as “The Golden Quarter” thanks to its income-generating potential.

This year, though, the cost-of-living crisis is taking some of the shine off the bauble. So, how can retailers navigate this challenging holiday season?

According to a new report from The UK E-commerce Association (IMRG) and Clearpay, which surveyed more than 1000 British shoppers, the challenges are real but the opportunities are vast – if retailers can understand what shoppers are searching for.

Consumer sentiment is cautious

We’ve all heard about the rate of inflation in the UK, which is now at a 40-year high – and there’s no doubt that consumers are feeling the pinch, making discretionary purchases more carefully. According to IMRG and Clearpay’s report, The Modern Consumer: How shoppers are behaving in the cost-of-living crisis, 61 per cent of consumers said they plan to spend less on gifts this Christmas.

Deals and discounts

The upside? More than half of consumers (56%) plan to spend the same or more in total compared to last year (including food, drink and entertainment). 

Shoppers are also on the search for value and discounts, and many (35%) are planning to start their festive shopping earlier than ever, in October and November. 

This means that Black Friday Cyber Monday (BFCM) is poised to be a major opportunity for retailers this year, which means it’s important to ensure that marketing is well under way.

And, according to the Modern Consumer report, shoppers who get in early often spend more: a quarter of consumers said that discounts or promotions allow them to budget more for gifts than planned, and around 25 per cent said they wait for sales and promotions to buy Christmas gifts. 

Meanwhile, four in 10 consumers said they are likely to spend the same as or more on Christmas overall than last year.

Gen Z = Gen Spend

An important customer group this festive season is Gen Z (aged 18-24). Unlike older survey respondents in their 40s and 50s, whose gift-purchasing intentions are most impacted by the cost-of-living crisis, Gen Z is most likely to spend the same or more this festive season.

This is possibly because many young adults have recently entered the workforce and are still living at home. Then there’s the post-pandemic pent-up demand factor to consider– after three years of limited festivities, young people want to socialise, travel and spend on entertainment.

For retailers searching for incremental revenue, Gen Z is an important demographic.

Location, location

Where shoppers are finding inspiration for their wish lists and gift lists is shifting too, perhaps reflecting Gen Z habits. While 56 per cent of respondents said being in-store or at a shopping centre is a source of inspiration when it comes to buying a Christmas gift, 66 per cent of shoppers expect to make the majority of their purchases online. 

Crucially, more than one in four shoppers said they would buy more online if they didn’t have to pay for shipping or delivery, so it’s important that retailers consider whether offering free shipping (or free shipping over a specific purchase price) is a worthwhile investment. 

Facebook, Instagram and Tik Tok are significant sources of inspiration for consumers, making them key purchasing levers. 

What’s on the wish list 

What’s everyone planning to give and hoping to receive? The traditional festive categories of toys and games, beauty, and jewellery will still be strong, but clothing and fashion is set to perform better than most other sectors. According to IMRG data, clothing, womenswear, and footwear were the only categories to experience year-on-year online sales increases in the first six months of 2022 and the category is predicted to continue to shine, with more demand for work wear, occasion wear and casual wear as we emerge from our loungewear. 

Flexibility is king

With the cost-of-living crisis continuing, payment flexibility is high on shoppers wish lists this festive season, with 55 per cent of respondents reporting that they have either used or would use Buy Now Pay Later systems like Clearpay as a budgeting tool to manage their finances responsibly.

While young people are most open to BNPL, at least a quarter of people in all age groups questioned who would consider or are already using BNPL. Now more than ever, retailers need to keep up with consumer demand when it comes to how they pay, especially as we enter the most expensive time of the year.

To read the full report, please download it from here.