Tough times dent luxury, shoppers buy high street, pre-owned and discount fashion
Luxury brands face an uphill battle to retain customers as the cost-of-living crisis sees consumers cutting back on big-ticket purchases. That’s according to The State of Retail Spend report containing new spend data from digital advertising platform Cardlytics, based on the purchasing habits of 24 million – or a quarter of – UK bank accounts.
It said total spend on luxury brands was down 7% in the first six months of the year, compared to 2021, while the number of transactions at luxury brands also dropped 10%.
And 59% of consumers plan to spend less on luxury items this year with 48% set to switch to cheaper brands for clothing and homeware.
Evidence of that is already being seen and on the plus side, high street fashion brands saw an uptick in spend of 11% as consumers traded down in the first half.
In many ways, the findings justify the approach of luxury brands to raise prices and focus on the high-spending consumers who are less likely to be feeling the pinch. It’s a strategy that has been seen multiple times during various global and local recessions as the more aspirational luxury shoppers who proliferate in boom times divert their spend elsewhere when times are tough.
The report doesn’t only look at luxury though and while it shows that the higher-end of the market is facing challenges, as that 11% figure for high street fashion proves, it also means that some areas are buoyant.
For instance, tighter budgets are driving consumers to discounters, with spend up 12% in the first half of this year and transactions up 17%.
The company spoke to 2,000 consumers for the study and 79% report spending more on day-to-day outgoings than they did a year ago, while 72% say they plan to cut back on non-essential spending this year.
Some 58% of consumers plan to shop more at discount homewares and fashion brands this year.
And more are looking for secondhand bargains. Secondhand platforms saw a 7% uptick in spend in the first half of the year, compared to the same period in 2021, while the average number of transactions made on these platforms rose 6%.
Average spend at secondhand marketplaces has risen 482% between 2019 and 2022, as consumers seek out pre-owned bargains. In 2019, consumers spent £35.67 on average on secondhand marketplaces, compared with £207.63 in 2022. As the study says, secondhand is now becoming “mainstream”.
That trend is set to continue as prices rise and consumers become increasingly aware of the eco impact of buying new. The report cites 34% of consumers planning to buy more secondhand items this year, while 47% plan to shop less at fast-fashion brands. In fact, the report said fast-fashion brands are already starting to feel the impact of this mindset, with the number of transactions at these retailers down 16% in H1 compared to 2021.
What's also particularly interesting given that the pandemic saw consumers spending less on fashion and focusing more on their homes and gardens, is that the opposite is being seen at the moment.
The report found that consumers are still committed to improving their outdoor spaces, for instance, but they’re increasingly looking to do so in ways that don’t break the bank.
The number of transactions at garden centres rose 22% in the first six months of 2022, compared to the same period in 2021, but the average transaction value fell 20%, suggesting consumers are continuing to shop at these brands but are spending less when they do.
And decline has set in for high street furniture brands where spend fell 20% in the first six months of this year compared to the six months prior. This puts the recent failure of made.com into context and highlights the challenges that such businesses face in the current economic circumstances.
Dawn Reid VP Advertising Partnerships at Cardlytics said: “There's an opportunity for retailers to invest now, to support consumers longer term, whether through investing in price and discount ranges, value-focused marketing, or loyalty schemes, brands can put money back into their loyal customers wallets and help build longer term brand affinity. Those brands that can grow and retain their customer base now, when times are tough, will be most likely to succeed in future.”
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