Yahoo News AlixPartners Forecasts Tightened Belts in 2024
Global management consulting firm AlixPartners has recently released a consumer priorities survey titled, “The Critical Consumer 2024.” YouGov conducted a poll on behalf of AlixPartners of more than 10,000 shoppers in France, Germany, Italy, Saudi Arabia, Switzerland, the UAE and the U.K.
The survey analyzes consumer sentiments and preferences across the regions for the year ahead, taking into account the economic challenges and geopolitical issues that overwhelmed 2023. With the shift across markets and where spending habits look next, the report looked at five major areas including spending intentions, category evolutions, omnichannel targeting, consumer personalization and loyalty, and use of technology.
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With an uncertain economic outlook and budget pressures, AlixPartners predicts spending intentions will continue to be influenced in the year ahead. Already, survey results showed that 37 percent of all consumers plan to spend less in 2024, compared to 2023. For 36 percent of consumers this will mean spending less on restaurants and bars, while 35 percent expect to spend less on travel and the holidays in the upcoming year.
The report’s authors also found a trend in the rise of “trading down” to more affordable brands, especially within the retail sector. Specifically, they said, shoppers are looking for value-right products that provide strong value-for-money. Additionally, 27 percent of consumers polled are expecting to spend less on holiday gifts for others this year and 24 percent of shoppers are reducing spending on gifts for themselves.
Unsurprisingly, while looking at category evolutions, AlixPartners said that consumers will be shopping less frequently and spending cautiously within nonessential categories such as retail and leisure in 2024. However, age is a major reduction of retail spending. For example, the report’s data showed that younger consumers are unwilling to allow economic hardship to affect their lifestyle.
Digging into which categories are likely to be impacted, the company’s research revealed that 44 percent of consumers are planning to spend less on sporting goods and 43 percent of consumers are planning to spend less on consumer electronics in 2024, as compared to 2023. The categories in which shoppers said they will be spending more in the upcoming year are groceries, clothing and home improvement/DIY. The report’s authors advise consumer-facing companies that an efficient product range and offerings are a paramount priority.
“Our latest consumer research shows widespread belt-tightening across the board, with only grocery maintaining spend levels but even here, volumes still drop sharply because of inflation,” said Matt Clark, partner and managing director, EMEA retail lead at AlixPartners. “Only those retailers at the very top of their game will retain or grow share of wallet and I fear we are in for another round of restructuring and consolidation in early 2024.”
As consumer behavior continues to dictate shifted spending across omnichannel and categories to manage budget pressures, the AlixPartners report also found some nuances in consumer payment preferences. While digital payment methods are the most prevalent, the usage still varies based on income levels and shopper demographics. Consumer shopping preferences show that the top categories for ordering online are clothing and consumer electronics.
An overwhelming majority (79 percent) of higher-income earners said they would rather pay with a card than cash — this falls to 63 percent for lower-income consumers. And while more than 70 percent of shoppers under the age of 44 prefer digital payment methods, only 57 percent of shoppers 65 years old and over do so.
As companies continue to embrace generative AI to modernize digital offerings, AlixPartners report finds that AI tool adoption is catching on the fastest in the Middle East. Consumers across the EMEA region have shown enthusiastic feedback for digital offerings like virtual fitting rooms via AR and unmanned stores.
While 55 percent of shoppers under 25 would rather pay at a digital terminal rather than a cashier counter, more than 80 percent of shoppers over the age of 65 prefer the traditional checkout option. Consumers reported that the top technology integration categories they are already using are digital or mobile payments, home delivery, self-scanning or self-checkout and click and collect or in-store pickups.
“The message is clear for the consumer goods sector — consumers behavior is continuing to shift into 2024 and the ability to pass inflationary increase prices without significant volume loss is over,” said Andrew Searle, partner and managing director, EMEA consumer products lead at AlixPartners. “As retailers’ position to be the champion of consumer value, the consumer-packaged goods retailer dynamic is shifting. 2024 will be a challenging year for consumer goods companies, only the most proactive management will thrive in this environment.”
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