UK consumer sentiment is muted as consumers are set to spend not splurge before the end of the year, according to McKinsey & Company’s 2021 European Consumer Sentiment Survey. Only 33% of UK consumers plan on splurging before the end of the year, down from 47% in February 2021. UK consumers are slightly more optimistic about an economic recovery (33%) than they were in February 2021, (30%). However, optimism in the UK is lower than the US (44%), China (67%) and India (74%).
Restaurants, dining out & bars set to benefit from those that do splurge
Of the 33% that are intent on splurging, 35% will do so in restaurants and bars, 30% intend to buy apparel, shoes and accessories, and 28% plan to spend on items for their home. There is a slight difference between generational behaviour:
- Gen Z intend to splurge on visiting restaurants, bars and dining out (45%), followed by apparel, shoes, and accessories (45%)
- Baby Boomers plan to splurge on travel, lodging, and holidays (43%)
- Gen X intend to splurge on visiting restaurants, bars and dining out (39%), followed by travel, lodging, and holidays (37%)
- Millennials are most like to splurge on items for their home (32%) and household essentials (30%)
Just 11% of consumers will wait for out-of-stock products
Concerns over inventory in the UK are motivating consumers to change brands or retailers. Of the 51% of UK consumers who encountered a stock shortage recently, 33% purchased the product at a different retailer; 31% bought a different brand or similar product at a different retailer; only 11% waited for the product to be back in stock; 7% bought a different product at the same retailer and 18% did not buy anything. More broadly, value is the primary reason behind brand switching. Of the 64% of UK consumers that cited value, 35% said they were looking for a better price/promotion, 13% wanted a larger package size and 7% looked for better shipping/delivery costs.
Product availability spurs on earlier holiday shopping
Overall, 34% of consumers plan to start holiday shopping earlier this year. This rises to 48% for Millennials, and 47% of UK Gen Z. Comparatively, only 33% of Gen X and 16% of Baby Boomers plan to start earlier. Of those who plan to start shopping earlier, they cite the following concerns:
- Concerns about stock availability – 47%
- Concerns about unexpected challenges due to COVID-19 – 47%
- Concerns about shipping lead time – 39%
- Desire to do something fun right now
Social media set to influence holiday purchasing
Fifty-six % of holiday purchases are expected to be influenced by social media; 84% of Gen Z and 73 % of Millennials expect to be influenced by social media. This compares with 38% of Gen X and only 10% of Baby Boomers. Gen Z are looking to TikTok (67%), Twitter (54%) and Instagram (46%) for holiday inspiration.
In the last three months, consumers cited the following categories as those where they were most influenced by social media in their purchasing decisions:
- The top three categories where social media influenced Gen Z to purchase are: skincare & make-up (58%), accessories (58%) and toys and baby supplies (53%)
- The top three categories where social media influenced Millennials to purchase are: jewellery (53%), sports & outdoor equipment (51%) and skincare and make-up (51%)
Eric Hazan, senior partner, McKinsey & Company, comments: “Spend not splurge is this year’s holiday sentiment. Retailers will need to navigate product shortages to obtain their share of wallet, as consumers rarely wait for stock availability. Value is also a deciding factor, as consumers cite this as the main reason behind brand switching. The opportunity for retailers sits largely with social media, where holiday purchases can be influenced.”