UK consumers are facing a challenging economic climate with a recession looming. However, for some, the true extent of damage to finances may not have hit home just yet. While there is lots of talk about households cutting back, search demand suggests that some consumers have not woken up to the reality of the current economic situation. But why?

Not all will be tuned in to the signifiers of a recession. For example, they may only be aware of one or two recession indicators, including GDP, Consumer Price Index, unemployment and stock market performance. It’s only when a recession directly affects people’s daily lives and prospects that it starts to hit home and they rein back spending significantly. In this article, we analyse search demand for a range of products and services to determine if the recession has hit home.

Consumers Seek Value for Money

As inflation, steep energy bills and rising interest rates start to bite; consumers seek better value for money. While consumer spending is growing, it is not catching up with inflation. Spending on non-essential items such as clothing, apparel, and home furniture has reduced over the last couple of weeks as consumers look for ways to save money.

Barclaycard’s October spending snapshot, which accounts for around half of the UK’s debit and credit card transactions, found that half of consumers are planning to spend less this Christmas by buying fewer presents and food and drink. Esme Harwood, Director at Barclaycard, explained that “consumers are adopting a restrained approach to festivities, reaching for pre-loved gifts and setting spending limits to manage their costs during this traditionally expensive time of year.”

Sale sign recession

October was a challenging month for brands, especially eCommerce. In its eCommerce report, Adobe revealed that consumers spent less money compared to the previous year. While spending reduced YoY by less than 1 per cent, brands still had reason to be concerned. The drop in spending may be because consumers chose to seek bargains, and the theory is that many chose to wait until the Black Friday weekend to make purchases.

Despite experts predicting that sales and profits would be significantly lower this year than last, an all-time record was made for the number of transactions per second between noon and 1 pm. Is this a sign that consumers may be burying their heads in the sand regarding the economic climate? Or are people simply buying items whilst they are discounted, with the intention of reining in spending later?

Retail: Food, clothing and health and beauty grows

Overall retail spending grew +0.5% compared to the same period last year. This rise is primarily driven by consumers spending more money on groceries and discount stores as they look for deals to try and combat inflationary food price rises. Helen Dickinson, the British Retail Consortium’s chief executive, said: “Households reined in spending as the cost of living crunch continued to squeeze consumer demand. Customers are buying down, particularly with food, choosing value range items where they might have previously bought premium goods.”

Surprisingly, demand for clothing has increased, even with the black clouds of a recession gathering. We found that demand for upper body wear has risen significantly compared to Q3 of 2022. For example, demand for tops, t-shirts and shirts has increased by 15.5% and 12%, respectively, showing higher intent to purchase, despite the gloomy economic outlook. Similarly, demand for lower body wear, including trousers and jeans, has seen an uplift in the last 12 months, albeit at a slower growth rate, up 5.7% and 3.1%, respectively. Finally, demand for trainers has remained relatively stable, recording an uptick of 2.5% in Q3 2022 compared to Q3 2021.

Clothing recession

Demand for health and beauty products is also slightly higher than last year. Consumer demand for products such as make-up brushes, lip gloss and nail polish remains elevated, recording slight growth in Q3 2022 compared to Q3 2021 at 4.8%. 

Hospitality and leisure: Brits spend more time at home

As prices rise, brits are spending more of their leisure time at home. Barclaycard found that people spent more money on digital content and subscriptions for the second month running as brits swapped nights out for cosy nights in front of the TV. Mike Saul, Head of Hospitality and Leisure at Barclaycard, explained: “It is clear that consumers are thinking carefully about their leisure spend as the cost of living continues to bite, with eating in and home entertainment growing in popularity as we head into the long winter evenings.” 

Food delivery: Signs of realisation

Search demand around food delivery services suggests that some consumers have realised the economic climate is worsening. As a result, they are reining in unnecessary spending on takeaways in favour of home-cooked meals. With more brits eating in, food-delivery brands such as Deliveroo, Just Eat, and Uber Eats have seen demand decline compared to last year. For example, as consumers tightened their belts, demand for Deliveroo decreased by -10.8%, -18.9% for Just Eat, and -29.1% for Uber Eats.

Deliveroo recession

The Bottom Line

With consumers planning to spend significantly less this festive season, retailers are bracing for a tough few months. With pressure piling on, it’s time for retailers to take a new approach because, more than anything, customers are seeking value for money. As a result, now is the time to revisit your pricing strategy. At onefourzero, we assist brands by providing data on competitor pricing strategies, allowing you to make informed decisions on how to price your products and services. Contact the onefourzero team today to find out how we can provide you with the data to build a successful pricing strategy.