Consumer retail purchase journey decelerated as cost-of-living crisis worsens- Mediahub study

New research undertaken by full-service media agency Mediahub has revealed high rates of consumers are brand switching across all income levels in Australia and New Zealand, along with signs the typical retail journey is taking longer in the face of a worsening cost-of-living crisis.

Consumers are also spending more time in exploration and evaluation modes to seek out ‘value for money’ and better deals, according to the new retail consumer study called The New Value Economy.  It reveals that three in five people in Australia and NZ are switching to cheaper products or choosing to delay purchases altogether.

Linda Fagerlund, chief strategy officer, Mediahub ANZ said this seismic shift in consumer behaviour is challenging brands to adapt and adapt quickly: “Understanding consumer behaviour and discretionary spend across retail categories, across income levels and consumer life stage segments is imperative for brand survival in the face of a worsening economic downturn.

“That’s why we’ve undertaken this study; to provide a deeper understanding of ANZ’s current retail landscape and the social, economic and cultural dynamics at play affecting consumers, and how brands and marketers need to adjust to drive growth.”

Fagerlund said with purchase trade-offs happening at both low and high-income levels, “the pinch is clearly being felt across all demographics, resulting in purchase deceleration across the board from high end/luxury brands to mid-range and lower-cost brands. This is a pattern of consumer behaviour that brands across all sectors need to be aware of.”

The research also shows:
• ‘Value for money’ is driving purchase decisions with 53% of Australians and 54% of New Zealanders saying this is the most important factor when choosing a brand or product
• Across all consumer segments, grocery spending is in decline or experiencing a plateau, with 45% of Australians and 36% of New Zealanders saying they have purchased groceries less regularly over the past 12 months
• In Australia, 58% of higher income earners, and 56% of low-income earners delayed purchase of a product; with 40% of high-income earners and 51% of low-income earners opting to skip purchase of a product altogether due to cost of living pressures
• By contrast in New Zealand, 75% of high-income earners and 43% of low-income earners delayed purchase, and 51% of high-income earners vs 40% of low-income earners skipped a product purchase

Says Fagerlund: “For brands, this pattern presents a double-edged sword and requires greater flexibility in developing marketing strategies. On the one hand, brands need to capitalise on new potential growth from customers seeking better value offers, but also need to defend from competitors for existing customers who are in a high “switch” mindset.

“It’s a delicate balance. Ultimately, brands need to continually look to ways to reframe and communicate their value over and above just price and promotion.”

Fagerlund said the study also showed that 68% of both Australians and New Zealanders voted cost-of-living or economic turbulence as their primary concern, revealing a secondary trend: in the current environment, Australians are feeling anxious and less secure – yet continue to have the most optimistic outlook, while New Zealanders view the cost-of-living crisis and resulting financial related stresses, as their main concern.
The broad spectrum of emotions from optimism to cautious is influenced by different age demographics with the younger demographic <35 skewing towards optimistic and the older >35 more cautious.

Says Fagerlund: “Across Australia and New Zealand people are most concerned about issues closer to home, and in particular their mental health, which highlights the personal impact of the economy, and how it is threatening our traditional sunny cultural outlook on life.  Brands need to apply empathy and not shy away from the realities of the cost-of-living crisis and the anxious age we are living in, when planning how best to connect with their audiences, regardless of income.”

To read the full report and opportunities for brands, click here.