Could Consumers’ Splurging Habits Be Making a Rebound?
Consumers have been hesitant to spend as they continue to ride a financial roller coaster, quickly citing inflation for the need to cut back on discretionary spending, but according to new survey data taken by 5WPR for its fifth annual consumer culture report, consumers may be becoming comfortable with spending again.
5WPR’s annual report and consumer survey asks consumers “to splurge or not to splurge,” digging into content that compels shoppers to make a purchase, spending intentions and priorities, and attitudes toward the in-store shopping experience. While the company found that inflation and a raised cost of living are still a key topic of conversation, the authors of the report said there was at least some movement with “movers and shakers when it comes to the categories that consumers are most likely to splurge on.”
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Similarly to last year’s findings, in 2024 consumers said they are most likely to spend on electronics and technology (52 percent). However, consumers also said they were just as likely to splurge on health and wellness (52 percent), a jump from the 43 percent who said they would splurge on the category just last year. Other categories that saw upward mobility include travel and experiences (43 percent, up from 38 percent year-over-year) and beauty and personal care (43 percent, up from 37 percent year-over-year).
Broken down by age, the top two splurge-worthy categories were consistently electronics and technology, and health and wellness. However, health and wellness ranks top, followed by electronics and technology for the 35 to 44 age range and the 65 and older age group. More variation is seen in the third most splurge-worthy category across age demographics with 16- to 24-year-old’s ranking beauty and personal care; 25- to 44-year-old’s ranking clothing and fashion; 45- to 54-year-old’s ranking travel and experiences; 55- to 64-year-old’s taking dining out, and the 65 and older age group ranking home goods and furniture as their top spends.
Notably, while the company’s 2023 survey found consumers predicting to spend most disposable income on clothing and fashion followed by dining out, actual spending in 2023 saw dining out outpace clothing and fashion. In 2024, consumers predict to spend the most on travel and experiences. The findings, said the authors of the report, show how consumers’ spending priorities have changed over the course of the last year and will likely continue to do so.
“Consumers tend to underestimate their spending behavior,” Dara A. Busch, co-chief executive officer of 5WPR. “In 2024, consumer predictions indicate a plan to allocate more disposable income to categories like travel and experiences, and health and wellness, than they did in 2023. If the trend from previous reports continues, these numbers are underestimated, signaling a busy year for consumer spending in these categories.”
With all categories competing for consumers’ share of wallet, 5WPR’s survey also asked consumers what the most compelling way for brands has been to convince them to make a purchase, revealing that the key relies on other consumers. Word of mouth (46 percent) and customer reviews/testimonials (44 percent) outranked all other paid advertising including print, online, TV, audio and social media. Only 16 percent of survey respondents said that organically created TikTok-user-generated content compels them to purchase from a brand.
As consumers are shopping, survey respondents said there is much to enjoy about the in-person shopping experience. Almost 40 percent of consumers said they prefer to browse for items in-store. Moreover, nearly 40 percent said shopping is an activity they enjoy doing alone for personal enjoyment or leisure and 28 percent said they think of shopping as a social activity they enjoy with friends and family.
The authors of the report said, according to the survey findings, the top three ways brands could consider enticing younger shoppers to shop in-store are with exclusive in-store deals (46 percent), exclusive in-store products (40 percent) and aesthetics/store set up as an experience or destination (39 percent).
“This year’s numbers indicate that, while inflation continues to be a term that media uses as a cautionary tale, its continued use has evolved into a buzzword for consumers, rather than a deterrent for spending,” Busch said. “We’re seeing that in 2024, consumers are eager to spend their money, appearing more confident in the power of the dollar than ongoing coverage of inflation may lead us to believe. They are no longer waiting for next year or holding onto the promise that the economy will be in a better place soon; they are spending now. In a crowded market, the challenge, and opportunity, for brands thus becomes encouraging consumers to spend with them rather than elsewhere.”
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