By Brad Hanna
McKinsey & Company’s ConsumerWise team has released its third-quarter research on consumer spending. The report provides insights into consumer behavior and spending patterns during the quarter and Trozzolo adds in some implications for brands.
Key Insights
- Consumer optimism grew from the second quarter and rebounded to a new high for the last two years. According to the report, higher income earners, males, Gen Z and millennials had the highest optimism. Men feel more optimistic about the long-term job market, while women have greater fears about making ends meet.
- Outside of low-income Gen Xers and middle-income baby boomers, all other groups state they plan to splurge-spend over the next three months. After several quarters of watching spending, consumers appear to be feeling “enough is enough” and want to reward themselves.
- Looking specifically at Gen Z, apparel, eating out, groceries and beauty/personal care are the categories they plan to splurge on for themselves. These certainly hint toward more entertainment being in store for Gen Z.
Why It Matters
Anxiety has become a new norm for today’s youth, with 59% experiencing suboptimal mental health. Worries include:
- Affording future homes, marriage or family.
- Their physical or mental health.
- The physical or mental health of others.
- Politics and social media.
This increase in optimism and a desire to treat oneself means Gen Z may be lowering their anxiety around finances and physical and mental health. This is great news for the overall health and wellness of this generation, but also opens up increased spending on oneself.
How to Win
- Brands in the restaurant, grocery, apparel and beauty categories should focus on messages that encourage consumers to treat themselves. Messages should focus on more glamour and rewarding experiences versus basic necessities and value.
- Consumers are continuing to look for discounts and promotions (55%), so offering a high-low promotional strategy could be a rewarding short-term approach.
- Brands should double-down on e-commerce and online shopping as this channel continues to grow (it now accounts for 20% of total consumer spending).
- Brands should also be ready for a hard pivot come 2025, when this consumer optimism could dramatically shift. Brands should be ready with secondary plans that dial back spending and shift the tone of key messaging to some of smart consumerism.