Recent years have been characterised by conflicting economic messages for shoppers.
On one hand, we have had a period of underlying economic stability. Unemployment has been low and has continued to fall. Interest rates have remained near historical lows, giving consumers and businesses access to cheap credit. At the same time, wages have increased faster than the rate of inflation, helping boost shoppers’ disposable income. While the overall economy has been subdued, the UK has avoided recession and even the embattled retail market has grown – albeit slowly and driven largely by online sales.
On the other hand, negative factors have weighed on shoppers’ minds. We have seen how consumer confidence has continued a steadily declining trend since the middle of 2015, with our own shopper research showing shoppers becoming more cautious in their outlook over that time. In 2019 Brexit rose to become one of the most pressing concerns for shoppers and was one aspect of a wider climate of political uncertainty.
As we enter 2020 and a new decade there is some reason for optimism.
Savvy’s research suggests that greater political clarity, following the election and subsequent ratification of the EU Withdrawal Agreement, has lifted optimism amongst a high proportion of shoppers. 60% of shoppers tell us that they feel more optimistic about the UK’s prospects than they did a couple of months ago (pre-election), and 72% are more optimistic about their personal financial prospects. Thinking about the whole year, 60% feel more optimistic about 2020 compared to 2019. Some other soft economic measures reported in January also point to an uplift in confidence.
This optimism, however, is fragile and the consumer economy remains exposed to significant risks – not least the unknown nature of the UK’s future trading relationship with the EU, which is set to be negotiated throughout 2020.
Adding to the need for caution, we find that the vast majority (83%) of shoppers plan to cut back how much they spend this year, while our behavioural research suggests shoppers are likely to step up money saving and other recessionary-like buying behaviours. Shoppers are savvier than ever and there is a growing body of evidence to suggest we’ve reached ‘peak stuff’.
As well as needing to contend with ongoing economic turbulence, retailers continue to face a structural adjustment of the market that will span the next decade. Online will continue to take share from physical retail and, as such, it is a certainty that the high street will need to evolve to meet changing shopper needs. Some of the most well known retailers face tremendous challenges. Not all will survive.
Whatever opportunities 2020 presents, they need to be viewed in the context of turbulent and changing times for shoppers and the consumer economy.