Fear tightens purse strings
It is fear of the recession that is driving consumer behaviour more than an actual change in circumstances, according to new research.
What is more, while less than half of adults (43%) claim to have been personally affected by the recession, as many as three quarters (71%) of consumers have cut down on their spending as a result of the current economic situation. Only 13% said they did not know anyone who had been affected.
James McCoy, head of consumer research at Mintel said: “Fear alone can cause major spending adjustments. A significant three in ten adults have cut back on their spending not because they have to, but mainly through fear of how the recession might affect them. These adults haven’t been personally affected by the recession, although they may know someone who has. The challenge for manufacturers and retailers is to overcome this fear and make consumers feel safe about spending again.
“Even if someone hasn’t been personally affected by the recession, knowing others who have been affected can shake a person’s confidence. In these difficult times, it is evident that consumers are changing their spending behaviour and adapting, whether or not it’s necessary.”
Although most consumers are worried about their own personal situation, more are worried about the state of the economy as a whole. Around seven in ten consumers in Britain are concerned about the state of the economy, compared with 59% who are concerned about their own personal financial situation. Interestingly, even fewer (37%) are worried about their job or employment prospects.
“It’s important to remember that a lot of consumers are cutting back not because they have to, but because it’s seen as the right thing to do. Nobody wants to be seen as being too flash in a troubled economy,” said James McCoy. “Many consumers are unsure when the green shoots of recovery will come, and without this confidence, they are unlikely to start making long-term plans again” comments James McCoy.
Big ticket items bear the brunt
It seems big ticket items will bear the brunt of these attitudes. Over a third (35%) of us admit that the recession has prevented us from booking a main holiday in the next six months. The same number say that the recession has prevented them from putting more money into savings. Around a quarter (26%) admit the state of economy has stopped them from carrying out DIY or home improvements. British Lifestyles also indicates fears over Britain’s troubled economy are eclipsing major personal concerns such as health and crime. When asked about key concerns, the economy ranked as the nation’s number one issue, at 71%.
When asked which items consumers would cut back on in the recession, as many as three-quarters (74%) of Britons said they would cut back spend on clothing and two-thirds (66%) would spend less on restaurants. However, just a quarter (26%) said they would cut back on spending on drinking at home.
Home drinking wins
The research also reveals how consumers in Britain are shunning drinking at the pub with 59% saying they are cutting back in this area, instead choosing to splash out large sums of money on alcohol. Today, the average British household spends £30 per week on alcohol, amounting to as much as a bottle of wine per night per household. While Britain’s mums and dads are worrying their way through the recession, it seems its not bad news for children’s piggy banks as only 9% of parents said they would be cutting back on children’s pocket money.
In 2008, consumers in the UK spent £28.8bn on entertainment, spending has grown 48% in last decade and has been relatively slow in the past couple of years. However, it seems evenings out are the first to suffer when it comes to cut backs – expenditure on nights out declined 8% in 2008 and has grown by only 12% in the last decade.
Bucking this trend, one of the star performers to the night out has been the theatre. In the last ten years, the proportion of people going to the theatre has increased significantly rising from 36% to 50% between 1998 and 2008.
The eating out market in the UK was valued at £31.1bn in 2008 and the average UK consumer spends £10 per week on eating outside of the home. Spending has risen 55%, faster than in-home food expenditure. Indeed, in 2008, for every £1 spent on food, 50p was channelled through eating out and takeaway establishments. Although this is unchanged on 2007, it compares with 44p in the pound in 1998. Mintel research shows that while the economic climate is forcing consumers to make some eating out cut backs, the fast food market is unlikely to suffer.
It seems consumers are also observing the great British tradition of eating at a local pub. More than half of all adults have eaten a meal in a pub or bar over the last 3 months.
Meals served in pubs and bars is the largest market within the eating out sector with sales of £7.6bn. In 2008, consumers in the UK spent £62.3bn on in-home food. Each household spent on average about £2,350 on food – an average of £45 per week.
Self-medicating – can’t wait won’t wait
It seems the nation has taken health matters into it’s own hands. Over the counter medicines have seen huge growth with an increase in consumers preferring to self medicate rather than wait for a doctor’s appointment. There has been a 98% increase of sales of self diagnostics such as blood pressure, blood glucose and body fat measuring kits in the 10 years to 2008.
Mintel predicts an increase of 18% in the value of over the counter medicines in the next five years, as consumers become increasingly reluctant to take time off work due to sickness. The typical adult in Britain spends £59 per year on over the counter medicines with total market valued at an estimated £3bn.
The value of consumer electronics reached £54.4bn in 2008, a growth of nearly 75% over the decade. However, with the current economic climate impacting consumer spending, 2009 may prove a difficult year. It seems not all of us have been convinced by this digital revolution, with Mintel research revealing only 5% of consumers tend to buy new things as soon as the come to the market and 17% admitting when they buy something new, they sometimes worry about having made the wrong decision.
British Lifestyles reveals that the next 12 months may see the traditional mid market family holiday struggle. 35% of consumers report that the current economic climate has prevented them from booking a main holiday, despite the fact that such a break has increasingly become seen as a right rather than a privilege throughout the recent era of cheap, easily accessible overseas travel.
In 2008, consumers spent just under £60bn on holidays and travel representing an average household spend of £2,259 per year. Our love of new horizons has seen spending increase 61% over the past decade, as Brits increasingly focused on what they did, rather than what they owned.
While the travel bug has prompted a major expansion of overseas holidays at the expense of UK ones, this trend could be reversed as the economic climate encourages Brits to seek experiences closer to home or cut back on additional weekend away.
As Brits look for domestic holiday options, holiday centres in UK are enjoying a revival – this type of holiday accounts for an increasing proportion of UK domestic holiday business, and currently stands at 16%. The Holiday centre market in the UK is estimated to have been worth £1.3bn with 6.4 million visitors in 2008.
In addition, the recession has not spelled disaster for all areas of overseas holiday spend.
All-inclusive holidays have bucked the overall trend, with the fact that costs are included in one prepaid price proving popular as consumers look to control costs. Mintel estimates that all-inclusive products account for 20-25% of all package holidays sold in the UK. Overall however, packages have been decreasing in popularity – in 2001, 54% of holiday spending was on inclusive packages, and this fell to 45% by 2008.