Retail

• Tighter budgets drive consumers to discounters, with spend at brands like TK Maxx, B&M and Home Bargains up 12% in the first half of this year, with transactions up 17%
• Average spend at second-hand marketplaces rises 482% between 2019 and 2022, as consumers search out second-hard bargains 
• Spend shifts from designer brands to the high street, as spend at high street brands rises 11% in 2022¹, while the number of transactions at luxury brands falls 10%

LONDON – 8th November 2022 – Cost-conscious consumers are switching to discount brands and second-hand marketplaces which saw double digit spending growth in the first half of the year, a new report from advertising platform Cardlytics finds. 

The State of Retail Spend report, based on the spending habits of over 24 million UK bank cards and the views of over 2,000 UK consumers, found that four in five (79%) consumers report spending more on day-to-day outgoings than they did a year ago, while with three quarters (72%) say they plan to cut-back on non-essential spending this year as the cost-of-living crunch sets in.  

Discount brands see boom in spend 

As costs increase and consumers look to make their money stretch further, the report found that over half (58%) of consumers plan to shop more at discount homeware and fashion brands this year.

Discount retailers such as B&M, TK Maxx, Home Bargains and Primark saw the largest increase in spend in the first half of this year, up 12% compared to 2021¹, whilst the number of transactions at these brands rose 17% in the same period.

Second-hand becomes mainstream 

The report also found that increasing numbers of consumers are turning to second-hand marketplaces in response to the cost-of-living squeeze.

Platforms like eBay, Depop and Vinted, saw a 7% uptick in spend in the first half of the year, compared to the same period in 2021, while the average number of transactions made on these platforms rose 6%.

It’s not just the number of purchases that are increasing, the amount spent per person has also risen drastically in recent years. In 2019, consumers spent £35.67 on average on second-hand marketplaces, compared with £207.63 in 2022 – a 482% rise.

That trend is set to continue as prices rise and consumers become increasingly aware of the environmental impact of buying new. The report found that one in three (34%) consumers plan to buy more second-hand items this year, while half (47%) of consumers say they plan to shop less at fast-fashion brands this year.

On the other hand, fast-fashion brands are starting to feel the impact of this mindset shift, with the number of transactions at these retailers down 16% in the first half of this year compared to 2021. 

Shoppers choose high street brands over designers 

Spend on luxury and designer brands fell 7% in the first 6 months of 2022, compared to 2021, while the number of transactions at luxury brands dropped 10% in the same period, indicating that consumers aren’t just spending less on designer and luxury goods, but are turning away from these brands altogether.

This downward trend looks set to continue into next year, with over half (59%) of consumers planning to spend less on luxury goods this year, while a further half (48%) plan on switching to cheaper brands for clothing and homeware as the cost-of-living bites.

Traditional high street retailers are already benefitting from the gap that luxury leaves, with both total spend and the number of transactions at high street fashion brands up 11% in the first six months of 2022, compared with 2021³ as consumers ‘trade down’ when shopping.

Home and garden spend dries up

The past two years saw bumper spend at home and gardens brands as lockdowns fuelled renovations, but withthree in five (61%) consumers planning to cut back on big-ticket purchases this year this upward trajectory may have reached its peak.  

The report found that consumers are still committed to improving their outdoor space, but they are increasingly looking to do so in ways that don’t break the bank. The number of transactions at garden centres rose 22% in the first 6 months of 2022, compared to the same period in 2021³, but the average transaction value fell 20%³, suggesting that consumers are continuing to shop at these brands but are spending less when they do. 

It's a similar picture for high street furniture brands who are increasingly feeling the impact of shifting consumer spending priorities. Spend at furniture brands fell 20% in the first six months of this year compared to the six months prior³.  

Dawn Reid VP Advertising Partnerships at Cardlytics said: “We know that even in times of economic downturn, consumers still want to find ways to treat themselves, refresh their wardrobes or invest in their homes. 

“But with tighter budgets than ever and the economic picture set to worsen, consumers are looking for cheaper swaps and ways to save, putting off big ticket purchases and trading down on many of their usual purchases.

“There's an opportunity for retailers to invest now, to support consumers longer term, whether through investing in price and discount ranges, value-focused marketing, or loyalty schemes, brands can put money back into their loyal customers wallets and help build longer term brand affinity. Those brands that can grow and retain their customer base now, when times are tough, will be most likely to succeed in future.”

Download the UK State of Spend report here.

About Cardlytics

Cardlytics (NASDAQ: CDLX) is a digital advertising platform. We partner with financial institutions to run their rewards programs that promote customer loyalty and deepen relationships. In turn, we have a secure view into where and when consumers are spending their money. We use these insights to help marketers identify, reach, and influence likely buyers at scale, as well as measure the true sales impact of marketing campaigns. Headquartered in Atlanta, Cardlytics has offices in London, New York, Los Angeles, San Francisco, Austin, Detroit, and Visakhapatnam. Learn more at www.cardlytics.com.

Energy bills are at an all-time high. Mortgage rates are at the highest level for 14 years. Last week the cost of a weekly shop rose at its fastest rate since 1980. 

While we all wait for the outcome of the Government’s budget in November, there’s only one question on retailers and shoppers' lips: when will prices stop rising? 

As inflation keeps creeping up, it’s fundamentally altering what consumers buy and how they shop. Our latest research found that three quarters (72%) of shoppers plan to cut-back on non-essential spending this year as the rising cost-of-living sets in. 

But, heading into a recession doesn’t always mean spending disappears. More often than not, spending just changes shape. 

Our new spending report, based on the spending insight of one in four UK bank accounts, found that increasing numbers of shoppers are turning to second hand marketplaces in response to the cost-of-living squeeze, swapping new for second hand in a bid to bag a bargain. 

Platforms like eBay, Depop and Vinted saw a 7% uptick in spend in the first half of the year, compared with the same period in 2021¹, while the average number of transactions made on these platforms rose 6%.

Strikingly, this growth isn’t just coming from an increase in the number of people buying second hand – the average spend per person has also skyrocketed by 482% in the past three years, from £35.67 in 2019 to £207.63. No longer just a budget option, second hand fashion is increasingly the go-to for buying clothes. 

There’s no arguing that the cost-of-living crisis is accelerating a trend towards second hand shopping in search of better value. But the shift to second hand was already on the rise as the impact of the fashion industry on the planet was made all too evident.

Almost half (47%) of shoppers say they plan to shop less at fast-fashion brands this year, and we’re seeing this play out across our spend data; spend on online fast fashion brands was down 4% year on year in the first six months of 2022, while the number of transactions fell by 16%.

The cost-of-living crisis will undoubtedly make it more challenging for fashion retailers, as the competition for people’s dwindling disposable income gets tighter. Brands will need to work harder to keep and grow their customer spending and their market share.

Harnessing the shift towards sustainability provides an opportunity to do this. While focusing on sustainability as a retailer has a positive impact on the planet and brand reputation, it increasingly also comes with benefits to a business’s bottom line.

We’re already seeing some retailers take steps to introduce second hand or upcycled ranges, or even their own resale platforms, such as Zara’s newly launched pre-owned service or Urban Outfitters’ ‘Urban Renewal’ upcycled range. Even high street heavyweights like John Lewis are trialling their own fashion rental service.

Rewards programmes that encourage second hand purchases or recycling clothing are another way to capitalise – for example offering discounts on end of line goods, or vouchers or cashback for bringing in clothes to be recycled can help drive further spending. 

Done right, these moves can not only improve brand perceptions, but turn into lucrative revenue streams. 

The cost-of-living crisis and tighter budgets have converged with a desire to reduce overconsumption and shop more consciously and the trend is showing no signs of slowing. 

Fashion brands that act now to capitalise on consumer concerns for their purse strings and the planet will reap the rewards in the long run.

Download the UK State of Spend report here.