The latest edition of the EY Future Consumer Index (FCI), a comprehensive global study that surveyed over 22,000 consumers across 28 countries, revealed that American consumers prioritize value for money over experiences, brand loyalty, or convenience. This shift in consumer behavior is particularly noticeable among the 1,500 US participants included in the study.
The FCI, now in its 13th edition, provides valuable insights into changing consumer sentiment and behaviors across various timeframes and markets. It identifies emerging consumer segments and tracks their evolution, offering a unique perspective on the future of consumerism. The current economic climate, characterized by inflation and high-interest rates, significantly impacts US consumers’ spending habits as they approach the holiday season.
The Affordability First segmentation of US consumers continues to take the top spot (36%, increasing 10% points since October 2022), while Experience First has seen a momentous decline compared with the last festive season (12% of consumers surveyed, decreasing 11% points since October 2022), falling behind consumers in the Health First (26%), Planet First (14%) and Society First (12%) segmentations.
The study found that many consumers are increasingly concerned about the rising cost of groceries. This concern creates new opportunities for emerging brands and private labels to make their mark in consumers’ homes.
As we move further into the festive shopping season, these findings suggest that retailers should focus on providing value for money to attract and retain customers. With consumers becoming more price-conscious, businesses offering quality products at competitive prices are likely to thrive.
“Cost-strained consumers want to know they are getting a deal, or they won’t prioritize a purchase,” said Kathy Gramling, EY Americas Consumer Industry Markets Leader. “Traditionally, brands and retailers have turned to big moments like Black Friday and Cyber Monday to drive holiday demand, but we’ve seen that many consumers are trying to manage their budgets and have been preparing and shopping sales all year round.”
Sales are no longer a ‘moment in time.’ With inflation in the US still at record levels, it’s no surprise that 62% of consumers are extremely concerned about the rising cost of living. While 50% of consumers expect to spend about the same on the next big shopping sale vs. previous years, overall, 39% of consumers expect to spend less this holiday season.
Overarchingly, 81% of US consumers plan to buy fewer items in general across all categories to save money. Many consumers are honing in on essentials, with 46% noting they’re only purchasing essentials now.
Additionally, findings reveal that 48% of consumers are shopping equally online and in-store for their seasonal shopping and sales events, while 42% are sticking mostly to online.
“These shopping habits support the need for a connected retail ecosystem and data-driven insights,” said Isaac Krakovsky, EY Americas Retail Leader. “There is a huge opportunity for retailers to leverage new technology to enhance their consumers’ in-store and online shopping experience. Through AI, retailers can better anticipate customer needs, and orchestrate the right conversations to create personalized assortments, experiences and offers.”
FCI shows that “moderate” or “complete” trust in things generated by AI remains highest for product purchase reminders (59%), tailored promotions and deals (58%), the use of augmented reality (55%) and personally customized recommendations (53%).
Consumers shift away from spending on experiences. US consumers are also more cautious about luxury or premium experiences, including travel, recreational activities, and beauty and wellness. After the pandemic, consumers had pent-up demand and spent on premium experiences.
That’s not the case today.
Consumers spend less on convenience and experience and instead look for more cost-effective alternatives.
For example, 52% are cooking more at home and 45% are spending more time at home. Additionally, 48% of consumers expect to spend less on vacations over the next three to four months, and 48% plan to spend less on recreational activities.
Consumers are willing to pay for more than just quality
Overall, consumers are planning to buy less and buy better. Many want to switch to products that align with their new values, priorities, and lifestyles and some will pay extra for that if necessary. This is especially true for younger consumers.
Quality and value for money remain the most important reasons for switching to a different product. But 44% say they will choose a more sustainable alternative if they can, and the percentage of consumers willing to pay a premium for sustainable products and services has steadily increased, from 24% in February 2022 to 32%.
But it’s younger consumers willing to pay more for what’s important to them
Private labels cut costs … without cutting quality. As consumers continue finding new and innovative ways to save money, many turn to private labels as a key alternative. Sixty-seven percent of consumers agree that private labels are helping them save money. Sixty-nine percent note that private labels satisfy their needs just as well as brands, with 57% claiming that private labels are increasingly better-quality products.
We see a major shift away from brand loyalty, as consumers re-evaluate their spending throughout the year. This shift is becoming even more evident within the food sector, where 64% of consumers are willing to purchase private-label packaged food and 63% are willing to purchase fresh food that’s private label.
The latest EY Future Consumer Index edition is available at: ey.com/FCI13.