1、Kearney Consumer InstituteQ1 2023 UK Should I stay or should I go?Redefining trading down,trading off and consumer shopping decisions2Shopping is an emotional,financial and time investment;innovation mixed with disrupted habits increased options,access and visibility to products and brands for consu

2、mers.With increasingly low switching costs,consumers constantly evaluate quality and brand,weighing their options.23 3The convergence of optionality,quality and loyalty blurs consumer behaviour.True changes in consumer behaviourhave been mistakenly explained by Stockouts and supply chain issues Work

3、ing from home and lifestyle changes Interest rates Purported values-aligned shopping(e.g.,sustainability)Need for convenience“Poor”customer service .3Inflation(and the“trading down”refrain)is the latest attempt to explain consumer behaviour.4We are seeing some customers trade down from beef into mor

4、e affordable sources of protein.Woolworths CEOAugust 2022We do not see consumers trading down.On the contrary,they are investing in quality and our best brands are the ones that have fastest growth.LOralCEO July 2022Alcohol consumers are trading down.Michters Distillery President December 2022Those

5、staples like pasta,bread and beans is where were seeing customers choose to trade down to the entry level product.Tesco CEO June 2022Mass is outperforming prestige,but its hard to know for certain if we are starting to see consumers trade down.Ulta CEO December 2022We are not seeing people trade dow

6、n.Dicks Sporting Goods CEO November 2022We are not seeing trading down.Unilever CEOOctober 2022European consumers are trading down.Coca-Cola CEO October 2022Consumers are trading down to eating at home over eating out.ConAgra CEO January 2023Conflicting opinions on trading down create confusion.And

7、even though you see signs of trading down for discounters,our own remarkable range has had difficulty keeping up with the volume of demand.Marks&Spencer CEO November 2022Source:CNBC,Yahoo Finance,Reuters,Bloomberg,Annual Reports 5 5“Trading down”oversimplifies(and judges)consumer behaviour.Buying lo

8、wer-priced products and brands Buying private label and store brandsBuying in bulk or smaller pack sizesBuying lessCutting back or eliminating products or categoriesShopping at discount retailers or dollar storesReducing spend in other parts of the walletis often defined as some mix ofIt conveys an

9、inherently negative sentiment:a consumer is getting less,forgoing quality or cannot afford another option.Trading down6In practice,consumers are searching for the best choice.Consumers notice higher prices but are still often buying what they want.The whole wallet is at play,with both luxury and val

10、ue on the rise.of consumers are still generally buying the same goods and services in the last 6 months,despite the price increases.53%2022 saw growth in+9%Luxury apparel+9%Fast fashion+23%Luxury spirits+58%Ready to drink spirits+14%Organic foods+7%Private label+8%Ready to eat mealsSource:Kearney Co

11、nsumer Institute Consumer Choices Study,Jan/Feb 2023;Euromonitor,Nielsen,Research and Markets,Food Navigator,Distilled Spirits,Future Markets7As consumers make shopping choices,from shifting spend to switching brands,do they see it as a sacrifice in quality,or more specifically:Do consumers see trad

12、ing down as trading down?or simply trading off?78Source:Kearney Consumer Institute Consumer Choices Study,Jan/Feb 20238Consumer choice is a series of personalised,individual trade-offs.Consumers view many shopping choices as neutral,and sometimes even an upgrade.41%Downgrade46%Neutral13%UpgradeWhen

13、you make shopping choices to try different products or reduce/eliminate categories,what percent of the time do you feel like you are upgrading,downgrading or trading off?9 9Consumers perception on quality of trade-off differs based on context.Source:Kearney Consumer Institute Consumer Choices Study,

14、Jan/Feb 202325%34%36%37%40%41%42%43%43%44%54%55%57%54%51%51%50%46%47%44%21%11%7%9%9%8%9%11%10%12%Downgrade(Trading down)Buying clothes or shoes resale compared to newSwitching to free options of a product compared to paying for premiumCooking a nice meal compared to going out to eatDoing a DIY home

15、dcor or furniture project compared to buying newBuying makeup and beauty products at a drug storeor big box compared to a cosmetics or mall retailerBuying clothes at a big box store compared to a mall-type retailerTaking a road trip vacation compared to flying to a vacation spotBuying store brand pr

16、oducts compared to brand name productsDoing at-home hair or spa treatments compared to going to a salon or spaShopping at a discount store compared to a normal grocery/big box storeUpgrade(Trading up)Neutral(Trading off)Largely a price play;free version adds frictionLingering stigma of resale;wide r

17、ange of quality Can splurge on wine or cut of meat/ingredientPerceived lesser quality at home 1010Which of the reasons motivated you to try new products,brands or services in the last 3 years?Consumers try new products for a variety of reasons,evaluating quality attributes and enjoying experimentati

18、on.These trade-offs are a psychological decisionnot an economic one.Consumers see trade-offs as a benefit,enabling them to spend how they want across the whole wallet.of consumers reduce spend in one category to spend in another.63%Inflation or higher pricesI like to try new productsFamily/friend re

19、commendationStock out or shortagesI found it online/in store Source:Kearney Consumer Institute Consumer Choices Study,Jan/Feb 202311A deeper reflection on attributes and switching can help.Reframethe questions askedEvaluateconsumer assumptionsConfrontthe tough questions What are consumers trading to

20、?How do their attributes compare?Is there too much focus on a single category rather than the full wallet?Is there an assumption that consumers will return after inflation?When and why do consumers trade back?Cost increases were passed through to customers as price increases.What happens for the con

21、sumer when the costs stabilise?Is price the default excuse(symptom)rather than addressing attribute problems(cause)?12Short-term adjustments12Thwart the trade-off When switching products,consumers say a top benefit of the new product was that it was easier to find.Dont give consumers a reason to wal

22、k away:Availability(in the right places)is table stakes.Evolve with where consumers are:Be thoughtful about assumptions and how sticky they aredont confuse the current moment(e.g.,pandemic behaviour changes)with eternity.After being dropped by UPS during COVID,American Eagle(AE)decided to take contr

23、ol of their distribution.AE invested$0.5B into their supply chain to integrate middle-and last-mile delivery capabilities.The enhanced control improved consumer experience via better product access and shipping accuracy.AE is now offering vertical logistics as a service to competitors.Source:Kearney

24、 Consumer Institute Consumer Choices Study,Jan/Feb 2023;Kearney Analysis13Medium-term initiatives 13Strike the balance The consumer is both objective and subjective;mimicking this balance can help to prioritise.Identify the core benefits to the consumer:Determine both the functional and psychologica

25、l drivers.Weigh price against core attributes:Understand what is“good enough”for consumers versus where to win.Davek makes an“indestructible”(and conventionally expensive)umbrella.Their motto is“buy once,buy well.”With a lifetime guarantee,they arguably discourage repeat business.65%R.M Williams,a 2

26、00-year-old Australian clothing and shoe brand,maintains an emotional,psychological connection with the consumer in crowded categories due to its generations of high-quality craftsmanshipof consumers will choose a more expensive option if they know it will work harder for themSource:Kearney Consumer

27、 Institute Consumer Choices Study,Jan/Feb 2023;Kearney Analysis14Long-term approach14Createa reason to returnMany consumers are not planning to switch back to their previous brands;they must be convinced.Determine whether consumer needs from the brand have changed:Across sectors,some pandemic habits

28、 stuck(hybrid work)while others returned(in-store shopping).Modify accordingly:Assess merchandise mix,innovation and channel to meet consumers where they are Premium Swiss confectioner Lindt experienced sales decline of-6%in 2020.To win back consumers,Lindt focused on new product launches,including

29、localisingflavours to consumers tastes.The brand also created some of the first vegan and gluten-free chocolates that still deliver on taste.Sales grew 13%in 2022,and 8%in 2023 as a result of these efforts.64%of consumers say they will keep buying at least half of the brands they switched to,rather

30、than going back to the old brand Source:Kearney Consumer Institute Consumer Choices Study,Jan/Feb 2023;Kearney Analysis15Looking forwardThe latest influencer trend:de-influencing.Whether calling out specific overhyped brands or discouraging consumerism for environmental purposes,many consumers are e

31、mbracing the counter take on TikTok and other socials.The advent of conversational bots(ChatGPT,Googles Bard and Baidus Ernie Bot)along with the growth of virtual influencers in consumer-facing categories brings larger questions around the consumer,and how AI and digital trends will impact consumer

32、trust and authenticity.From Apples recent privacy changes to TikToks standing in the US,consumer data privacy has been a hot topic.Its no secret that consumers are concerned about the use of their data.However,they are frequently willing to share their data when it benefits or makes sense for them.S

33、imilar to trade-offs,consumers can prioritise what is most important to them regarding their own data.More to comeWhat were watchingWhat comes next15Next KCI quarterly briefing:May 16,202316What is it?Kearney think tank creating thoughtful,consumer-first content and perspectives,assessing existing a

34、nd evolving consumer behaviours,needs and decision-makingWhat does it do?Advocates for the consumer Challenges existing assumptions Reframes to ask different questions Generates conversation Translates into action Kearney Consumer Institute(KCI)For further discussion,please contact:Katie ThomasLead,Kearney Consumer ITwitter:katiethomaskciTanya MoryoussefManager,Kearney Consumer ITwitter:tanyajadeKearney Consumer Institute