Retail & Consumer Market Insights | Quarter 2, 2017

In our most recent consumer survey, we focused our questions on shoppers’ expected spending for the year ahead and their views on in-store purchasing and experience. We have also drilled down further into our data to segment by age group. This has given us interesting perspectives on these groups’ future outlook; and their behaviours and expectations when engaging with the retail industry.

The retail sector will be fueled by shoppers maintaining or increasing their spending levels in the year ahead

While 46 per cent of shoppers told us they had maintained their level of spending from the previous twelve months; a larger cohort of shoppers (53%) expect that they will maintain their spending levels in the year ahead. This is particularly prevalent for the older generations who are more likely to be maintaining their spending levels versus the younger generations who have indicated that they expect more movement against the previous years' spending.

Twenty per cent of shoppers indicated that they expect their level of spending to decrease in the next 12 months, while 27 per cent expect to increase spending levels. Given that 80 per cent of shoppers are planning to either maintain or increase their spending levels, retailers may feel cautiously optimistic that spending will remain relatively predictable but probably will not be able to factor in a big up-tick in discretionary spending. This should be factored in for Christmas planning - particularly inventory levels and the planned promotions.


Shopper age is a driver of expected spending

Breaking the above results down further, we can see that spending expectations and rationale vary widely across the age brackets. Spending expectations appear to be very linked to “stage of life” and the financial freedoms and pressures that may bring including study, first jobs, promotions, marriage, children, mortgages, selling businesses, retrenchment and retirement.

1. Millennials are a divided generation

The millennials were the least likely to indicate that they will keep their spending level the same as the previous year. This is to be expected as they transition from school to university and on to secure work. Interestingly they were reasonably split on whether they were planning to increase or decrease spending. In an age group usually associated with study, first jobs and self improvement - it appears that this generation are actually having quite disparate experiences. Some are finding their opportunities are positive and improving; while others are experiencing job volatility, pay cuts and carry a general uncertainty in the economy which is leading them to reign in their spending.

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2. Loosening the purse strings

Of all the age groups, the 25-34 year-olds are the most likely to be planning on increasing their spending in the year ahead. This aligns with this group finding more permanent employment and seeing pay increases and promotional opportunities come their way.
The younger generations (up to 44-year-olds) are planning on spending some of their savings to boost their budgets. This indicates that they are putting off life events such as marriage and home ownership to place more of their income and savings into shorter-term enjoyment through experiences and purchases. The middle generations (35-44 and 45-54 year-olds) are feeling more confident in the economy while the younger baby boomers are finding additional financial freedom as they enter retirement. The older retirees have circled back and are digging into their savings to enable them to spend more in the year ahead.

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3. Gen X not reigning in spending

The middle age groups (35-44 and 45-54) are the least likely to be restricting their spending in the next year. This bodes well for spending within the retail sector. In a separate question these age groups indicated that although mortgage repayments are their spending priority for the year ahead - in terms of retail spend, they will be prioritising clothing, shoes and baby/kids products.

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4. 45-54 look to the economy for spending decisions

Interestingly, the primary rationale amongst 45-54 year-olds for their expectations of spending increases AND decreases was based on the outward-looking measure - confidence in the economy. This indicates that they feel personally powerless in their ability to change their discretionary spending and are basing their behaviour on where they believe the economy will head and its impact on important factors such as employment and interest rates.

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What does this mean for retailers?

Given the large number of shoppers across all age groups that are planning to maintain spending levels, retailers should be cautiously optimistic about the year ahead. Given this environment, retailers should ensure they:

  1. Have robust pricing architecture to capture a broad range of customers with different price sensitivities
  2. Add rigour to their supply chain and inventory management to meet customer expectations of product availability but not over-burden the business with stock
  3. Continually review the cost base, particularly given that sales may not grow for some time

Shoppers’ in-store vs online preferences differ significantly across category and age

In three of the high-volume categories - grocery, clothing and footwear - the majority of shoppers still prefer to shop in-store rather than online. This indicates a continued wariness to shop online in categories that can contain variability (e.g. grocery, clothing etc.) versus standardisation (e.g. books, toys etc.). Shoppers consider that “being there in person” will improve outcomes from a quality (particularly grocery) and product specifications (clothing and footwear) perspective.

The 35-44 year-olds are the most likely generation to shop online in the grocery, clothing & footwear and pharmaceutical categories. This indicates both a greater confidence with online shopping as a medium but also that they are at a busy stage of life where convenience is a priority.

In all categories, the over 65s are the least likely to prefer online shopping over purchasing in-store. The categories where they feel most comfortable shopping online are those with less variability in product including health & fitness, outdoor and cosmetics.

What does this mean for retailers?

The above highlights the need for a segmented customer strategy. Retailers need to gain a better understanding of why customers prefer shopping different categories through different channels; and how they can leverage these preferences. This will give retailers confidence to target different age groups with different channel propositions. For example, a supermarket chain might target Generation X with online advertising, promoting their home delivery service. At the same time, the supermarket chain could continue to invest in more traditional media such as catalogues for those generations who still prefer to shop in-store.

Overwhelmingly, shoppers are positive about recent shopping experiences

Somewhat surprisingly (given regular negative commentary about the Australian retail experience), 94 per cent of shoppers indicated their last in-store experience was positive. Most age groups indicated this was due to product availability while the middle two age groups (35-44 and 45-54) stated that this was due to competitive prices. Other commonly cited reasons were: ease of finding products; and the quality and variety of products available. The older two age groups (55-64 and 65+) both cited the quality of retail staff - knowledgeable, friendly and helpful - as reasons why they had positive experiences.

Only four per cent of the sample indicated they had previously had a negative experience which makes the rationale sample size quite small. Taking that into account, the most common reasons cited were quite varied across the age groups and included: limited variety of products, sales staff lacked knowledge, prices were not competitive and there was inconsistent pricing between the store and online.

What does this mean for retailers?

Shoppers have given us a clear indication of what makes them happy. Retailers should focus in on retailing basics - competitive and consistent pricing, product availability, effective merchandising and quality staff to ensure they are able to create positive experiences across their store network.


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Donna Watt

Donna Watt

National Retail & Consumer Leader, PwC Australia

Tel: +61 421 141 350

Daniel Rosenberg

Daniel Rosenberg

Retail & Consumer Leader, Financial Advisory, PwC Australia

Tel: +61 3 8603 3886

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