Consumer spending tightens in wake of covid and inflation concerns
Hospitality, fashion and luxury retail are at greatest risk as Kiwi consumers reduce non-essential spending, leading companies to rethink their customer propositions and omni-channel offerings. Consumer confidence in New Zealand has taken a hit in 2022, leading consumers to restrict non-essential spending amid some of the world’s highest levels of concern about COVID-19, rising inflation […]
Hospitality, fashion and luxury retail are at greatest risk as Kiwi consumers reduce non-essential spending, leading companies to rethink their customer propositions and omni-channel offerings.
Consumer confidence in New Zealand has taken a hit in 2022, leading consumers to restrict non-essential spending amid some of the world’s highest levels of concern about COVID-19, rising inflation and other global events.
The findings are drawn from Boston Consulting Group’s inaugural New Zealand Consumer Sentiment Survey, which is part of the firm’s global consumer sentiment series.
Phillip Benedetti (pictured), a BCG managing director and partner and head of the firm’s New Zealand office, said New Zealand consumers showed a higher level of concern than those in most other markets surveyed around the world.
“Inflation in New Zealand has reached levels not seen in 30 years, so it’s little surprise there has been such a drop in consumer confidence,” Benedetti said. “In fact, our survey showed that 90 percent of New Zealand consumers are worried about the rise in goods and services costs. This level of concern is greater even than levels in Europe and North America, where inflation is higher.”
Benedetti said luxury goods and services sales are set to take a hit, with the top five categories respondents expected to spend less on being women’s clothing, savings, dining, fashion accessories, and luxury brands.
“The exception to this trend in decreasing spending on non-essentials is leisure travel, a category in which 18 percent of respondents expect to spend more in the coming months. This is the largest expected travel increase across all countries surveyed.
“The New Zealand CPI as of June 2022 is 7.3 percent, the highest since 1990, while the World Bank has rated New Zealand one of the top ten most expensive countries in which to live. What’s more, given current global conditions, three-quarters of New Zealand respondents are worried that the world will struggle with a long-term economic recession. More than half the respondents expect the local economy to get worse over the next 12 months, and 60 percent are worried about their personal finances as a result,” says Benedetti.
BCG’s survey found many New Zealand consumers are looking to the government to promote a business environment that will improve the economic outlook. But only 36 percent of survey respondents believed the government was delivering on this.
Benedetti said it was important for Kiwi businesses to look forward to the ‘next normal’ regarding consumer preferences. “Unfortunately, ‘business-as-usual’ is not an option. To remain competitive in this challenging consumer landscape, companies need to review their customer offering to ensure it resonates with increasingly price-conscious customers. With raw materials and labour costs on the rise, businesses need to think carefully about where and how to raise prices without alienating customers.
“There is also growth potential for businesses to deliver a fully integrated experience across branding, communications, and value between their bricks and mortar stores and online channels.”
BCG’s Consumer Sentiment Series aims to support business by identifying trends among their current and potential customers. This ongoing regular survey will measure changes in New Zealand consumers’ income, saving and spending habits, and will explore consumer attitudes towards inflation and global events.