New research from ALDI Australia indicates that rising costs combined with lifestyle changes are shifting consumer behaviour, with private label and “little luxuries” the big winners.
ALDI Australia’s ‘Household Expenditure Report’, with research conducted by Deloitte Access Economics, reinforces popular commentary that Australian households are feeling the pinch now more than ever.
Despite the average Australian household having more than $1 million in net wealth, 37 per cent of households covered by the research are concerned about their ability to pay for expenses, including bills and household costs. The proportion is up from 31 per cent two years ago and expected to reach 40 per cent by 2019.
As household budget pressure increases, consumer behaviour is shifting in various ways.
Over the past 12 months, 25 per cent of surveyed Australians have switched the grocery store at which they shop most frequently, with value for money being the primary driver (44 per cent). This is a significant increase from ALDI’s previous research into consumer behaviour in 2015, which found that the price of groceries was the only driver for switching supermarkets for 31 per cent of surveyed shoppers.
Rising costs are also causing a decline in the importance of brands, with 15 per cent of respondents saying they would switch to private-label products to save money if their day-to-day expenses increased. This is reflective of wider trends, with Nielsen figures showing that the private-label product category grew by 4.3 per cent in 2016 (60 per cent faster than brands) and equates to 24 per cent of total grocery sales (Nielsen Homescan 13wks to 1/7/17 vs 13wks to 2/7/16).
The report shows that broader spending patterns are also changing, with many new categories rapidly moving from luxury to necessity for many. Entertainment subscription services are one such example: Netflix was introduced to Australia only in 2015, yet the report claims that, today, 39 per cent of Australians subscribe to entertainment on-demand services.
For some, these new services have become so essential that they would rather cut back their grocery spend and other essentials than on ‘little luxuries’, the report claims: of those that subscribe to entertainment services such as Netflix or Spotify, more people would first prefer to cut back on car, clothing, holiday (20 per cent) or grocery spending (12 per cent) than sacrifice their subscriptions (four per cent).
ALDI’s Household Expenditure Report combines macroeconomic analysis of spending and retail trends with a nationally representative survey of more than 1,000 households in Australia.
ALDI Australia CEO Tom Daunt says the research will help to shape the retailer’s opinions on future product development.
“We know that to remain on top we need to continue to expand our range into categories that meet the evolving tastes and preferences of our customers,” he said.
“More and more Australians are doing their main shop at ALDI and this gives us the confidence to invest in more stores. But don’t think differently about us because we’re growing. We will always maintain our position as the lowest price leader and we remain dedicated to driving down costs to provide Australians with a richer life for less. There’s no need to sacrifice on the little luxuries.”