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.