The consumer behaviours that will define 2024

With ongoing economic uncertainty, consumer spending will continue to be impacted this year. But what does this mean for buying behaviours in 2024? We uncover how the major trends from our latest consumer sentiment survey are influencing consumer behaviour this year. Our analysis gives a greater look into consumers’ priorities and where the pockets of opportunity lie for businesses in the year ahead.

Financial uncertainty among women spells challenges for clothing retailers

Our research found that 62% of men feel comfortable financially, versus 42% of women. This 20% sentiment deficit between the sexes will create a divergence in spending priorities in the year ahead. This is particularly apparent when we look at the differing priorities for future cutbacks.

The top five categories where men and women plan to reduce spend are the same, but the order of priority is where we see differences. Women’s intentions for cutting back are much more pronounced, especially when we look at clothing and accessories spending plans in isolation. Double the number of women (36%) will reduce their spend in this area compared to men (18%).

With women making up a far larger proportion of the yearly spend for clothing retailers (the UK women’s apparel market is over 80% larger than the men’s apparel market), this segment of the retail industry will certainly feel the pinch.

Womenswear retailers must therefore consider ways to get ahead of these new behaviours. But how? Cutting back ranges and refining stock volumes for orders is a strategy we saw some of 2023’s most successful retailers employ. The name of the game? A tighter range with a focus on selling-through lines to preserve margin.

Marks and Spencer set a great example of a ‘less is more’ strategy, with slimmed down clothing and accessories ranges and a focus on value and style over choice. The business reaped the rewards, seeing strong H1 results, with clothing and homewares up 5.5% on a LFL basis and gaining a leading net promoter score for quality and value in summer 2023. With overall market share reaching 9.5% for the same period, Marks and Spencer achieved the leading market share position for womenswear for the first time in four years.

Marks and Spencer’s customers – typically female and increasingly millennial – rank value for money and quality as their top priorities when purchasing. This perfectly Illustrates why the business’ razor sharp focus on refining product lines and improving product quality has paid off. In an uncertain economic climate, Marks and Spencer illustrates that knowing your customers’ needs can deliver better profit margins despite lower demand.

Demand for men’s health and beauty products dictates market trends

Historically, the health and beauty industry has been a highly gendered space. But where once the words ‘health and beauty’ was perhaps synonymous with red lipstick and nail polish, perceptions have changed considerably in recent years. Today, the male grooming market is booming. Indeed, Statista estimates the male grooming industry will be worth $115 billion in 2028, up from nearly $80 billion in 2022. The results from our survey support these indications for growth, with only 10% of men planning to cut back in this category, compared to 25% of women.

Men are typically more focused on the higher end of the market (branded or premium), with only 14% trading down to own-brand products in the category compared to 29% of women. As we see brands wise up to the evolution of men’s health and beauty, the way businesses market to men will evolve. In the 90s- and 00s,men’s products were marketed in a typically masculine fashion, with dark packaging and sports stars heading up TV and print ads. However, with a new era of poster boys like Timothy Chalamet and the likes of Pharell Williams releasing his own ‘all-gender’ health and wellbeing line – ‘Humanrace’, perceptions around men’s beauty are changing.

Williams’ punt on a genderless product range is well placed and is supported by increasing market share. The Ordinary’s parent brand Deciem posted profits of $460 million in 2021, and digital data agency Similar Web reported that 39% of visitors to the brand’s website were men. One of the highest profile deals in the health and beauty world in 2023 was L’Oreal’s purchase of Aesop. At $2.525 billion, it’s the French beauty conglomerate’s largest deal to date. Aesop, a long-standing Aussie staple, is boxed in classic genderless packaging and marketed as a luxury good. Its exponential growth in recent years, and the sale price to L’Oreal, shows the strength that this part of the market holds.

We anticipate further growth in this space and new entrants when it comes to genderless and male-centred grooming in the year ahead.

End of the revenge travel era impacts domestic and overseas travel markets

Last year, our research revealed that every demographic surveyed had increased plans to take a holiday in 2023. However, in 2024 this intention has reversed. According to our research, the 'revenge travel' phenomenon that emerged after Covid-19 is losing momentum, with short breaks abroad being the only area where intentions saw a slight improvement of 2% year on year. Even those consumers with more money in their pockets are reducing intentions to travel with 43% of high-income households planning a long break overseas in the next 12 months, down from 54% in 2023.

In an environment where consumers are still feeling the pressure on their finances, this sentiment is understandable. Particularly when considering the rising cost of airfares. According to data from the Office of National Statistics (ONS), prices for air passenger travel in summer 2023 were 60% higher than pre-Covid in 2019, and 19% more expensive than in 2022. With uncertainty around the outlook for fuel prices going into 2024, the trend for higher air fares will persist, dampening demand for overseas travel during the year.

Intentions to travel domestically have also fallen by 3.5% on average since last year. Again, this trend is most pronounced when we look at those consumers who are more likely to travel – high earners. In 2023, 56% of households earning £80K or more planned to take a trip of five days or longer in the UK. This is versus 43% of respondents this year. Compounding these figures, the latest data from ONS for July shows international travel to UK shores is still 6% below 2019 and our latest Hotels Tracker shows UK hotel occupancy remained on average, 4% below pre-pandemic levels in 2023.

With inflationary pressures easing and real wages growing, one might anticipate that consumer sentiment towards travel will improve as we get further into the year. However, with lockdowns beginning to feel like a distant memory, and consumers no longer stuck within their own four walls, we expect the experience-led spending trend we saw explode at the end of 2022 to begin to soften. Additionally, mortgage rate rises and rent hikes for many will exacerbate the prolonged drag on consumers’ finances. In our view, this means holidays – the ultimate discretionary purchase – will be impacted and see demand deflate this year.

Affluent families most likely to eat out, but hardest hit by higher interest rates

Our research shows that the current economic climate has a significant impact on families in particular. According to our survey, the respondents feeling most vulnerable to rising interest rates are affluent people aged between 25 and 54, who have children and a household income of over £60K per year. 93% of them said rising interest rates will affect discretionary purchases in 2024 and this will be the main factor to influence spending in the next 12 months. This is different from the overall result, which showed the rising cost of goods was the main factor that will influence consumer spending this year.

Affluent families are an important customer segment for many hospitality operators, as according to our survey they will eat out in a restaurant twice as frequently than the average consumer in the next 12 months (twice a month). However, families who fit these criteria are set to be the most impacted by the economic environment in the year ahead.

Over the course of 2024, the pace of inflation will slow, benefitting consumers overall. But at the time of writing (January 2024), market analysts predict interest rates will stay higher for longer and remain at over 3.6% in December of this year. This means the economic challenges we see in 2024 will be weighted towards tighter monetary policy and high interest rates, rather than the higher cost of goods. Subsequently, discretionary spending for affluent families will take a hit, and this group will feel the pain in their finances more than others.

The good news is that sentiment towards eating and drinking out is improving among these families, with 40% having cut back in the last three months on eating and drinking out, compared to 35% intending to do so in future. However, spending on eating and drinking out remains the number one area where affluent families intend to decrease spending, coming ahead of essential spending on energy bills, which is ranked the number one area across all respondents.

So, how can hospitality businesses attract and retain this valuable group of customers? One strategy is to offer loyalty programmes. When asked how they would reduce the amount they spent on eating out in the next six months, 41% of affluent families said they would seek out special offers and discounts. This was tied as the top priority, alongside reducing the frequency of eating out for this group, which 41% said they would do (this is the top priority across all consumers). This shows that affluent families are more interested in finding discounts than the average consumer (26%) and suggests loyalty programmes that cater to these families could help to increase customer loyalty and engage with this group. This will be particularly beneficial to operators that rely on affluent families to fill seats in earlier day parts and which are in the heart of local communities, where families use much loved hospitality venues to mark major milestones like birthdays and exam results.

With increasing demand for loyalty schemes, particularly from the affluent family segment, it’s likely we’ll see more competition in this space in 2024. These schemes should help hospitality groups drive volume in venues and grow market share. But the focus should be on a ‘give to get’ ethos, rather than discounts. Afterall, nobody in the sector wants to return to the discounting days of the late 90s and 00s where operators found themselves in a race to the bottom on price to attract trade, significantly impacting profitability across the sector.

Want to know more?

Learn more about the latest consumer trends in our 2024 Consumer Outlook report. Or if you have questions about a specific customer segment, get in touch with our experts for more insight on how your customers might behave in 2024.