Shopper survey: How cash-strapped consumers plan to cut spend this Christmas

An exclusive survey for Retail Week has found that 39% of people plan to spend less on food and drink this Christmas compared with last year, with chocolate and confectionery the category most at risk. 

Overall, the survey of 2,000 UK adults by Walnut Omnibus paints a picture of an average consumer looking forward to shopping this Christmas, but concerned about the cost and planning to make savings wherever possible. This includes buying fewer gifts, using discount stores and only buying things that are on promotion.

Financial crisis shaping spend

In the run-up to Christmas, shoppers are being battered by a cost-of-living crisis that has seen prices on basic goods and services soar. In September, the Consumer Prices Index (CPI) returned to its July peak of 10.1% year on year following a slight dip to 9.9% in August.

This represents the highest annual CPI inflation rate since records began in January 1997. The Office for National Statistics said food prices were a key driver of the increase as they hit 14.6% in the 12 months to September 2022, up from 13.1% the previous month.

Price inflation is having a dramatic effect on people’s spending power. Asda’s cost-of-living index found average household disposable income fell by £35.44 a week in September – equivalent to £141 per month.

The supermarket reported a surge in sales of energy-saving products such as air fryers and slow cookers as customers try to keep energy costs down.

In this context, it is perhaps little wonder that many consumers are adopting a cautious approach to Christmas spending, with 12% of people surveyed saying they do not plan to do any shopping at all – a figure that increases to 17% for consumers aged 75 and over. 

Of those who do plan to shop, 65% intend to do some of their shopping online this Christmas versus 30% who plan to spend on the high street. Just over a quarter (27%) say they will visit a shopping center, with shopping in retail parks and city centres proving less popular.

Among those who intend to shop this festive season two-thirds say they are looking forward to planning their spending.

However, their enthusiasm is tempered by significant concern over how they will meet the cost – almost four out of five will monitor their expenses or cut back versus 2021, particularly among women and those under 34. Overall, 42% say they are somewhat worried about the cost of Christmas and will monitor their spending.

Digging deeper into these results reveals how retailers would be well advised to target the ‘grey’ pound this Christmas. People’s propensity to spend correlates with their age: while just 13% of 18- to 34-year-olds plan to spend the same or more this year, that proportion rises for each age group up to a high of 32% for the over 55s.

Ways to control spending

Among those who say they are worried or somewhat worried about the cost of Christmas, half (50%) plan to buy fewer gifts; 52% say they will compare prices online, while 31% intend to only buy things that are on promotion or discounted.

The preferred money-saving tactic differs between age groups: respondents aged 18-34 favour comparing prices online, whereas those aged 45-64 prefer to buy fewer gifts, and discounts are more popular among the under 44s.

Almost four in 10 (38%) people surveyed plan to use discount stores like B&M, Home Bargains or Poundland, suggesting these retailers could be in for a bumper Christmas.

In a recent interview with Retail Week, Poundland chief executive Barry Williams noted how “price and value are everything right now”.

Williams explained how the Covid-19 pandemic interrupted a long-term shift in customer behaviour away from the big four grocers towards discounters, both in grocery and the value end of the retail market more generally. “Inflation over the last few months has only accelerated [the return to] that trend,” he said.

Poundland has invested heavily in broadening its range in recent years to allow customers to do more of a full shop under its roof. This includes the development of a chilled and frozen food range.

Williams said: “There are these huge markets that are complete white space for us, with small incremental sale increases that we weren’t currently tapping into – think fresh food, produce, alcohol. The opportunities for us to expand our proposition and gain more market share are almost endless.”

His comments are especially pertinent in light of people’s intention to make savings on groceries this Christmas – 39% of those surveyed said they plan to spend less on food and drink.

Chocolate and confectionery (64%) is the category at greatest risk from a drop in spending among those who will cut back. Party food is next, followed by alcohol, crisps and snacks, and edible gifts.

Christmas dinner is most insulated from planned spending cuts with just 32% of people saying they will look to make savings on their traditional festive meal. Similarly, consumers are less willing to renounce spend on gift hampers.

How retailers are responding

Leading grocers have been investing in price and customer offers this autumn in preparation for a fierce battle for Christmas spend amid depleting disposable incomes.

In October, Tesco announced a wide-ranging new price-lock commitment, freezing the prices of more than a thousand everyday products until 2023 in a move it framed as helping people “spend less on their shopping and more on friends and family this Christmas”. 

The grocery market leader is also running an Our Clubcard Christmas Savers Scheme, which offers customers a bonus voucher of up to £12 when they save Clubcard vouchers to use towards their big Christmas shop.

“We know times are tough for many customers right now, particularly as we head into the winter months. We hope this extended price-lock commitment gives our customers the certainty of knowing that over a thousand household favourites will stay at the same great price for months to come – helping them budget when they need it most,” says Tesco UK chief executive Jason Tarry.

Sainsbury’s has said it will provide a £2 coupon every week over the next six months to customers using a Healthy Start card, the NHS scheme that encourages a healthy diet for pregnant women, babies and young children under four from low-income households.

In a bid to attract older shoppers into stores this Christmas, Asda is offering customers aged 60 and over the chance to purchase a meal deal comprising soup, roll and unlimited hot drinks for just £1 in any of its 205 cafes throughout November and December.

Morrisons, meanwhile, has reduced the prices on 150 of its most popular products covering nearly 6% of its volume sales with an average saving of 14%.

The reduction includes Christmas dinner staples such as a 2.5kg bag of Maris Piper potatoes, which have been cut from £1.79 to £1.49.

“The cost-of-living crisis continues to place an enormous financial burden on our customers and we want to play our part in helping them when it comes to the cost of grocery shopping,” says Morrisons chief executive David Potts.

The retailer has also recently started offering exclusive discounts to loyalty card customers, a tactic already employed by rival Tesco with Clubcard prices.

There is evidence too that cash-strapped shoppers are increasingly willing to purchase ‘wonky’ fruit and vegetables as a money-saving tactic.

The latest grocery market share data from Kantar showed a strong spike in sales of ranges like Tesco Perfectly Imperfect or Morrisons Naturally Wonky. Kantar said grocers had been making a virtue of selling visually imperfect fruit and vegetables at a discount as shoppers seek out the best value. 

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