At the same time that it’s been announced lockdown will be extended for another three weeks in the UK, we are seeing a glimmer of hope for retail elsewhere in the world. Though the emergence of consumers there isn’t a crazy, mob-handed spending spree, the luxury market in China is seeing consumers emerge from their lockdown and ‘Revenge Spending’ (A term used to describe the phenomenon of consumers splurging post-lockdown).
But at TYC, we think the term ‘Revenge Spending’ is a bit misleading and doesn’t give the full picture. It sounds a little negative, short-lived and is mainly referring to the luxury market and big splurges on high price tag goods. Take for instance, the Hermes store in Guangzhou that took in over $2million in a day – the largest amount for a single boutique store!
If China is anything to go by, then yes, there will be big spikes in luxury goods. But that’s not to say that it will just be premium or luxury retailers who could be enjoying high sales figures post-lockdown.
After being cooped up, unable to visit stores and restaurants, and restricted with what they can buy, it’s likely consumers will want to enjoy spending their money again and treat themselves. Our recent research has shown that 78% of UK consumers have spent less during COVID-19 and for the lucky ones who have kept their jobs, will find themselves with a pocket of disposable cash.
That will obviously come with different price tags. For some it will be luxury purchases, for others it will be based on quantity. Even those with more modest amounts are likely to reserve some cash for simple, low-cost pleasures, e.g. a good coffee on the way back to work. Whatever they decide to spend and whatever they decide to buy, the underlying feeling will be one of freedom; that restrictions have been relaxed and that we are, once again, able to enjoy spending our money on what we want to. This could well become known as ‘Freedom Spending’ in true age of consumerism.
Notably, whilst ‘Revenge Spending’ appears more reactionary, and describes bigger blow outs, we predict that ’Freedom Spending’, the desire to enjoy spending one’s own money and / or treat ourselves, will last for longer. Clues are in previous patterns. For instance, the rise in the affordable F&B sector post-2008 recession that has continued on to today shows that people have a desire to treat themselves, even in economically uncertain times, and that at the right price point, they will do so.
So, this could be good news for brands, across the board not just in the luxury market. Products may need to be adapted and positioning may need to be tweaked in order for consumers to feel like they are spending money on a worthwhile, well-deserved treat. But if it means a brand can stay relevant and thrive, then it will be worth it.
The question is, have you done enough through COVID-19 to keep relevant with your consumer and will they be ‘Freedom Spending’ with you?