How Brands Can Adapt to the Cost-of-Living Crisis

The cost-of-living crisis is defining much of 2023 so far, but the impact is not just on consumers. As consumers shift spending patterns to seek value-for-money and practical purchases, brands too are feeling the effects. Learn more about these changing buyer habits and how brands can adapt here.

February 13, 2023

4 mins read

Catz Thompson

Isabel Murphy

In the UK, inflation rates are expected to fall in 2023 yet still remain above 3%. As stagnating wages and rising inflation rates coincide, consumers are starting to feel the impact of the cost-of-living crisis.

In the wake of rising living costs, 61% of UK consumers planned to cut discretionary spending in 2023, favoring more versatile purchases that offer value for money, and it’s within this time of cost-conscious consumerism that brands must adapt to continue to create growth opportunities.

To understand how brands can adapt to changing consumer habits in the wake of financial strain, we must first consider how consumers are altering their behaviors as buyers as a result of the cost-of-living crisis.

An increased demand for dupes

Rising living costs aren’t stopping consumers from spending altogether; however consumers are increasingly considering whether they’re getting value for money. In many cases, shoppers are choosing to substitute expensive products for lower priced options offering similar results – products known as ‘dupes’.

The hype for dupes is on the rise, with a 200% increase in search volumes for the term in 2022. This demand growth is particularly notable in the beauty and wellness space – searches for ‘Dior makeup dupes’ increased by 100% in 2022, and #makeupdupes clocking over 750M views (and counting) on TikTok.

With dupe products renowned as like-for-like versions of their luxury-priced counterparts, this increased interest indicates consumers are craving premium-feel products, but the cost-of-living crisis is causing more and more to turn to alternatives at a lower price point. In fact, 52% of women said they had purchased a dupe product, whilst 47% had never purchased a luxury product.

A desire for multifunctionality

With consumers having to consider how to prioritize their spending, many brands have seen an increase in sales of higher versatility and value-for-money products. Superdrug Christmas gifting saw an increase of 219% in 2022 sales compared to the previous year with gift sets being a prevalent purchase, attributed to their value-for-money advantages.

Turning once again to the beauty market, in a bid to seek out high-value products, consumers are increasingly focusing the science behind the products they purchase and the holistic benefits they have on their wider wellbeing. Beauty brands maintaining a more premium price point are heroing multifunctional products which have benefits to the skin whilst also enhancing the appearance. Jones Road for example, has been founded on the consumer desire for multifunctionality backed by science, offering versatile products such as; a lip and cheek tint, foundation with skin benefits as well as high levels of coverage.

Blank skincare products on neutral shade building blocks

Spending money to save money

In order to combat rising costs, many British consumers are making larger purchases in the short-term, choosing to invest now in the hopes of saving money in the long-term. Deloitte found that 38% of consumers paid higher prices for products that were longer lasting and more durable in 2022. This emphasis on circularity and investing in products not designed to be replaced has led many high-end brands to launch their own resale platforms.

Brands including Ganni and Hugo Boss are amongst those taking this approach to appeal to value-for-money shoppers. Both launched a resale platform in 2022, giving consumers the chance to buy luxury, high quality items at a lower price point. By doing so they are appealing to consumers seeking to spend money in order to save money.

Sales of practical items have also risen as consumers consider the longevity of their purchases. Clothes dryers and airers, for example, saw a 6000% increase in sales in October 2022, and some air fryer models had sales soar by 800% last September.

What does this mean for brands?

In the wake of the cost-of-living crisis brands need to be aware of how consumers' shopping habits are changing and how they can connect with them going forwards.

As retailers have been hard hit by rising costs due to supply chain issues and inflation rates, many have passed these on to the consumer. For example, high street retailer Zara has started to charge for returns despite 71% of UK shoppers claiming they would avoid shopping online if they were forced to pay for returns.

Additionally, more than 78% of CEOs say investment should be shifted to digital opportunities which could help combat economic headwinds. This can be seen by brands including Levi’s who have leveraged dynamic pricing through applied AI. The brand has tested hundreds of price points to calculate the level of discount they should offer their customers and over what length of time to grow gross margins whilst still helping consumers looking to cut back on spending to save money.

Brands looking to build a connection with the consumer need to consider how they can add value throughout the purchase journey and demonstrate awareness of possible financial hardship. This could be achieved through offering free delivery when consumers spend over a certain amount, offering gifts with purchase or even including sample sized products. Brands should also emphasize the cost-saving potential of versatile or timeless products to demonstrate to consumers how spending a little extra now could save them additional money in the future.

To discover how Ingenuity can support your brand in adapting to shifting consumer habits in the wake of the cost-of-living crisis through digital commerce, reach out to our experts today.

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