Future Consumer Index: In crisis, but in control

Many consumers are responding to a world in crisis by using the values and behaviors they learned during the pandemic.

For consumers around the world, the last few years have been an unwanted rollercoaster ride. When the COVID-19 pandemic first emerged, people put their health first, adopting very different behaviors and attitudes almost literally overnight. As the economic impact of the pandemic took its toll, they shifted their attention to affordability and the cost of living. And when it looked as though the clouds were slowly starting to lift, people started to prioritize a new set of “post-crisis” values, especially around sustainability.

But that post-crisis era is yet to arrive. The global economy is slowing down, interest rates are going up, inflation has returned on a scale not seen for decades, geopolitics is playing out on the global stage, and new variants of COVID-19 continue to emerge. It’s debatable whether this combination of factors is creating a new crisis or simply extending the one we were in already. In the minds of consumers, the distinction probably doesn’t matter.

This latest edition of the EY Future Consumer Index (Index) – the 10th in the series – shows that people have become used to living in a context of relentless crisis and uncertainty. They are worried about the future, with 63% not expecting the economy to recover within the next 12 months and 62% expecting their living costs to increase over the next six months.

Since the start of the pandemic, we’ve been tracking five different consumer segments. The percentage of consumers that align with each segment has been particularly volatile over the last year, as people react to a volatile world.

Instead of just passively reacting to endless waves of change and uncertainty, they are actively responding – or at least trying to. People increasingly want to control and shape their lives around their own needs and priorities, even as the world keeps throwing new challenges their way. Indeed, 58% say they feel in control of their life and this is something they want to both protect and extend.

Increased working from home has given consumers more autonomy over how they structure their time; they’d also like to be in the driver’s seat in other parts of their lives — notably, how they use their money and how they share their personal information. While they’re becoming more careful about their spending, they’re also feeling bolder about taking action to protect their values and lifestyles. Compared to previous financial crises, we think there are three fundamental changes at play:

1. The pandemic experience has made consumers more adaptable

People are growing used to uncertainty and volatility. More now live with what we call an “always on emergency mindset.” They have become used to making drastic changes to how they live – from daily choices to long-term plans – and are more open to abandoning long-established habits and forming new ones. They’ve found levels of resilience they didn’t know they had.

2. The digital world is giving them more options

At the time of the last global financial crisis – in 2008/9 – the online world was a remarkably primitive space. The smartphone was a rudimentary device and broadband was running at a snail’s pace. Today, it’s much easier for consumers to get information, find alternatives, share their experiences, work together and learn from each other. At the same time, the digital world can also amplify panic, exacerbate uncertainty and overwhelm people with information and opinions.

3. Consumer values have fundamentally changed

Previous iterations of our Index have shown how deeply the pandemic experience has changed consumer values. In particular, people are now far more committed to living sustainable lifestyles and their interest in material goods has waned. Our latest data show that they are not willing to simply abandon their new values as their household budgets come under pressure. Rather, they are looking to express them in new ways – which we explore in more detail below.

What are the implications for business leaders? Consumer-facing companies thrive when their values and actions are aligned with the people they hope to serve and suffer when they are not. When consumers think about which brands to buy – or whether to go private label or not buy the product at all – they want to see their concerns and priorities reflected back at them. Beyond the product, they increasingly look to the organization behind the brand: what impact is it having on the world, and is that impact aligned with their values? It’s clear that consumer values and behaviors are continuing to evolve fast on multiple fronts, which means leaders need to adapt. How relevant is a “sell more stuff” strategy when many consumers say they want to buy less?

There are four imperatives to consider at the end of this article. First, we want to highlight some of the key trends our latest Index has revealed.

Cutting costs: consumers are substituting but not sacrificing

The dominant consumer segment currently is “Affordability first,” but the cost of living is a worry for all consumers: 79% say their finances are a concern; 35% are worried about having enough money to spend on things other than living expenses; 66% are focused on value for money.

Many consumers (33%) are substituting their normal purchases with new brands or trading down to private label (21%). In many ways, consumers are turning back to what worked for them over the past two years – they were able to save money by working from home, spending more time at home, eating at home, and not feeling the need to buy new clothes. This creates a challenging context for many brands.

• 49% would consider buying private label packaged food
• 48% are purchasing cheaper alternatives
• 42% expect to spend less on out-of-home recreation
• 35% expect to spend less on grocery delivery

Typically, when finances are tight, people cut their spending in a narrow range of categories and still reward themselves with “treats.” But now we’re seeing consumers apply their money-saving tactics across all categories. In make-up, for example, there’s a vibrant social media culture around influencers sharing “dupes” – low-cost alternatives to luxury brands that, in their view, perform just as well and provide better value for money.

Consumers do not trust information from just any source. They seek insights they feel are credible and transparent, and they value ways of filtering and personalizing what they are exposed to. We’re seeing this broader trend play out with regard to sustainability, with almost a third of consumers having signed up to an app or service that tracks elements of their carbon footprint or environmental impact. Consumers increasingly want to make informed decisions about the products they purchase and are looking for trusted sources to support that.

Consumer-facing companies are looking for trusted sources too – they’re using “sustainability tech” to improve their products. Many are already working with sustainability tech companies to access information and insights that get them closer to the consumer. These partnerships are generating new forms of consumer insights that help companies to engage consumers, drive sustainable innovation, and meet their sustainability goals.