How the cost of living is affecting our spending habits

cost of living crisis

As the cost of living rises, people’s spending habits are changing. New research reveals that people will be cutting back on eating out, luxury brands and more expensive supermarkets, while charity shops will be seeing higher footfall. Here’s what businesses can do to help…

Words: Annie Ridout

At the start of the pandemic, spending habits shifted. Supermarkets ran out of pasta, flour and toilet roll as people flocked to the shops to stockpile. And then we saw a boom in sales for takeaways and online courses. Amazon’s profit increased by 220% during the pandemic – rising from $2.6 billion to $5.2 billion.

But the new crisis we’re facing – the cost of living crisis – is having a different impact. This time, we’re carefully assessing where to put our money in order to avoid unnecessarily expenditure and to compensate for the base costs that we have no control over (food, energy, fuel).

According to British Gas, while people typically turn on their heating on 24th October, this year it’s likely to be later. Instead of heating our homes, we’ll be adding extra layers of clothing and watching TV under warm blankets. Wood burning stoves and fire wood sales have soared.

As well as keeping the heating off for longer, 35% of people will give up eating out, 33% will forgo takeaways and 23% will stop going to bars and pubs, according to research from consumer insights company Toluna. Yet another disastrous blow for the hospitality industry.

Around half of those surveyed said they’ll reduce unnecessary purchases, buy more own label products and go to cheaper supermarkets, while a quarter will spend more time shopping around for lower prices.

But consumers don’t want to be making all the shifts themselves, they’d also like to see more brands actively supporting the ethical issues that are important to them, specifically those working in: energy supply, food and drink companies and household cleaning.

However, the majority of us are willing to up recycling efforts (paper, plastic, glass), reduce our own food waste and reuse rather than discarding items, as well as donating unwanted clothes to charity shops.

When asked about the importance of certain values when choosing brands, 62% of respondents said that it’s very important for brands to be sincere and authentic, and to care about their role and contribution to the environment and society.

So, as a small business, what can you do?

Well, we know that people are still spending but they want lower cost products and services, rather than investing in big life expenditures. So it’s time to focus your marketing efforts on selling your lower-price products. If possible, break a bigger product down.

If you’re a coach, selling one-to-one coaching for a three-month period, could you offer one-hour sessions, for a while, instead? Or put together a more affordable group programme? If you sell art work, could you produce prints rather than selling only original pieces?

Also, maybe now is a good time for a one-off sale – a flash sale – or for adjusting your prices over a longer period, to meet current needs. It’s not about devaluing or undervaluing your product, it’s about being aware that people’s understanding of value might have changed, at least temporarily.

We know that 50% of people feel the cost-of-living crisis is impacting their health and wellbeing, 38% of respondents said they are more stressed and 20% of people said they are eating less healthily. Can you help these people, with what you sell?

It’s important that we keep selling, during this period, as our own livelihoods matter. But we can ensure we are operating in moral and ethical ways, to prove to our clients and customers that we truly do care about them, and that we want to find ways to help.

Lucia Juliano, Head of Research, UK & Netherlands at Toluna said: “our research shows that consumers are increasingly concerned. They are preparing to forego some of their lifestyle choices in the face of price hikes, but, interestingly, they are still willing to hold brands accountable when it comes to ethical behaviour; they even agree that their own savings and investments should contribute to sustainability.”

“As prices continue to rise, expectations for brands will increase. It’s vital that brands do everything they can to help people through the coming months. This means they must ensure they are providing consistent, clear messaging around products and services and demonstrate that they’re in tune with consumer sentiments so that they can genuinely help their customers.”

Want more info on how to beat the recession, as a small business owner?

You might like The Robora’s online course: Move with the times: How to keep growing your business through a recession – just £19.99. 

Author: Annie Ridout