The only trend you need to know this year
At the start of this year, as in most years, I was inundated with trends for the coming year. While they always make for interesting reading, this year there is one trend more important and more dramatic than anything we have seen for years, and one that is already changing the way consumers think and behave. For the first time in a generation, consumers are feeling financial pressure. And the implications of this will be profound.
Australia has had an incredible run of over 25 years without a recession. Even during the Global Financial Crisis, the Australian economy barely skipped a beat. A combination of a mining boom, boosted by economic growth in China, and a government supported real estate boom meant that household spending continued to power on.
However recent signs indicate that the party is coming to an end. The mining boom has already started to wind down, and now a series of circumstances are threatening to derail the housing boom. Tighter borrowing regulations, increasing borrowing costs for banks, and restrictions on the ability of Chinese investors taking money out of the country to invest in Australian real estate are suddenly making the boom look more like a bubble that is about to burst.
Add to this the cost of living increases due to rising grocery, petrol, and electricity prices, and wage growth that has failed to keep pace with asset price growth, it is clear that household budgets are starting to become stretched. We have seen evidence of this already in the work that we have done for our clients over the past year. This will provide new challenges for Australian business, unlike those that most marketers have seen at any point of their career to date.
What does this mean for Australian businesses? We are likely to see consumers changing the way they make purchase decisions. Consumer priorities will change, and things that may have been important before will become less-so once the purse-strings are tightened.
There will be more to this than simply spending less, or switching to cheaper brands. In some categories, consumers may spend more as they look for better quality products that last longer, or provide affordable luxuries. Other previously essential categories will become expendable.
Not all industries will be affected either as there are some things that people are unlikely to give up. Internet and telephone spend is likely to continue, although even in these “essential” categories, the way people make decisions will still change.
With so many signs pointing to a potential economic downturn in Australia, it is critical that businesses understand what is happening in the real world with their customers, as waiting until sales are affected will be too late.