Mounting pressure on UK consumer’s wallet is prompting a critical need for retailers to get closer to their customers, according to the latest research from KPMG UK.
The inaugural report by KPMG, entitled Me, My Life, My Wallet, reveals that UK consumers are spending as much as 76 per cent of their disposable income on necessities, as opposed to luxuries. This was a greater share of wallet than noted by US (72 per cent) and Indian (68 per cent) consumers, however Chinese shoppers were found to be spending 79 per cent of their disposable income on essential items.
These findings come against a backdrop of growing financial pressure on the British consumer’s purse. The latest BRC-KPMG Retail Sales Monitor figures revealed a record decline in non-food retail sales. Over the 12 months to October 2017, sales of non-food items declined 2.1 per cent, the deepest decline since 2012. Moreover, for several months the figures have pointed to notable polarisation of consumer spend, with consumers spending more on non-discretionary items like food, whilst clawing back on discretionary items.
Paul Martin, UK head of retail at KPMG, said:
“Many British retailers have been left disappointed by sales performance for some time now, with shoppers notably prioritising their spending in the face of price inflation and low wage growth. Running in parallel, the industry has also been battling for their share of the consumer’s wallet, against other avenues of spend including services, experiences and general leisure activities.
“Of the retail sales growth that has occurred this year, a significant proportion has been fuelled by growing consumer debt. However, with the Bank of England having just raised the interest rates for the first time in over a decade, the tide is turning and we are likely to see a slow-down in customer spending.”
When respondents were asked which categories of spend they would cut first if their disposable income were cut by 10 per cent or more, nearly a third (32.6 per cent) said they would cut back on eating out and ordering takeaway. Meanwhile, 15 per cent said they would cut back on clothing spend, whilst one in ten (9.6 per cent) said they would claw back their holiday and travel spend.
Over and above financial influences on consumer behaviour, the latest research stresses the need for businesses, including retailers, to take a multidimensional view of consumer behaviour.
Adrian Clamp, UK head of customer advisory at KPMG, explained:
“There is no doubt that the drivers of consumer decision-making have become more complex in recent years. Businesses reliant on traditional market research and demographic profiles may well find themselves heading in the wrong direction.
“Many of today’s most successful companies are adopting ‘insight-driven-growth’ strategies – where advanced analytical tools are used to understand and predict customer behaviour, with this insight then used to personalise products and customer experiences.”
To view KPMG’S full report, Me, My Life, My Wallet, please visit: kpmg.com/customerinsights
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• As part of KPMG’s Me, My Life, My Wallet report, the firm surveyed 10,000 consumers across the US, UK, India and China (2,500 consumers in each), between June and August 2017. These findings were then integrated into KPMG’s broader, multi-layer customer insights framework, as designed by KPMG’s Global Customer Centre of Excellence and the KPMG Innovations Labs.
• The BRC-KPMG Retail Sales Monitor for the month of October 2017, can be viewed in more detail: here
KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 13,500 partners and staff. The UK firm recorded a revenue of £2.07 billion in the year ended 30 September 2016. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 152 countries and has 189,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.