2020s: The Roaringly Unpredictable Decade...
Michael Boyle
Retail & Digital Growth Director Scaling DTC Brands | ￡100M+ Ambitions | Shopify | eCommerce | Strategy | Innovation
European Consumers Defying Price Hikes with Smart Spending.
Despite High Street shops suffering after record rain storms, European consumers are embracing a sunnier economic outlook, defying the challenges of continuing price increases. Recent ConsumerWise research reveals an optimistic sentiment among consumers in five European countries: France, Germany, Italy, Spain, and the United Kingdom.
A Sunnier Outlook Emerges:
German consumers lead the way with a significant increase in net confidence, up by 13 percentage points since September 2022. The highest level of optimism comes from 31 percent of German respondents, who believe their country's economy will rebound within two to three months and grow stronger than before the Ukraine conflict. Across the continent, approximately one in five consumers remains concerned about the lasting impact of the crisis on their country's economy, with French consumers expressing the least optimism.
Coping with Price Increases:
Eight out of ten European consumers are taking proactive actions to alleviate ongoing pressure on household income. With careful expense tracking and adjustments to savings rates, consumers are effectively managing their budgets. Interestingly, both low-income and higher-income consumers are adapting their spending habits in response to the price increases.
Smarter Spending, Not Less Spending:
While European consumers report spending less on nonessential items like fashion, home decor, and dining out, they are still maintaining spending on essential items like groceries, personal care, and pet supplies. Rather than cutting down on essential purchases, they are shopping smarter, buying fewer items, and seeking out better deals to make their income stretch further.
Intent to Splurge on the Horizon:
Consumer saving actions are not solely about frugality; there is also an exciting intent to splurge! German consumers, in particular, express the highest intent to splurge, indicating a positive economic outlook. Among the third of European consumers planning to splurge, their focus is on experiences such as travel and dining out, along with indulging in fashion. This demonstrates a balanced approach between saving for the future and enjoying the present.
With European consumer confidence on the rise and savvy spending strategies in place, there is optimism.
Q2 Results: Bellwether Brands Show Positive Performance.
Zalando, Europe's largest online fashion retailer, reported an 87 percent growth in adjusted earnings before interest and tax (EBIT) in Q2 2023, reaching €144.8 million.
Next, the fashion chain, raised its profit guidance after reporting stronger-than-expected summer sales. Full-price sales increased by 6.9% over 13 weeks to July 29, with online trade growing by 10%.
Skechers achieved record sales of $2.01 billion in Q2, a 7.7% YoY increase, with DTC sales driving the strength, growing by 29.1%. The company aims to generate $10 billion annually by 2026, driven by new category development.
Airbnb's Brand-Building Bonanza: Investing in Success.
Airbnb's strong brand focus on top-of-funnel activities has proven to be a game-changer for the company. CEO Brian Chesky revealed that their brand's robustness allows them to maintain consistent marketing spend as a percentage of revenue year after year.
In their most profitable second quarter ever, Airbnb's net income soared to $650m, up by $271m from the previous year. With a revenue growth of 18%, reaching $2.5bn, their brand-building investments have paid off brilliantly.
By prioritising brand and PR over performance marketing and SEO, Airbnb made a significant shift in their marketing strategy, leading to impressive results. A prime example of this strategy was the listing of a Barbie Malibu Dreamhouse or Gwyneth Paltrow's Guest House in Montecito.
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Airbnb's CFO, Dave Stephenson, affirmed the success of their full-funnel approach, incorporating social, celebrity, brand, and search engine marketing. The company's focus on brand channels has paid dividends, contributing to 90% of their traffic coming directly.
Embracing brand strength has not only improved Airbnb's overall profitability but also allowed them to optimise their channel and audience mix for maximum impact.
New IPA Insight Survey Reveals 64% of UK adults plan to cut back on their Christmas spending compared to last year.
The festive season is just around the corner, but this year, UK consumers are facing tough choices as interest rates rise yet again. According to the IPA Insight report, "Christmas amidst the Crunch 2," a staggering 64% of UK adults plan to cut back on their Christmas spending compared to last year.
Younger generations, especially those aged 18-24, are feeling the pinch the most, with a whopping 82% planning to tighten their belts.
The hospitality sector will bear the brunt of these cutbacks, with 24% of consumers reducing their spending on meals out and 19% curtailing visits to bars and clubs. Other areas experiencing cutbacks include clothes (23%), presents for extended family (21%), and premium groceries/drinks (20%).
To make ends meet during the festive season, almost half of the respondents (48%) will dip into their savings, rising to 58% among 18-24-year-olds. Additionally, 13% of all adults intend to use credit, and 10% will rely on 'Buy now, Pay later' schemes.
However, there is hope for brands seeking opportunities in this challenging climate. Over half of UK adults (51%) are planning to shop during Black Friday, and a third (33%) will allocate up to a quarter of their Christmas budget for the sales. Younger shoppers aged 18-24 are especially enthusiastic about Black Friday, with 79% planning to participate.
As we approach Christmas, brands should keep their communications festive, funny, nostalgic, and value-focused. Consumers are seeking advertisements that remind them of better times (46%).
The survey highlights the importance of understanding consumer intentions and appealing to the nation's mood in both advertising and seasonal offerings. This Christmas will be a test of adaptability and creativity for brands, but with the right approach, opportunities are within reach.
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