61 per cent of shoppers say they will not be discouraged from purchasing premium items if prices rise by up to 10 per cent. 40 per cent believe they will be ‘worse off’ post-Brexit, whilst 37 per cent say they will ‘better off.
’New findings from the Centre for Retail Research and Rakuten Marketing, the leading digital marketing company, reveal the effect triggering Article 50 is likely to have on the premium brands market over the next two years and takes the temperature on consumer attitudes to retail spending in the coming months.
The report, which surveyed 1000 consumers across the UK, highlights the polarised views reflected in the referendum result. Over the next six months, 37 per cent of people are ‘very’ or ‘quite sure’ they will be better off, whilst 40 per cent think they will be ‘worse off’ or ‘not better off’.
However, shoppers claim they will not stop purchasing premium products if prices have to rise as a result of Brexit. Recent figures show that prices in the UK are now rising at an annual rate of more than 3%. However, when faced with a price increase of even up to 10 per cent, only 6 per cent of Brits claim they would refuse to buy the item, whilst 62 per cent would buy their premium brand anyway.
There is a tipping point though; the rise from a 10 per cent increase to a 15 per cent price increase was expected to make over a fifth (21 per cent) of shoppers switch products.
In contrast, paying more for online delivery is an area that consumers will not compromise on. 57 per cent of consumers are not prepared to pay more for online delivery.
Outlook for spending on premium brands divided
Whilst some consumers remain confident their spending on premium brands will remain buoyant, a similar number are cautious and believe Brexit will have a negative effect. Exactly half of shoppers expect to spend the same or more on premium products post Brexit, but 39 per cent say they will spend less on these items.
Looking to foreign-produced premium brands, respondents were generally more pessimistic than optimistic about a drop in spending. Almost a third (29 per cent) expect there could be reduced spending, and a further 10 per cent expect a large reduction in spending on these products. Only 16 per cent expect to spend more.
Consumers also divided on trust in luxury brands
38% think that Brexit will make no difference to consumers’ trust in premium brands produced outside the UK, but a third think there will be a ’large‘ or ’some‘ loss of trust. This is largest for handbag, casual apparel, and formal clothing brands but lowest for laptops, tablets, and smartphones.
Mark Haviland, EVP Global Development at Rakuten Marketing commented: “Whilst sentiment suggests that people will still purchase premium products if prices rise slightly, the viewpoints on what Brexit will do to spending on these brands overall is completely polarised. The customer segments marketers target are likely to be completely split in how they approach shopping over the next few years.
“Whether audiences are cautious or optimistic about the effects of the decision to leave the EU, retailers need to make use of data and programmatic targeting to engage these different groups in the way that is most relevant to them. Our findings make it clear that marketers must work hard to understand their customers better if they are to engage customers successfully in this unsettled market.”
Prof J A N Bamfield, the Director of the Centre for Retail Research said: “Although there is a clear divide in opinion, negative attitudes about the effects of Brexit outweigh positive ones. However, when we look at consumers’ perception of how well off they will be in six months compared to two years’ time, their outlook is fairly stable suggesting that a crash in consumer confidence may not come. Ultimately though, we could see a change in living standards as a result of Brexit and this could affect brand loyalty as well as consumer buying behaviour, and retailers must be prepared for this.”