European consumers dealing with price inflation: Budget cuts in all categories

We all feel it, hear it, and see it. Like the weather, it’s becoming increasingly challenging to go through an entire week without talking about it: price inflation. Inflation and its effects are felt on a day-to-day basis no matter the position on the social ladder. So, how do people feel?  What effect does price inflation have on their life, and how do people in Europe cut budgets? Do old habits die hard, or are consumers’ habits changing? To better understand the impact of the current price inflation, we share the insights of a follow-up study (following the same survey in June this year), in six European countries: The UK, Germany, The Netherlands, Sweden, Norway, and Denmark.

EMOTIONAL DESPAIR AND FURY

While the extent to which consumers indicate engagement with the current price inflation has not changed, the way of expressing their feelings has. Consumers are no longer merely worried but also emotionally challenged, feeling angry, anxious, and frustrated. In fact, more and more people feel like “crisis victims” and Dutch, German, and Danish consumers expect the global economic and financial situation to only get worse. Especially people in the Netherlands, Germany, Denmark, and Sweden believe that “they must make do with what they have”. Meaning that 6 out of 10 respondents already limit their spending because they cannot afford as many purchases as they could a couple of months ago. The Brits and Norwegians are slightly more optimistic about their finances, with 57% believing they are able to meet the majority of their needs.

IMPORTANCE AND EASINESS OF SAVINGS PER CATEGORY

Old habits die hard so how are consumers getting by with what they have? What behavioural changes are a result of this? What has become clear is that consumers have reduced their spending by reevaluating the importance of various categories. Categories that do not fall within the basics and essentials of daily life, in particular, have lost personal importance compared to the June measurement. So while consumers are unwilling to compromise on their internet access and telecom subscriptions, Dutch, German, and British consumers among others have downsized the importance of media streaming and sports. Home improvements have also become less important in the lives of Norwegian and Danish consumers. Even though consumers have not allowed inflation to affect every aspect of their lives they had to change their shopping behaviour by cutting budgets and intend to continue to cut more.

WHICH PRODUCT CATEGORIES ARE LOSING IMPORTANCE?

A majority of consumers have already reduced their spending, not only in categories where it is easy to do so such as ordering food and going on vacations or trips but also in categories where it is perceived to be more difficult such as daily groceries, and clothing/shoes/accessories.

While they expect to save even more on these categories they do not plan to sacrifice any more on their social activities. Furthermore, ordering food is the only category across all measured countries that remains in the top three categories where consumers plan to save more in the next six months. Additionally, one of the significant budget cuts is planned by consumers in gas, water and electricity in the upcoming months.

SAVING TACTICS

Now that we know what consumers save on, the question is how they do it and to what extent tactics differ by country. Consumers employ various saving strategies with slight variations across countries and spending categories. What has become clear is that all respondents in all countries expect to buy less of everything. Other common strategies in all examined countries include postponing a purchase, comparing offers, cancelling the purchase of a product or service, or switching to a less expensive alternative or a retail brand.

However, there are some nuances to consider since some saving strategies are more popular in certain countries. For example, in the United Kingdom, consumers regularly keep an eye on savings programs, whereas the Dutch focus more on advertising. Furthermore, Germans are comparing prices, and the Danish have begun to shop at discount stores more frequently.

When it comes to daily groceries, what strategies dominate in this category? For example, consumers in Norway, Germany, and Sweden opt for cheaper alternatives and compare offers more frequently, whereas the British and Dutch are more likely to switch to private labels.

LOOKING FOR DEEPER INSIGHTS?

Are you interested in the full report, including coping mechanisms of the different countries and age groups, important changes in category-specific saving strategies per country, and strategic options for brands to manage price inflation challenges? Feel free to download the report.

RESEARCH METHOD DVJ INSIGHTS

The study is conducted among 3,337 people 18+ years old in Germany, the Netherlands, the United Kingdom, Denmark, Norway, and Sweden. This number is the national representative. In addition, a representative sample by gender and age was used. Based on this sampling method, we can state that the results represent the opinion of these six countries as it was at the time of measurement.