Consumers anticipate increased spend on essentials in coming months has been saved
Consumers anticipate increased spend on essentials in coming months
Deloitte H2 2014 Consumer Review
39% of consumers report reduction in confidence on household disposable income. Consumers favour saving over spending.
Half of respondents do not pay into a pension fund. Majority of consumers believe sales and sales promotions offer ‘some value but ‘not much’.
Irish consumers’ confidence about their household disposable income has declined over the last six months, but people nevertheless expect to spend marginally more in the next six months, largely on essentials. These are among the results of the Deloitte H2 2014 Consumer Tracker, published today.
The Deloitte Consumer Tracker provides a regular update on changes in consumer spending and behaviour. Over the last six months, 39% of Irish consumers have become less optimistic about their disposable household income. While 17% indicated that they are more optimistic about disposable income. 39% indicated that their level of optimism remains the same. Five per cent either didn’t know or didn’t respond.
Findings show many consumers have increased spending in the last six months on non-discretionary items such as utility bills (45%), transport (33%), healthcare (30%) and housing (22%). Correspondingly, respondents also reported decreased spending on more discretionary items and activities including going out (39% of respondents), restaurants and hotels (39%), alcoholic beverages (35%) and clothing and footwear (33%).
This pattern is set to continue – a considerable number of consumers believe they will spend more in the next six months on non-discretionary items such as utilities (44% of consumers), transport (24%), health (23%) and housing (21%). However, findings also indicate there will be marginal increases in spend across discretionary items as well. On average, a two percentage point increase in spending across all categories is anticipated when compared to research carried out in March 2014.
Almost half of respondents (48%) pay money into a savings account every month, while two in five are making monthly repayments on loans (39%). Just under a third (31%) have an outstanding balance on a credit card, while a similar percentage (34%) repay the total balance on a credit card. Worryingly, half of respondents indicated that they do not pay into a pension fund – and just 25% indicated that they do.
With regards to purchase intentions, on average across all categories of spending, 60% of respondents have indicated that they have no intention to make a significant purchase. However, 15% of respondents indicated that they intend to purchase a new car (up from 10% from research carried out in March). There is also an increase in the number of respondents who indicated that they plan to purchase a new property (7% compared to 5% in March).
Kevin Sheehan, Head of Consumer Business at Deloitte, commented: “While the findings show that many consumers’ financial situations have stayed the same over the last number of months, for those that have experienced a change in circumstances, it is more likely to have gotten worse than better. While marginal increases in spend are anticipated, these are mostly likely to be on essential items, with little left for discretionary items. Irish consumers remain cautious, as evidenced by the high level of savings. For retailers, the festive season will bring an obvious jump in sales but their focus must be on ensuring a strong value proposition to capitalise on this seasonal opportunity. Irish consumers are very discerning with regards to spending and outgoings, and are likely to remain so.”
In order to explore the impact of sales and sales promotions on consumer behaviour, research released by Deloitte also examined how consumers change their purchasing behaviour as a result of availing of such offers. In terms of consumers’ perceptions of promotional offers, findings show that the majority of consumers believe they offer some, but not much value. However, just under half (49%) of respondents also highlighted that sales and promotions do make necessary items more affordable. Just 17% of respondents spend more than they have as a result of promotions and just 16% purchase products or services that they don’t need.
Interestingly, on average across all categories examined, half of respondents indicated that they would buy whatever brands are on offer, indicating that sales and sales promotions do encourage consumers to switch brands. The categories of product that have the most brand loyalty are grocery products and cosmetics with just over one in three respondents indicating that they always buy the same brands. On average across all categories, one fifth of consumers indicated that they always buy the same brand, while just under a third indicated that they are not influenced by brand.
Over half of respondents (52%) have not switched any of their key service or utility providers as a result of a promotional offer. Switching due to promotions is most common with electricity, motor insurance and broadband providers at 29%, 25% and 23% respectively. Of those that did switch providers, the numbers of respondents that switched back to their original provider ranged from 25% for motor insurance to 34% for health insurance, highlighting that a significant majority of people who switch based on a promotion do not return to their original provider.
Interestingly, over half of respondents indicated that they would only purchase items such as furniture, electrical equipment and household appliances on sale. One in four respondents indicated that they were not influenced by sales at all for a number of categories, including gym membership, jewellery and cars/other vehicles.
“Overall, the findings indicate that sales and sales promotions seem to be most effective for driving a short term increase in sales, however they do not seem to drive long-term brand loyalty. Interestingly, the prevalence and regularity that a wide variety of products are on offer may be leading to a sense of scepticism amongst consumers as to if they offer genuine value. But the majority of consumers are not tempted to depart from their prudent spending approach – a significant majority are not compelled to purchase products that they do not need, or spend money they do not have,” said Kevin Sheehan.
Additional findings included:
- 69% of respondents indicated that they retain and actively use coupons.
- Despite the continued growth of the internet and electronic media, just over a third of those who use coupons source them from magazines and newspapers.
- 52% of Irish adults agree that sales and sales promotions encourage people to purchase branded good over own-brand items.
Notes to Editors
About the survey
The research was carried out by Amárach as part of an omnibus survey. A total sample of 1,000 was achieved with quotas set on gender, age, social class and region to achieve a sample aligned with the national population. Interviewing fieldwork dates were 11 to 15 September.
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Deloitte H2 2014 Consumer Tracker infographic
Although Irish consumers’ confidence about their household disposable income has declined over the last six months, people nevertheless expect to spend marginally more in the next six months, largely on essentials.
You can view our highlights infographic above or access a downloadable version opposite.