The FINANCIAL -- Mounting pressure on UK consumer’s wallet is prompting a critical need for retailers to get closer to their customers, according to the latest research from KPMG UK.
The inaugural report by KPMG, entitled Me, My Life, My Wallet, reveals that UK consumers are spending as much as 76 per cent of their disposable income on necessities, as opposed to luxuries. This was a greater share of wallet than noted by US (72 per cent) and Indian (68 per cent) consumers, however Chinese shoppers were found to be spending 79 per cent of their disposable income on essential items.
These findings come against a backdrop of growing financial pressure on the British consumer’s purse. The latest BRC-KPMG Retail Sales Monitor figures revealed a record decline in non-food retail sales. Over the 12 months to October 2017, sales of non-food items declined 2.1 per cent, the deepest decline since 2012. Moreover, for several months the figures have pointed to notable polarisation of consumer spend, with consumers spending more on non-discretionary items like food, whilst clawing back on discretionary items.
Paul Martin, UK head of retail at KPMG, said:
“Many British retailers have been left disappointed by sales performance for some time now, with shoppers notably prioritising their spending in the face of price inflation and low wage growth. Running in parallel, the industry has also been battling for their share of the consumer’s wallet, against other avenues of spend including services, experiences and general leisure activities.
“Of the retail sales growth that has occurred this year, a significant proportion has been fuelled by growing consumer debt. However, with the Bank of England having just raised the interest rates for the first time in over a decade, the tide is turning and we are likely to see a slow-down in customer spending.”
When respondents were asked which categories of spend they would cut first if their disposable income were cut by 10 per cent or more, nearly a third (32.6 per cent) said they would cut back on eating out and ordering takeaway. Meanwhile, 15 per cent said they would cut back on clothing spend, whilst one in ten (9.6 per cent) said they would claw back their holiday and travel spend.
Over and above financial influences on consumer behaviour, the latest research stresses the need for businesses, including retailers, to take a multidimensional view of consumer behaviour.
Adrian Clamp, UK head of customer advisory at KPMG, explained:
“Every day, new influences impact consumer motivation, behaviour and consumption, and these forces are upending conventional predictions of where, when and why the consumer wallet opens.
“There is no doubt that the drivers of consumer decision-making have become more complex in recent years. Businesses reliant on traditional market research and demographic profiles may well find themselves heading in the wrong direction.
“Many of today’s most successful companies are adopting ‘insight-driven-growth’ strategies – where advanced analytical tools are used to understand and predict customer behaviour, with this insight then used to personalise products and customer experiences.”