1、Kearney Consumer InstituteQ1 2023 FranceShould 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 co

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

3、rking 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 behavior.4We are seeing some customers trade down from beef into mo

4、re 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 do

6、wn.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 2022Sources:CNBC,Yahoo Finance,Reuters,Bloomberg,annual reports 5 5“Trading down”oversimplifies(and judges)consumer behavior.Buying l

8、ower-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 va

10、lue on the rise.of consumers are still generally buying the same goods and services in the last 6 months,despite the price increases.58%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 mealsSources:Kearney

11、Consumer 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 tr

12、ading down as trading down?or simply trading off?78Source:Kearney Consumer Institute Consumer Choices Study,Jan/Feb 20238Consumer choice is a series of personalized,individual trade-offs.Consumers view many shopping choices as neutral,and sometimes even an upgrade.35%Downgrade45%Neutral20%UpgradeWhe

13、n 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 Stud

14、y,Jan/Feb 202313%15%17%18%21%21%21%25%28%30%36%46%40%43%39%58%53%47%46%48%51%39%42%40%40%21%26%28%26%22%Doing a DIY home dcor or furniture project compared to buying newCooking a nice meal compared to going out to eatBuying makeup and beauty products at a drug storeor big box compared to a cosmetics

15、 or mall retailerSwitching to free options of a product compared to paying for premiumBuying store brand products compared to brand name productsBuying clothes or shoes resale compared to newShopping at a discount store compared to a normal grocery/big box storeTaking a road trip vacation compared t

16、o flying to a vacation spotDoing at-home hair or spa treatments compared to going to a salon or spaBuying clothes at a big box store compared to a mall-type retailerUpgrade(Trading up)Neutral(Trading off)Downgrade(Trading down)Lingering stigma of resale;wide range of quality Can splurge on wine or c

17、ut 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 experimentation.These trade-offs are a psychological

18、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.74%Inflation or higher pricesI like to try new productsFamily/friend recommendationStock out or shortagesI foun

19、d 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?How do their attributes compare?Is ther

20、e 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 consumer when the costs stabilize?Is price

21、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 walk away:Availability(in the right places)

22、is table stakes.Evolve with where consumers are:Be thoughtful about assumptions and how sticky they aredont confuse the current moment(e.g.,pandemic behavior changes)with eternity.After being dropped by UPS during COVID,American Eagle(AE)decided to take control of their distribution.AE invested$0.5B

23、 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.Sources:Kearney Consumer Institute Consumer Choices Stu

24、dy,Jan/Feb 2023;Kearney analysis13Medium-term initiatives 13Strike the balance The consumer is both objective and subjective;mimicking this balance can help to prioritize.Identify the core benefits to the consumer:Determine both the functional and psychological drivers.Weigh price against core attri

25、butes: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.67%R.M.Williams,a 200-year-old Australian clothing and shoe

26、 brand,maintains an emotional,psychological connection with the consumer in crowded categories due to its generations of high-quality craftsmanship.of consumers will choose a more expensive option if they know it will work harder for themSources:Kearney Consumer Institute Consumer Choices Study,Jan/

27、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 stuck(hybrid work)while others return

28、ed(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 localizing flavors to consumers tastes

29、.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.55%of consumers say they will keep buying at least half of the brands they switched to,rather than going back to the old brand Sourc

30、es: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 embracing the counter take on TikTok a

31、nd 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 trust and authenticity.From Apples re

32、cent 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.Similar to trade-offs,consumers can pr

33、ioritize 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 and evolving consumer behaviors,needs,

34、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