Consumer Spending Continues to Rise in 2022

Merchants are slowly seeing a steady growth more akin to those seen in the 2010s [1]. As a result, many will be on the lookout to see where consumers will spend their monies.

What does rising consumer spending mean for business?

There are dozens of important factors that influence the disposable income available to a population which ultimately determines consumer spending. A cost of living crisis is being widely publicised, and the conflict in Europe has led to more of people’s income being spent on fuel.

But despite this, the Reserve Bank implementing a 3.5% pay rise “anchor” and rising interest rates are likely to counterbalance such crises and encourage consumer spending further into the year^[2]. February 2022 saw record employment high across Australia, with unemployment down at 3.9% and an employment to population ratio of 64.1%^[3].

Put simply, in most businesses, higher consumer spending indicates confidence in the economy and more disposable income being spent by customers in many different kinds of businesses. There are some sectors less affected than others by this, such as essential services that people cannot afford not to spend on or utilities and food. But even these sectors can notice the difference when people are saving more than usual.

Most industries watch consumer spending closely as a way of predicting future trade and guiding business decisions. The 2020s have seen many changes that are indicative of people’s new expectations and interests following a difficult start to the decade. So what are the most recent changes in consumer behaviour, and which industries are receiving a boost as a result?

Consumer spending trends 2022

An on-demand, improved convenience service

One of the most noticeable hangovers from the pandemic has been the normalisation of on-demand services. Delivery services boomed through the early 2020s while most other industries were struggling to maintain any kind of momentum. Meanwhile, companies that could deliver their products and services virtually, did so, which resulted in rapid service that required just a few minutes of download or a software update.

The result is a growing on-demand industry, up 75%^[4]. More than ever, consumers in 2022 are expecting their spending to earn them instant service, anywhere and anytime. That is true from the point of making the purchase: from the moment they discover a need, they expect to pick up their mobile phone and buy it there and then. It is also true for receiving the product: they regularly expect delivery to begin immediately and to arrive the next day at the latest, or at their convenience.

Streaming services like Netflix, NowTV, Disney and Amazon are “prime” examples. Signing up takes moments, and no sooner has a customer signed up then they can access the product. But this trend extends far beyond entertainment as check-out-free stores and autonomous delivery emerges onto the retail scene and new forms of on-demand service arise^[5].

On-demand groceries are beginning to transform their industry. Australian Financial Review published an article on this subject, focusing on ambitious start-up Send, which has capitalised on grocery delivery demand during lockdowns to establish strong inner-city roots^[6]. The nation can expect to see a battle of brands, with many unfamiliar names, fighting out over the grocery delivery market including Aircart, Voly, and Milkrun all competing for a bigger share.

Consumer spending predictions for these companies are very positive, and if 2022 consumer behaviour is anything to go by, on-demand grocery shopping is going to become more and more influential.

While a hard-working grocery retailer’s instincts may be to panic at the thought of greater competition (with the supermarkets already dominating the industry), Send and co may have shone a light on the values and expectations of the market, providing every grocer with the opportunity to fulfil that same need. 2022 spending is moving towards companies with the quickest service, most convenience, as well as the lowest prices.

The arrival of a Generation Z with disposable income 

Many parents came out of the pandemic and saw how much their children have matured in the time they’ve been stuck inside. Meanwhile, businesses are realising that this new generation has entered the workplace.

The youngest of Gen Z were born in ‘97 and are now in their mid-twenties, with more money in their pocket and new values that retailers are beginning to cater to. As a generation raised with an established internet and global media, many of these values revolve around sustainability and traceable production histories.

This means that consumer behaviour in many sectors is leaning towards second-hand products, recycled products, and products with packaging that demonstrates traceable, ethical, production history. It also means products that do not require packaging are selling better, with the zero waste industry expected to rise at just under 10% by 2028^[7].

Retailers will notice their younger customers questioning product packaging more and more over the coming years, so taking note of which products organisations like Fairtrade give their stamps of approval will be worth the time. Although companies are noticing this and are finding ways of demonstrating their ethical production and sustainable values. Some show their circularity on the packaging while others are providing clear disposal instructions to help consumers spend and consume responsibly.

A fast-changing, fast-growing environment

The pandemic, and the economic uncertainty that has defined recent years, has seen many larger retailers struggle. Consumers are beginning to see a difference between a brand name and a brand-standard product, and are making purchasing decisions on more than brand recognition alone.

As few as 37% of consumers are citing brand names as influential in the choices they make when shopping, a staggeringly low figure^[8]. This scepticism provides opportunities for new companies and could indicate a period of wider competition in many areas of retail.

Part of this could be a reluctance on established retailers part to invest in alternative forms of sales. Some 20th-century names have been late to build websites, while companies like Send are making their sales through apps. Retailers that provide omnichannel sales options for their customers will be optimising their sales capabilities while operating in alignment to market expectations. Though it has taken time, most corporations are catching up to the changes that have occurred in retail.

With spending on the rise, 2022 is sure to provide many opportunities for retailers to capitalise on fast-changing consumer trends that have left established giants vulnerable and created a mobile and exciting environment.