A growing number of Canadians are saying rising prices are affecting their ability to purchase goods, according to a new survey by EY.
The EY Future Consumer Index Survey says 53 per cent of consumers feel that way and 61 per cent of them plan to save money for their future instead of splurging on non-essentials.
Other key findings from the survey include:
- Over half of shoppers are pivoting to private label brands for fresh and packaged food;
- 37 per cent of Canadians are prioritizing experiences over buying physical goods;
- The rising cost of goods and services is impacting Canadians’ ability to purchase goods – lower-income earners (81 per cent), middle-income earners (50 per cent) and high-income earners (35 per cent);
- Canadians are spending less on key items including clothing (40 per cent), beauty and cosmetics (37 per cent), and big-ticket items (34 per cent);
- 61 per cent of consumers plan to save money for their future instead of splurging on non-essentials and are also seeking private label alternatives for fresh food (58 per cent) and packaged food (63 per cent); and
- 37 per cent of Canadians are prioritizing experiences over buying physical goods, pushing retailers to explore new and innovative ways to directly reach their target consumers.
“COVID plus inflation has driven a move toward people looking for simplicity and flexibility both in terms of how they want to use their time, the services they want to pursue, and in terms of the products they want to buy,” said Elliot Morris, EY Canada Consulting Partner.
“As a retailer, being able to get access to the consumer has been very challenging over the last two years and it’s not going to get any easier because the consumer is going to continue to economize how they take in information, how they make purchases, how they experience brands and both inflation and their experience through COVID I think is going to make them continue to want to pursue this view of simplicity and it’s going to make it harder for brands and for retailers to access customers.”
One of the trends the retail sector is seeing is a shift toward more discount stores and stores with lower prices as well as thrift stores.
“One of the final shifts that consumers will make will be meaningfully switching banners. I think that what we already observe, people being willing to trade brands in terms of products, people being willing to trade down into home brands or private label brands, and people are now willing to travel further, and take on some inconvenience, to be able to shop for price or for different experiences,” said Morris.
“And of course that leads to a shift towards discount. But I think that in a more meaningful way, even outside of discount, you see big shifts in terms of where people are buying within categories and that I think is the shift that retailers need to pay attention to in addition to a move from more traditional into discount.”
Morris said trust has never been more important. While the consumer is becoming more discerning, they are still buying. The way in which consumers are buying allowed retailers to become much more intimate with them because that consumer is buying either fewer things or being more choiceful about what it is that they purchase.
“And so the tightness of relationship is becoming more important. As we think about price alone, obviously that would push us going from traditional to discount. But if you think about it in terms of a more fulsome view of value, you look at programs like loyalty programs or you look at different channels to be able to reach consumers with, I think the intimacy is what retailers need to worry about and to think hard about and how to increase the intimacy with their consumer in addition to obviously how to make sure you’re delivering competitive prices,” he said.
In this environment with more discerning customers, customer service and the customer experience become even more important.
“Ensuring that you’re valuing the customer’s time, that you’re able to address the customer’s need, all plays into the customer’s view of both trust and the value that they perceive in the interactions with your brand and with your banner,” added Morris.
Lokesh Chaudhry, EY Canada Consumer Co-Leader, said the fabric of daily life for Canadians has shifted in many ways from where people travel and seek entertainment, to how they work and meet their needs.
“These significant shifts, coupled with inflation, are driving consumers at all income levels to change their shopping behaviours and rethink purchase decisions,” he said. “To be relevant in the future and drive customer loyalty, companies need to better understand the growing range of consumer needs, eliminate pain points and quickly respond with the right offering at the right price.
“In line with the growing desire for simplicity and flexibility, the most appealing experiences will be those that are easy to access and take minimal time investment — that means more digital touchpoints, frictionless brand experiences and personalized consultations in the metaverse.”
Ryan Beck, EY Canada Consumer Co-Leader, said people are beginning to focus on the parts of their life where they feel they have more control, including how they use their time and money and how they can improve their health and mental well-being.
“The modest post-pandemic lifestyle that many consumers plan to live is one that puts a higher value on experiences, with over a quarter of Canadians pivoting to spend more on this category rather than physical goods,” he said.