Consumers expect companies to help them through the cost-of-living crisis

Consumers are concerned about their personal financial situations

The majority (61%) of consumers globally say they are extremely concerned about their personal financial situations. This concern is more pronounced for Millennial (66%) and Gen X (64%) than Boomer (55%) and Gen Z (60%) consumers (see Figure 1). We also observed that consumers with children in their household (66%) are more concerned than are individuals without children (59%). By country, the greatest proportion of consumers are concerned in Canada (68%), Australia (65%), and the US (65%), while the Netherlands (50%) has the smallest proportion of consumers concerned.

61%

of consumers say they are extremely concerned about their personal financial situations

Figure 1. Six in ten consumers are concerned about their financial situations

^{Source: Capgemini Research Institute, Consumer demand survey, October–November 2022, N=11,300 consumers; 992 Gen Z consumers, 3,264 Millennial consumers, 3,332 Gen X consumers, 3,712 Boomer consumers.}

Among the consumers who are extremely worried about their personal financial situations:

many believe the government is not doing enough to address the rise in their cost of living (79%);
they are worried about energy use in their home due to rising energy prices (64%);
they are worried about their ability to afford food or other basic household necessities (62%);
their mental health has been negatively impacted by the rise in their cost of living (60% globally, and even higher for Gen Z and Millennials, at 69%);
they fear that their personal financial situations will worsen within the next 6‒9 months (80%).

Consumers are becoming more sophisticated in their purchasing behavior because of their cost-of-living worries

To deal with the cost-of-living crisis, 73% of consumers are making fewer impulse purchases. Sixty-nine percent of consumers are cutting back on non-essential items, such as electronics, plants, toys, and other non-essential expenses, such as dining out, as well as delaying the purchase of luxury items.

In addition, over half (65%) of consumers say they now prefer cheaper private-label products over name brands, and a similar percentage (64%) say they are buying products from hypermarkets and discount stores, rather than using, for instance, convenience stores or specialty grocery stores (see Figure 2). Over half (57%) of consumers also say they are spending more time in different physical stores to find deals and discounts. The cost-of-living crisis has led to more sophisticated purchase behavior, with consumers experimenting with different options for more affordable products.

We are starting to see consumers down-trading and looking for [greater] value… Sales volumes are beginning to fall as some shoppers switch from branded goods to own-label products in a bid to make ends meet.” ^2,3

Graeme Pitkethly, CFO at Unilever

Gen Z consumers are less likely than those in other demographics to have changed their behaviors. For example, 60% of Gen Z consumers say they are making fewer impulse purchases compared to 76% of Boomers. In addition, 59% of Gen Z consumers are reducing purchases of non-essential items versus 73% of Gen X consumers.

_{²Financial Times, “Unilever raises prices by 8% and warns inflation will accelerate,” April 2022.
³ Bloomberg, “Unilever’s sales rise as consumers swallow higher prices,” July 2022.}

Figure 2. Amid the cost-of-living crisis, consumers are making fewer impulse purchases, lowering their spending on non-essential items, and looking for cheaper alternatives

^{Source: Capgemini Research Institute, Consumer demand survey, October–November 2022, N=11,300 consumers.}

Consumers have cut down on spending since the pandemic lockdown period

Amid the cost-of-living crisis, the percentage of consumers who say they are reducing their overall spending has risen this year, to 44% compared with 33% in November 2020 (see Figure 3). The percentage of consumers who are planning to reduce their spending on non-essential items has increased more than for essential products.

Douglas McMillon, President and CEO of Walmart, believes inflation is driving consumer price sensitivity, regardless of income level: “Higher-income families are shopping at Walmart because they are more price-sensitive now. Families making over $100,000 in household income have driven a lot of our growth, since around the middle of the first quarter, when we saw food inflation reach a level where behavior was starting to change."⁴

Recent data from the US Bureau of Economic Analysis for the third quarter of 2022 reveals that while US consumers kept spending despite rising prices through the third quarter, spending on goods, led by food and beverages, gasoline, and motor vehicles, declined for the third consecutive quarter.⁵ In addition, according to Nielsen, while overall CPG sales are growing, fueled by rising inflation, consumption – i.e., spending volume or the amount of items consumers put into their baskets – is declining. There was a 9% increase in dollar sales in September, but unit consumption dropped by 3%.⁶

_{⁴ CNBC, “Walmart CEO says people are 'price-focused' regardless of income level,” August 2022.
⁵ World Economic Forum, Here’s how inflation is affecting consumer spending in the US,” November 2022.
⁶ Nielsen IQ, “The US moved 16 points closer to a consumer recession in Q3,” November 2022.}

Figure 3. Amid the cost-of-living crisis, more consumers are planning to reduce spending

^{Source: Capgemini Research Institute, Consumer demand survey, October–November 2022, N=11,300 consumers; Capgemini Research Institute, The great consumer reset: COVID-19 and the consumer products and retail consumer, November 2020. *Overall spending includes groceries and food supplies, household supplies, personal care products, over-the-counter healthcare products, furniture and furnishings, consumer electronics/white goods, apparel and accessories, at-home entertainment/media, luxury products, take-away food from restaurants, casual or fine dining in restaurants, alcoholic beverages, tobacco, leisure travel, work-related travel.}

Consumers expect companies to help them through the cost-of-living crisis

The majority of consumers globally expect companies to help them through this difficult time. Seven in 10 consumers expect companies to provide a wider range of discounts to help them purchase essential items and to provide bigger discounts to loyal customers (see Figure 4). Organizations have responded with initiatives to help consumers; for example, Tesco is freezing the prices of more than 1,000 everyday products from October 2022 until January 2023.⁷ In April 2022, Morrisons reduced prices on more than 500 products, including many essentials such as eggs, beans, coffee, rice, chicken, and diapers, and improved multibuy savings on 180 product lines.⁸

_{⁷ Tesco, “Tesco to lock over a thousand everyday products at low prices until 2023,” October 2022.
⁸ Reuters, “Britain’s Morrisons picks out over 500 products for price cuts,” April 24, 2022.}

Figure 4. Most consumers expect support and assistance from companies

^{Source: Capgemini Research Institute, Consumer demand survey, October–November 2022, N=11,300 consumers.}

Consumers will reward companies that help them through this difficult time with their future business and loyalty

The vast majority (78%) of consumers say they will be more loyal to companies that help them through this difficult time, for example, by prioritizing purchasing products or services from that company over others. This percentage is 67% globally for Gen Z shoppers, and in Italy and Canada, it rises to 82% and 78% of Gen Z shoppers, respectively. Seventy-four percent of consumers globally plan to purchase more products or services from companies that they perceive as helping them. Gen Z consumers in Italy (77%) plan to purchase more from companies helping them compared to 64% of Gen Z shoppers globally (see Figure 5).

78%

of consumers say they will be more loyal to companies that help them through this difficult time

Figure 5. Consumers will be more loyal and buy more from companies that help them get through this difficult time

Brands and retailers are standing up to support (and, in the process, win the loyalty of) consumers struggling with the high cost of living. For example:

Offering ideas to lower the cost of living

During 2022, British supermarket chain Waitrose launched “Super Saver recipes.” For under £2 per portion, the recipes offer easy, low-budget meal options to customers.⁹
UK supermarket chain Iceland has launched a new range of services to help customers cut bills. It has launched “Shop Smart, Cook Savvy” in partnership with energy company Utilita to help families better understand economical cooking and save up to £604 a year. The retailer also added energy-efficient cooking methods to food packaging.¹⁰

Reducing prices of essential items

UK supermarket Asda is reducing the price of over 100 popular items, including tea bags, rice, and cheese, for the year as part of its broader cost-of-living measures.¹¹

Offering discount programs

Iceland also launched a 10% discount scheme for customers over the age of 60, with no minimum spend to qualify for the discount.¹²
Technology retailer Currys introduced an exchange program called "Cash for Trash,” which allows customers to recycle old, broken, or unused technology in exchange for vouchers.¹³

Historically, customers do remember the brands that helped them in previous crises. Following the economic crisis of 2008, loyalty programs boomed, growing by 19% between 2007 and 2009 and driving consumers back to brands that were offering the best deals.¹⁴ Loyalty programs also performed well during the pandemic and helped keep customers engaged. The US fast-food chain Taco Bell launched its new subscription service, Taco Lover’s Pass, nationwide during the pandemic, which resulted in members visiting locations three times as often as non-subscribers and 16% of enrollees signing up for another month.¹⁵ Similarly, Tesco has already seen massive growth in its customer base and sales amid the cost-of-living crisis. With its loyalty scheme, Clubcard Prices, the supermarket’s UK grocery market share was at a four-year high in 2021.¹⁶

_{⁹ Grocery Gazette, “Waitrose launches saving campaign to help shopper combat rising prices,” September 2022.
¹⁰ Iceland, “Shop Smart, Cook Savvy: An Iceland and Utilita partnership manifesto,” August 2022.
¹¹ Wales Online, “Asda reducing prices of more than 100 items including tea and cheese and increasing pay for staff,” April 2022.
¹² Yahoo Finance UK, “Iceland offers over-60s 10% discount on shopping bill every week,” May 2022.
¹³ Standard.Co.UK. “Currys ‘cash for trash’ offer rewards you for being green,” July 2022.
¹⁴ Forbes, “Loyalty programs—A tool in times of crisis,” September 2022.
¹⁵}_Yahoo_{, “Taco Bell’s Taco Lover’s Pass is now a permanent service,” February 2022.
¹⁶ Reuters. “Loyalty pays off for Tesco as Britons feel the pinch,” February 2022.}

_{¹³ Standard.Co.UK. “Currys ‘cash for trash’ offer rewards you for being green,” July 2022.
¹⁴ Forbes, “Loyalty programs—A tool in times of crisis,” September 2022.
¹⁵}_Yahoo_{, “Taco Bell’s Taco Lover’s Pass is now a permanent service,” February 2022.
¹⁶ Reuters. “Loyalty pays off for Tesco as Britons feel the pinch,” February 2022.}