What happens when household spending gets squeezed?

During the recession we tracked the impact on household spending, and how shoppers were coping with the difficulties they faced. We decided to re-visit the analysis now that the Brexit shockwaves are starting to become apparent, and this is reflected in our most recent figures: 57% of UK households say they are having to make changes to spending because of the economic situation. This is a considerable shift from the situation in January, when the majority (52%) were making changes just in case, and 22% felt they would be unaffected.


With the election now looking like yet more upheaval could be on its way, and the Brexit negotiations yet to even start, it is clear that consumers will face just as many challenges as businesses. And that in itself will be another key challenge that brands and retailers need to face in these uncertain times.


But it isn’t all doom and gloom. The benefit of having gone through a significant recession so recently is that consumers know how to make the most of their spending. And we, as businesses, can also draw on that recent experience in order to plan for any softening in consumer spending.


During the recession we saw shoppers adopting a range of strategies to cope:


  • Prudent behaviour was the most consistent strategy during the recession, and in fact has continued to shape shopper behaviour since. This involves avoiding waste and making sure the pennies are well spent
  • Economising can be a knee-jerk reaction that peaks in the initial squeezing of budgets – when shoppers trade down from premium to mainstream, or test own label versions, or categories previously ignored in Discounters
  • Avoidance is all about avoiding temptation – whether that’s specific types or brands of stores, or categories in-store. Those places or products that the shopper feels are extravagances they can do without when times are tough
  • Active shopping – choosing where to shop on the basis of getting the best deals


It is likely that all of these behaviours will become apparent over the coming months. The interesting point, however, is that shoppers don’t pin all their hopes on one strategy – they will flex each of the above depending on what’s on the shopping list and what pressures they are feeling at that point. Because the beauty of all the choice we now have in terms of shopping is that we can tailor our reactions to tough times to suit ourselves. If I want to keep having the holidays, maybe I switch my main shopping from Sainsbury’s to Aldi? Or if food is the luxury I can’t lose, maybe I start buying own label basics when it comes to the household cleaning products I use?


As brands and retailers looking to keep sales buoyant during these turbulent times, it’s important to appreciate that consumer and shopper needs will change, and there won’t be one single fix. Understanding how those needs are changing, and delivering solutions that meet those needs will keep your business relevant. It may not be easy, but it is possible.