Future Consumer Index: People are reconnecting with their deeper values

Future Consumer Index: People are reconnecting with their deeper values

Kristina Rogers

Since the start of the COVID-19 pandemic, business leaders have been looking forward to a time when consumer behavior would return to some kind of normality. Just when it looked like we might be reaching that moment, the world has been plunged into yet more crisis.

The latest edition of the EY Future Consumer Index captures consumer thinking in the weeks before the war in Ukraine began. It shows that in a time of rising inflation and global turmoil, people around the world have been fundamentally rethinking how they live their lives and asking themselves what relationship they really want with consumerism and its values.

The “Great Resignation” is already a well-documented phenomenon, with employees across the developed world quitting their jobs and rethinking their career plans. The EY Index points to profound shifts in behavior and attitudes as people lose interest in their pre-pandemic life goals, work patterns and consumption habits.

Over the last two years most people have spent less and gone out less. Working remotely has given them more choice over how they use their time and distanced them from the workplace, both geographically and emotionally. At first, this was tough. But many people have come to prefer this way of being, or at least found it to be far better than they imagined.

They feel the quality of their time is as important as the quantity of money in their bank account. They’d rather stay in than go out. They want to buy experiences rather than more stuff.

For corporate leaders, this cultural shift has profound implications. Power is shifting from employers to employees; from older people who are ending their careers early to younger generations who are less motivated by money and status, and more interested in living in line with different values; and from brands to consumers, as people spend more time at home and offline, making them harder to reach than ever.

Worried consumers are staying near home

Even before the war in Ukraine, consumers around the world were not optimistic about the future. Inflation was returning. Their work and personal lives had changed. Our Index shows it’s no longer just low-income consumers who are worried.

While the middle classes are most aware of rising prices, inflation is causing consumers at all income levels to change their shopping behaviors and purchase decisions. Overall, 52% of consumers say the increasing cost of goods and services is making it harder to afford things. People are making the most changes in how they purchase non-essentials, such as clothing and electronics, to be able to afford gas and fresh food, where there are fewer alternatives.

With their spending power eroding, consumers are planning to rein-in their consumption, trade down to cheaper alternatives, and purchase fewer non-essentials. The categories most affected are alcoholic drinks; beauty and cosmetics; and clothing and shoes.

Many remain determined to have less “stuff” in their lives.

  • 34% say they are buying fewer physical goods because they don’t need them.
  • 30% will buy more secondhand products.
  • 47% will just buy the essentials.

Most people are choosing to spend more time at home, with 56% saying they are less likely to go out now unless they have to. When they do go out, 63% are choosing to spend more time in their local area. Their social circles have shrunk. Seventy-four percent are not seeing friends and family as much as they did before the pandemic. People continue to feel uncomfortable traveling far away.

People want more control over their lives

Living with the pandemic forced people to change their behavior. Many now prefer their new lifestyle and want to protect it. They’re focusing on the parts of their life where they feel they have more choice and control. This includes how they use their time and money and how they can improve their health and mental well-being.

As they reprioritize their wants and needs, consumers are looking for more flexibility in their daily lives, particularly from their employers. Forty-one percent say their schedule/routine has improved as a result of the pandemic. When asked which benefits they value most from a potential employer, 26% say flexibility and 25% say competitive pay.

The emerging commitment to a simpler and more balanced life could result in more sustainable choices. The Index shows that consumers are increasingly mindful of their impact on the planet. They are choosing to make more sustainable purchases and doing what they can to protect the environment.

  • 56% will pay more attention to the environmental impact of what they purchase.
  • 52% will pay more attention to the social impact of what they purchase.

Simplicity and escapism are increasingly valued

Many people want to make up for lost time and escape the pressures of the post-pandemic world. Sixty percent of consumers are planning to take a vacation in the next six months; 39% of younger generations say they will spend more on vacations this year. Overall, 45% of consumers say they plan to live more in the moment and not plan for the long term.

The modest post-pandemic lifestyle that many consumers plan to live is one that puts a higher value on experiences, with 42% saying they plan to spend more in this category. In line with the growing desire for simple flexibility, the most appealing experiences will be those that are easy to access and take minimal time investment. That means more digital experiences and quick, last-minute getaways.

Since the start of the pandemic, we’ve been tracking five consumer segments, defined by their preferences, behaviors and outlook on life. In the early phases of the pandemic, our “Experience first” segment represented the smallest proportion of consumers. But now it is climbing fast, as health and financial concerns diminish. There are also many more consumers in our “Planet first” segment.

The Baby Boomer workplace has lost its appeal

The Great Resignation is a structural shift, not a temporary blip. The Baby Boomer generation has created a world of work that younger consumers are not keen to inherit. Older employees are leaving work faster than ever, but who will take on their stressful working hours and heavy responsibilities? Only 20% of Gen X consumers are interested in advancing their careers over the next 2-3 years and a quarter of Gen Z want to start a business of their own.

The generational shift to Millennial and Gen Z talent is an epoch-defining transition of wealth and power, but also of workload. Younger people are turning their backs on traditional organizational life, and those who entered the workforce in the last two years have no experience of what work was like before the pandemic. As a result, employees are feeling more empowered to demand greater flexibility. They expect to control when, where and how much they work. This will lead to new ways of working and greater employee choice across a range of areas — not just whether or not you can work from home.

That doesn’t necessarily mean younger generations want to work less. Some people have used the pandemic years to double down and even work harder. Our Index shows many consumers — especially younger ones — are using working from home as an opportunity to earn more. For example, 32% of Gen Z say they are putting in more hours and 34% have increased their income by working multiple jobs. Younger generations believe working from home can bring benefits for both their employer and employees.

Power isn’t just shifting from employers to employees and from older to younger generations; there’s also a change in the power dynamic between brands and consumers. As people spend more time at home and offline, they are becoming harder to reach than ever.

Brands will need to work much harder to be in the right place at the right time with the right message. Consumers are more discerning than ever, which makes it more difficult to capture and hold their attention — and they are changing the way they engage with brands:

  • 44% plan to consolidate shopping trips and shop less frequently
  • 43% will shop more at local, small businesses
  • 42% will only buy from brands that align with their values
  • 36% say they will only visit stores that offer great experiences

Four imperatives for business

1. Explore new ways to reach consumers

As consumers turn inwards, brands will find it harder to get their attention. Companies must identify and invest in emerging or evolving physical and digital touchpoints, so they are present at the point of need.

This means going a step further to ensure that every potential channel to engage or be visible to the consumer is explored and can be easily integrated into the brand experience. That could range from a personalized, in-store consultation to personalized branded skins in the metaverse.

2. Contextualize your brand experience

Companies need to reconsider the context in which they try to engage the consumer. People’s routines have become increasingly fragmented. Brands must have the digital capabilities to understand the growing range of consumer needs based on contextual indicators and to quickly respond with the right offering.

3. Make it easy to access

In a world where people are consuming less, focusing more on affordability and retreating from engagement opportunities, it’s never been more important to eliminate consumer pain points. If consumer expectations for quick and easy purchases were high before the pandemic, their expectations now of frictionless brand experiences are exponentially higher.
Brands must explore how best to drive stickiness, ensuring consumers are spending the right amount of time in each phase of the consumer journey. However, the actual act of purchasing needs to be simple, quick and easy.

4. Explore partnerships that create collective value

Selling a product to a consumer may get harder, especially on your own, but if you work within an ecosystem of partners then the path to purchase will become clearer. As consumers become more focused on their holistic priorities, they will seek out flexible solutions that work for multiple needs rather than individual products that serve a specific one. This means that brands can work with other brands and other sectors and industries to come together to reach and meet consumer needs optimally.

Conclusion

To be relevant in the future, companies need to account for these changes both externally as they engage their consumers and internally in their employee engagement.

Companies need to redesign their talent models, so they can attract and retain people who increasingly value flexibility in their lives. The ability to access the skills the business needs will be more important than simply filling career-oriented roles. Companies that source talent in this way will be more agile as their business needs evolve.

More importantly, the growing consumer demand for flexibility will increasingly fragment future consumption patterns. People will work in more places, shop in different places — more local to them, not defined by the commute.

Source

https://www.ey.com/en_gl/consumer-products-retail/future-consumer-index-moving-out-of-brands-reach