Changing consumer behaviour, and expectations for 2024

Alex McCulloch, Director at CACI

First published in Retail Destination, January 11 2024

In 2023 we paid more for less. The money spent on non-food retail only rose by 0.8%, while inflation ran north of 8%. Any operator therefore that has managed to maintain their spend or footfall in 2023 did brilliantly – the size of the pie got smaller, so to stand still you must have taken a bigger slice. £100 to spend in-store in 2019 is now worth £83 – once you account for erosion of non-discretionary spend and the impact of a pandemic online surge – and if you strip out 5 years of inflation that falls to £67.

Our expectation in 2024 is a return to something approaching normality. Retail spend will grow by 4%, much of which will be in physical stores. We expect online spend to flat-line, after two years of proportional decline following covid-era peaks.

With inflation falling, the economic focus will be on interest rates. There are 1.5 million homes re-mortgaging onto higher rates in 2024, creating a £3.5 billion increase in mortgage payments, money that could have been spent elsewhere. For homeowners the pie shrinks further, potentially to the tune of £400 a month for those with higher value mortgages.

Every cloud has a silver lining. For those with savings and minimal mortgage exposure, typically more mature consumers, higher interest rates will pay dividends, literally. They’ll take home notable savings returns for the first time in over a decade, so expect an increase in leisure and F&B spend, and a resurgence of the silver pound narrative.