Rising costs – from fuel to food – are causing misery for consumers. Gas and electricity bills, which are expected to rise by more than 50% in April, are the latest in a long line of headaches that look unlikely to be relieved any time soon.
A survey from Barclaycard showed three in ten believe that rising costs are likely to impact the amount they spend on discretionary purchases. But, with a growing number of consumers returning to shops – figures from the Office for National Statistics suggest retail footfall returned to 83% of 2019 levels – how does this impact brands?
Since the pandemic hit, consumer trends that were already in full swing have massively accelerated. The seismic shift towards e-commerce, and increasing move towards direct to consumer (D2C), during lockdowns has democratised the opportunity for brands.
Many have sensed a business opportunity and come to market with new and unique offers to challenge the status quo and increase competition for established brands – more than 340,000 SMEs were formed in H1 2021, up 32% on the same period in 2019.
Fundamental shifts in how we shop, combined with increasing costs could be a perfect storm for brands: consumers have a smaller wallet with even more brands, including a rising cohort of disruptors, competing for a share.
While this won’t necessarily mean a flight to value – many consumers are likely to show price elasticity in the short-term – some will become more selective over their discretionary purchases.
This requires brands to go above and beyond and double down on what matters to them and consumers, including areas like supply chain responsibility, local sourcing and sustainability that are moving to the very top of the agenda. This will create new points of difference and may be the deciding factor between a consumer choosing to spend with one brand rather than another.
Finally, the brands which in recent years have gone above and beyond to focus on protecting employees, small suppliers, and customers, will no doubt continue to resonate with consumers as they decide where to spend.
But brands that neglected these audiences, or those with a ‘cookie cutter’ offer that doesn’t stand out, may need to reach for the aspirin.