Aussies are ditching their favourite brands in droves in response to the cost-of-living crunch.
Price is increasingly the driving factor at the checkout, outweighing considerations around brand loyalty, sustainability and quality, according to new data from Emersys, a division of software giant SAP.
The Emarsys Customer Loyalty Index 2023 reveals a majority of Australian households are shunning their favourite brands, with cost cited as the major factor in the decision.
The global survey questioned 2000 shoppers in Australia, the US, UK and Germany. A move towards cheaper brands was recorded in all countries, but none so strongly as Australia (63 per cent here versus a 49 per cent global average).
Why are we switching brands?
At home, interest rate rises, rampant inflation and a widespread dip in consumer confidence are all weighing heavily on the economy.
Joanna Milliken, Emersys CEO, told The Australian that brand loyalty is often the first thing to go when purse strings need to be tightened.
“Given the state of the world and our economic conditions, consumers don’t have a choice about being loyal to a product,” she said.
“They are motivated much more when push comes to shove to make decisions that are economical for them, and they’re not going to compromise on price when times are tough.
“We’re seeing people say they might be very values-driven and want to buy from a certain brand because it might be sustainable, but inflation means they can no longer afford to be pay a premium that they one might have been able to,” Ms Milliken said.
Effect of inflation
Recent Consumer Price Index (CPI) figures show inflation has been rising steadily over the past few years, but perhaps has hit its peak.
The CPI is a broad measure of inflation, but doesn’t always give the complete picture.
The Australian Bureau of Statistics (ABS) also publishes a number of separate ‘living cost indices’ that break down consumer behaviour even further, and these show there is still a lot of pressure on consumers.
Over the year to June 2023, living costs of employees (anyone working more than one hour per week) rose by 9.6 per cent but costs for self-funded retirees rose by 6.3 per cent and for age pensioners by 6.7 per cent.
The main reason for the difference between the groups was that interest rates increased and employees are more likely to have a mortgage than are retirees.
Over the same period, the CPI rose just 6 per cent, making inflation look tamer than consumers have been experiencing.
So while the news might be telling you inflation is dropping, this is why it may still feel like everything is too expensive.
The September quarter CPI figures are due out tomorrow.
Have you switched your regular brands for cheaper alternatives? Is there anything you would never switch? Let us know in the comments section below.
Also read: Add up the savings, room by room