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News - 1 November 2012
She just can't keep shopping like that

Change of consumer mindset

UK consumers are changing their spending habits in realisation that the recession/austerity and uncertainty over job security is the “new norm” for some time to come. Bad news for retail. Bad news for the UK recovery.

In the early stages of the recession shoppers were continuing to spend like they were expecting a quick recovery; although job insecurity was a worry most believed that if they could hang onto their jobs their wages would rise with inflation thus protecting their disposable income. Of course, few people saw inflation rising to the heights that it did or wages stagnating. 

Four years later, rising fuel prices and effective pay freezes or even reductions have severely reduced their spending power, and they can’t see an improvement on the horizon.

While there was more growth than had been expected in the UK economy in the three months to the end of September, many analysts are predicting another contraction in the final quarter of the year [see earlier story].

Retail analyst Patrick O'Brien at Verdict Research said, "There is a new mindset among consumers. Even a year or two ago it was possible things would return to how they were before the credit bubble burst in 2008, but now it is clear there is no going back."

He suggests that this could lead to a permanent change to retail on the high street with the shops that have closed in the past few years never coming back [see related story]. Consequently there has been a structural change, with companies developing click and collect and multi-channel offerings rather than investing in their stores.

Consumers are also responding by going to greater lengths to save money. Tesco chief executive Philip Clarke said that more than half of visits to the company's website were by people checking prices. The strong trading results from discount supermarkets at one end of the spectrum and and premium supermarkets at the other suggests that people are trading down in search of value for money, while they are still prepared to go to luxury outlets for a treat.


If true, this change in consumer behaviour does not bode well for a country relying largely on consumer expenditure at Christmas to maintain the growth demonstrated in the last quarter. It may turn out to be another tough trading period for retailers with consequences for the entire national economy.

Read related items on:
Retail, pubs, clubs and restaurants
Disposable income
Economic growth

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