Inflation in Europe is falling – in the Eurozone it is already at 1.7% i.e. below the upper limit of 2% – interest rates are also on a downward trend, but accuracy persists.
They chase the deals and discounts
Consumers are understandably tightening their belts and cutting back on non-essentials such as clothes, snacks and alcohol, while for essentials they are turning to label products and chasing deals and discounts. This is the main conclusion of research carried out in five major European economies by the Boston Consulting Group (BCG).
The fact that the respondents reside in over-developed North-West European economies with comparatively very high GDP per capita suggests that the accuracy problem is even more acute for households in Central and Southern Europe.
The US group’s survey included 7,000 consumers in the Eurozone’s two biggest economies, Germany and France, the Nordic countries of Denmark and Sweden, which are part of the European Union but not the Eurozone, and also in self-excluded Britain.
Wrinkles
As shown in the survey, 73% of Europeans have felt “on their skin” the accuracy of goods and services in the first half of the year. Many complain that their income is not enough to meet their needs and that they find it difficult or even impossible to save money. In particular, 25% of respondents said their income decreased in the first half of 2024, while 28% said they did not save as much as they wanted and planned.
To compensate for the difficulty of consuming and saving, European consumers are cutting back on non-essentials and bargain hunting for essentials. Clothing at a rate of 20%, snacks at a rate of 15% and alcohol at a rate of 15% are the aggregated categories of products whose purchase, according to their statement, consumers limit.
“Surprisingly the net decline in spending on luxury goods was not as great as it was on clothing and footwear. The possible explanation lies in the presence of two diametrically opposed categories of consumers: those belonging to a group more vulnerable to price increases, which reduced its spending by 35% in the first half of 2024, and those belonging to a more resistant group, which increased its spending by 22%,” BCG researchers report.
“Something that will stay”
This second consumer group is largely characterized “by purchasing products of higher quality or branded and more expensive brands”, notes the European Consumer Sentiment Report 2024. However, consumers with moderate purchasing power, who are placed in the so-called middle income class, seem to they prefer to buy fewer products in number but of high quality – products that last over time and use, so to speak.
“As consumers tighten their belts they are becoming more selective about what they buy and where,” said Andreas Molby, head of BCG’s Europe, Middle East, Africa and South America Consumer Division, who led the research and co-signs the report.
Molby explained that “branded products included in local discount offers, dynamic product pricing and hyper-personalization will win the market battle and garner the lion’s share of the consumer’s spending money.”
In other words, the old saying of the South and East “expensive is ultimately cheap” is confirmed in the “rich markets” of the European North. And this marks a significant shift in the current consumption model, given that environmental propaganda in Northern Europe has demonized overconsumption.
Dissatisfaction with politics
The BCG survey also recorded an increased concern among Europeans – which appears to be bordering on discontent – about political and geopolitical developments in their countries. This is a concern that clearly goes beyond that for their personal situation, that is, for their physical and mental health, for their personal financial stability and well-being, and for the security they feel about the future.
In other words, what worries the Germans, the French, the Swedes, the Danes and the British the most are international developments and of course the so-called “national issues” of their homelands. They are concerned with developments in the international political and economic scene and international security issues – something that obviously has to do with the more general geopolitical destabilization of recent years and of course with the war that has been raging for almost two years in Ukraine, that is, in European territories.
In particular, 57% of Europeans said they were more worried about the political situation in their country, while a smaller percentage (49%) said they were worried mainly about the economic future. In contrast, only 25% of respondents said they were pessimistic about their personal financial situation and security.
French melancholy
Residents of the Nordic countries appear in the survey to be slightly more satisfied and more optimistic than other Europeans about the current situation and what the future holds for them, both on a personal and national level. On the contrary, the French state that they are the most disappointed and worried about both the present and the future and especially about the political situation in their country.
Finally, the BCG survey showed that the environmental issue remains consistently high in the interest and concerns of Northern Europeans. Everyone recognizes the importance of sustainability that, in theory, all human actions should have. However, few seem willing to pay a “premium” to contribute to this sustainability.
Almost four out of ten European consumers said that they occasionally or regularly think about the sustainability of the planet and climate change when shopping. However, only 19% said they would pay more to consume “green” products and services.
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