10 minute read 23 Nov. 2023

Why consumer brands must look beyond Black Friday

Authors
Marc L’Huillier

EY Oceania Customer Strategy and Consumer Insights Leader

Customer Strategy. Accelerating Growth. Consumer Insight Expert. Thought Leadership Author.

Lisa Nijssen-Smith

EY Oceania Consumer Products & Retail Leader

Retail, consumer, tech and media focus.

Contributors
10 minute read 23 Nov. 2023

The 13th edition of the EY Future Consumer Index (FCI 13) shows more than eight in 10 consumers are cautious or concerned about their current financial position. This will weigh heavily on the retail sector.

In brief:

  • 41% of Australians surveyed say they are going to spend less in the festive season than last year
  • As consumers continue to downshift discretionary spend, brands and retailers must look beyond the current sales events to ensure they are set up for a stronger 2024
  • We outline 5 strategies for brands to remain relevant to consumers.

In October, EY teams surveyed more than 22,000 consumers in 28 countries, including 1,000 in Australia. The research provides extensive insight into consumer behaviour, with a deep dive into spending intentions around the end-of-year sales season.

The headline data shows four in 10 Australians (43%) are expecting to participate in Black Friday and related events. However, 33% of those planning to take part expect to spend less than they have in previous years. A higher proportion of consumers also say they are going to spend less in the festive season (41%) than last year.

Given the economic conditions, it’s not a surprise that consumers are focused on savings and finding the best value.

Future financial outlook of consumers

72%

will be more focused on value for money in the future

56%

will be buying less clothing and footwear in the future

47%

plan to shop less for non-essentials in the future

According to the OECD1, Australia has recorded the sharpest falls in household disposable income in the developed world in 2023. Interest rates have hit a 12-year high, with mortgage repayments as a share of Australian household disposable income at a record level of 9.5%.

The data is confronting, with Reserve Bank analysis showing $100 million2 extra is being pulled out of the economy in interest each day compared to the same time last year.

It’s little wonder that FCI 13 research shows close to four in five Australians remain worried about the cost of living (80%) and nearly half of Australian consumers (48%) say they are purchasing just the essentials.

History shows some companies came out of the global financial crisis in stronger shape. LEGO’s profits grew by 63% during that period as it expanded into Asia3. Domino’s changed its signature pizza recipe to boost sales and profits4.

Australians are still making purchases – they are just being more selective about where, when and how much they are prepared to spend. To ride the roiling economic conditions with success, brands must remain relevant – and that means consumers must be front-and-centre of strategic thinking.
Marc L’Huillier
EY Oceania Customer Strategy and Consumer Insights Leader

Five strategies to remain relevant to consumers

1. Find new ways to uncover hidden value

We know consumers are looking for value in a wide range of categories to get the products and services they want at the prices they can afford. Their decision hierarchy has changed, and they aren’t shopping by rote. Instead, they are looking in their peripheral vision at new options, including where they shop and what they buy. It is critical that brands tap into this new value paradigm and continue to evaluate ranges, pack sizing, bundling, and pricing. Immediate discounts and rewards, from free shipping to vouchers, are highly compelling. In fact, nearly three-quarters of consumers surveyed for the CommBank Consumer Insights Report5 said these incentives were purchasing triggers.

2. Elevate omni-channel engagement

Of consumers planning to engage in sales events, 38% said they’d shop equally online and in-store. Another 32% said they would take part mostly online. We know customers are often using a range of sources to undertake research before making a purchase, with search engines their first choice. The message here is clear: you need to be ready to engage with customers across a range of channels as they explore, research, and transact

3. Invest more, not less, in loyalty

It can be tempting for companies to be conservative and to pare back on programs that drive loyalty and underpin personalisation. However, the opposite is critical to building rapport and maximising both consideration and conversion. FCI 13 finds 35% of consumers globally are willing to pay extra for brands they trust — and this is up 10% from February 2022. Loyalty programs abound, but when done well, they provide a powerful competitive edge in difficult conditions. Consideration needs to be given to better use of data and exploring a wider range of targeted and unique reward types, from time-sensitive incentives to exclusive online events, early product releases to personalised experiences.

4. Embrace emerging technology

We are seeing brands6 use generative AI (GenAI) to streamline CX and underpin content creation to deepen engagement. Some global brands are employing GenAI to create and refine new product formulations; others are integrating it into consumer campaigns.

5. Use data to target a profitability uplift

In a time of consumer constraint, there is a need to protect margins and drive efficiency across a portfolio. The opportunity for brands lies in optimising trade promotions, maintaining a clinical focus on the end consumer pricing strategy and taking a hard-nosed review of the portfolio.

Not every consumer experiences an economic downturn in the same way, nor does every brand. The most powerful competitive edge is having a better understanding of consumer behaviour than your competitors.
Lisa Nijssen-Smith
EY Oceania Consumer Products & Retail Leader

Summary

While it is tempting to look at the FCI 13 data and see consumers in a holding pattern, the truth is more nuanced. Consumer behaviour is continually shifting, not stagnating. The near-term conditions will be challenging, but by prioritising the consumer and thinking differently, brands and retailers can come out on the other side stronger.

(Chapter breaker)
13

Future Consumer Index Wave 13

Outlook in Australia

2023

The economy

45%

expect the economy to worsen in the next 6 months (-)

Cost of living

64%

expect the cost of living to rise in the next 6 months (-5)

Affordability

46%

say the rising cost of goods and services is making it hard to afford things (-2)

Current financial outlook

More than eight in 10 consumers are cautious or concerned about their current financial position.

Personal disposition

Feelings compared to three-four months ago

About this article

Authors
Marc L’Huillier

EY Oceania Customer Strategy and Consumer Insights Leader

Customer Strategy. Accelerating Growth. Consumer Insight Expert. Thought Leadership Author.

Lisa Nijssen-Smith

EY Oceania Consumer Products & Retail Leader

Retail, consumer, tech and media focus.

Contributors