Clear changes are occurring in Australian shopping behaviours as cost-of-living pressures escalate, consumer behaviour company Circana says in its latest report.
Sustainability has been bumped from top priority and replaced by value, with Australian shopping trends mirroring others around the world as people feel the financial pinch.
The latest part of Circana’s 2023 FMCG Outlook series, Shifting Shopper Behaviours, found that key traits at play included the generational values of shoppers and brand loyalty being tested as consumers increase unplanned purchases to make the post of products on promotion.
Alistair Leathwood.
Circana head of Product and Solutions, APAC, Alistair Leathwood said he was already seeing rapid changes in behaviour as inflation bites.
“How shoppers behave will continue to change swiftly as household budgets squeeze tighter, and price and value become even more intrinsic to shopping decisions. Loyalty will be tested. Values will be tested too.”
Research through its Circana Shopper Panel found 93 per cent of Australians were ‘somewhat or extremely concerned’ about the effects of inflation.
“For the FMCG sector, this means that shopper insights will become even more important for manufacturers and retailers as they recalibrate, develop and execute new strategies to address the changing behaviours of the market,” Leathwood said.
The report highlights key areas brands should focus on:
The impact of inflation
Just over three quarters of respondents (77 per cent) were concerned about the cost of food and groceries, with 72 per cent concerned about household bills, 54 per cent about the cost of petrol, and 46 per cent about their rent or mortgage payments.
This sentiment is driving a clear pattern of shoppers spending less on discretionary items and allocating more to the essentials.
Leathwood said, “Australia’s grocery channel is a $120 billion industry. Dollar sales are up 6.8 per cent compared with the prior year and unit prices are up 8.6 per cent, which reflects the broader inflationary narrative of essentials now recording faster price increases than discretionary items.
“This demonstrates the degree of financial pressure that households are experiencing and shows why shopper behaviour is changing so rapidly across the country.”
Loyalty losing out to value
The report found that value is now the overwhelming priority for Australians deciding to change brands. Seven in 10 consumers (68 per cent) are now likely to make unplanned purchases after seeing products on promotion or discounted; 69 per cent will switch to a new brand if it offers new features or benefits that appeal.
It found 56 per cent of Australians had tried a new store or brand due to perceived value and 80 per cent now actively stock up on products when they are on sale. Two-thirds believe that retailer/own-label products are a good alternative to branded products.
Leathwood: “Retailers and manufacturers need to show shoppers that they are going through this journey and difficult period with them. Honesty and transparency underpin a solid relationship, especially during disruptive times. The cost-of-living crisis is hitting Australian households hard. Our research shows that value for money is the primary driver of shopping behaviour for the majority of Australians.”
In Q1, Circana’s global research found 40 per cent of consumers intended to increase in-store purchases and reduce online shopping because of deliver costs.
Value also trumps sustainability
For the first time since the middle of the pandemic, there is a global and domestic trend that is prioritising affordability over sustainability.
Leathwood said while there was evidence about half the population are still trying to buy environmentally friendly products, 41 per cent believed sustainable products were priced too steeply and 21 per cent believed that the quality of sustainable products was not consistent.
“The cost-of-living crisis in Australia is inadvertently forcing many people to think more sustainably especially as soaring energy prices force a review of household energy consumption and practices however this is not necessarily translating into the purchase of ‘green’ products at the supermarket checkout,” Leathwood said.
This was also where generational values play a part. The report said 68 per cent of consumers still try to buy locally grown/made products over imported products when available.
All Australians are concerned by the ethical status of the products purchased and the companies that these products were purchased from. In particular, seven in 10 Gen Z consumers would pay higher for products that aligned with their purpose and core beliefs.
“Overall, affordability tends to be a leading factor in the decision making for Boomers and Gen X who are the bulk of the consumer market. Gen Z and Millennials include sustainability of a product and company core values as an added deciding factor when making purchases but increasingly buying behaviour is being impacted by affordability as cost-of-living bites. Finding ways to deliver sustainability in an affordable way should be the key priority to achieve greater share of wallet,” Leathwood said.
Omnichannel all the way
The pandemic ushered in a new era of online purchasing trends that have continued, showing omni-channel purchasing is here to stay. For grocery retailers, the surge in popularity was good news, with omni-channel shoppers highly valuable, spending more than double compared with in-store only or online-only customers.
For Leathwood, it means retailers and manufacturers must treat and analyse online channels as shopper-led businesses, making the most of data and technology.
“Brands and retailers must put shoppers at the heart of everything they do. This is absolutely critical as our research clearly shows that omni-channel shoppers are highly valuable. Fast-tracking smart investment in data technology and shopper solutions will provide a clear 360-degree view on who your shoppers really are, and how to satisfy them,” he said.
Leathwood added that shoppers are increasingly savvy at using a mix of channels to inform their purchases.
“Physical retailer websites are most frequently used for product information, online marketplaces and e-tailers for price comparisons, retailer apps for seeking out promotions, and social platforms for future purchase inspiration.
“The whole umbrella experience considers every engagement, thought, and feeling your customer has with your brand including how they engage on your platform, from search function to shopping cart, and it’s vital to deliver and connect on every touchpoint.
“Online shoppers are also more loyal to retailers, so winning the omni-channel shopper is critical to capture their tendency to spend more share of wallet with a single retailer,” he said.
The data highway to success
The report said that as consumers change how and when they shop, so too do their expectations of retailers and manufacturers.
“Brands and retailers that respond to individual shopper needs, especially during the current cost-of-living crisis will come up on top. Knowing your shopper in the moment is key to the why behind the buy,” it said.
Leathwood added, “The balance of power has shifted from retailers and manufacturers to the shopper. Knowing the shopper attitudes driving behaviours is key to unlocking loyalty and acquisition.
“We all know that what shoppers say and what they do can vary significantly. This is why it is very important to understand your brand’s competitive advantage and key vulnerabilities through uncovering the product attributes that are most important to shoppers, especially at a time when shoppers are facing increased financial pressure and re-evaluating what is important to them when making purchases across particular categories. Investment in valuable data is not a cost, but a powerful solution to deliver ROI.”
