Majority of Australians to go basic and cut luxury spend
More than 60% of Australian consumers plan to cut luxury spending in the post Covid-19 economy, shifting their focus to essential spending instead. This is according to new research by Boston Consulting Group.
The shift in consumption patterns comes amid fear of a profound recession. Covid-19 has caused a disruption to global trade and supply chains, not to mention slashing revenues from the face of most industries. The economic outlook for the short and medium term is bleak, with some reporting that Australia will take an economic hit in the tens of billions.
Boston Consulting Group reports that Australians are well aware of the economic outlook, and many are planning a change of lifestyle. As it stand, the average level of personal financial security felt among Australians is relatively higher than that in many other markets. Nevertheless, over 80% of Australians expect a recession in the near future induced by Covid-19, and as a result many are planning to tighten their pockets.
In the short and medium term, even after the dust settles from the crisis, well over two thirds of Australians are expected to cut luxury spending. This includes spending on travel, movies, public entertainment, spas, fashion jewelry, accessories and handbags, luxury brands, and clothing.
The finding is in sync with a global study from Boston Consulting Group, which found that the world’s luxury market could see as much as $650 billion worth of sales evaporate this year. “The impact will be worse than the global financial crisis of 2008,” said Sarah Willersdorf, Head of Luxury at the management consulting firm.
Going basic
Beyond luxury, even public transport features in the bracket where Australian consumers are planning to cut expenditure. Many are planning to hunker down and wait out the challenging economic scenario, spending only on essentials and basic goods. More than half expect spending to remain constant on things such as fresh fruits & veg, home cleaning products, pet food and gardening supplies, among others.
A third even expects to increase spending in this bracket, as living and working from home becomes the norm. The authors stipulate that this is indicative of a broader shift in lifestyle and priorities among Australians.
“Ethnographic research conducted by BCG Platinion illustrates this retreat to the simpler life further with consumers using the time returned from commuting to pursue creative interests: baking bread, growing vegetables and nurturing gardens, and home maintenance. Our study reveals that 74% of consumers who have cut down on eating-out are cooking meals at home, and one-third of Australians are taking up DIY home repairs,” wrote the firm.
BCG’s analysis is based on consumer data collected towards the end of April, part of a broader effort from the consulting firm to monitor consumer behaviour as the crisis progresses. The change in lifestyle observed by BCG is consistent with other similar research being conducted.
Consumer insights firm Kantar has also been monitoring consumer behaviour, reporting that daily life in Australia has undergone a significant change, and that most Australians expect the consumer market to tighten even further in coming months. On the other hand, many Australians are looking forward to a trip to the pub or a nice meal out when this is all over.
Such a knee-jerk reaction to the lockdown lifting might boost the consumer market at a later stage, although one segment is benefiting from the current scenario, namely ecommerce. Markets across the globe are seeing a similar scenario, where consumers stuck at home at turning to the online sphere for their commercial activity, be it shopping or ordering food.
In Australia, retail activity was already undergoing a dramatic shift to the online domain, with BCG reporting that purchases via digital channels have nearly doubled in the last four years. The firm reports that these purchases have grown by a further 3% in the last three months alone, with growth across all age groups as well as ecommerce segments.
