When it comes to affordability, the EY Future Consumer Index Survey finds that the rising cost of goods and services is impacting over half of Canadians’ ability to purchase goods. While, inevitably, this impacts lower-income earners the most (81%), the survey reveals that middle-income earners (50%) and high-income earners (35%) are also being squeezed.
“The fabric of daily life 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,” says Lokesh Chaudhry, EY Canada Consumer Co-Leader. “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.”
Driven largely by inflation on prices and emerging COVID-19 variants, consumers will continue to rein in their consumption, trade down to cheaper alternatives and purchase fewer non-essentials. Some key items where Canadians are spending less include clothing (40%), beauty and cosmetics (37%), and big-ticket items (34%). In an effort to save their hard-earned dollars for the future (61%), many consumers are also seeking private label alternatives for fresh food (58%) and packaged food (63%).
“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,” explains Ryan Beck, EY Canada Consumer Co-Leader. “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. ”
Preferences for how consumers choose to enjoy different experiences will push retailers to explore new and innovative ways to reach their audience. With two-thirds of Canadians preferring at-home experiences, companies will need to identify and invest in emerging digital capabilities to be able to deliver the experience directly to the consumer. On the other hand, customers who are willing to venture out are demanding more from physical stores, with a quarter planning to only visit stores that offer a great experience.
“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,” suggests Chaudhry.
SOURCE EY (Ernst & Young)