Headlines over the past few months outlining the impact of the cost-of-living crisis on the British public and the impact on their financial circumstances have been inescapable. And unfortunately, the downturn is set to continue in 2023, much to the concern of many small businesses. Now more than ever, it is vital to the stability of a business that they understand what British consumers are going to spend their reduced disposable income on. So, in turn, they know how to encourage consumers to spend it with them.
So, what consumer spending trends can SMEs expect in this new year – and how can they leverage these for their own benefit too?
To deal or not to deal
A recent QuMind Sentiment Index (QSI) survey of the British public’s responses to the cost-of-living crisis showed that a staggering 43% said they are buying more deals and discounted items, as consumers try to keep ‘business as usual’ at a reduced cost. And, with the rise in the cost of bills and daily products seeing no signs of slowing down, it is crucial that SMEs adapt to the needs of their customers and are quick off the mark in offering them deals to make the purchases even more attractive. Particularly for big purchases, like holidays, this will allow customers to plan as far ahead as possible in these uncertain times.
Spending sustainability
In 2023, the shift towards buying more quality items for less will not only be driven by more sustainability-minded consumers but as a means to manage spending in the mid-to-longer term amid the cost-of-living crisis. Spending more upfront for reusable items or those with a longer shelf-life will help many individuals better manage their expenditure on many products, and ultimately save money – and SMEs must cater to this.
Purchasing with purpose
Values-based purchasing decisions will extend from Gen-Z to all age demographics as customers increasingly want an affinity of ‘what I stand for’ and ‘what I believe in’ between a brand and their own values. Customer loyalty in this environment will only be achieved with a clear understanding of what their values are, and then showing that these values are shared by the brand.
Gen Alpha gains purchasing power
Gen Alpha – of whom the eldest turn 13 years old this year – will start to assume purchasing power in 2023. SMEs will have to start listening to this new customer segment to understand their wants and needs. This is the first generation where the majority of its members have been born into a high-tech world, so seamless digital customer experiences will be crucial. But questions remain over whether they will continue or shake off Gen-Z trends. Will they be as socially conscious as their predecessors? Will they want more physical experiences? All that can be safely assumed is that they won’t be like any generation that came before them, and all businesses need to prepare for that.
Hello to the high street
Over the pandemic, the “death of the high street” was a headline frequently peddled across many mediums of media. However, 2022 saw a bumper year for shops as consumers flocked back instore. This year, the high street will continue to resurge as people look for physical connections and experiences, particularly given the QuMind Sentiment Index found consumers predict their spending on hospitality will fall. SMEs must build more physical touchpoints into their omnichannel experiences for consumers in the year ahead.
Be adaptable for advantage
The biggest learning from all of this for SMEs? It’s about being adaptable. Being adaptable – at speed – to the market conditions that are impacting consumer demands allows a business of any size to stay relevant and pivot to reflect changing wants and needs.
Rising costs for monthly outgoings, including bills and essentials, are a growing concern for many people and spending will fall as a result. So as SMEs head into this new year, they need to stay close to their customers, so that they can react, adapt, and retain their custom.
