Britons will still buy premium brands despite Brexit price hikes but may 'ration' their spend
Brands concerned about the impact of Brexit-related price rises on their sales can draw some encouragement from new research that shows Britons will continue to buy from premium brands even if their prices rise.
However, the research also shows that many shoppers may make up for buying those more expensive brands by cutting the number of products they purchase overall and their trust in overseas fashion brands could drop.
Some analysts and retailers have suggested price hikes of 5% to10% due to higher materials and other costs following the fall in the value of the pound. And if the Uk fails to secure a strong trade deal with hr EU, then import duties may add further price pain.
But a survey of 1,000 adults by digital marketing company Rakuten Marketing and the Centre for Retail Research shows that only 6% of people would not buy if prices rose by up to 10%.
And as many as 62% said that they would simply go ahead and buy, regardless of the higher price ticket.
That attitude could be influenced a much by some consumers thinking they will be better off in the months ahead as much as their determination to buy their favourite brand regardless of its price.
As many as 37% of those surveyed were ‘very’ or ‘quite sure’ they will be better off, only sightly less that the 40% who believe they will be ‘worse off’ or ‘not better off’.
BREXIT INFLATION AHEAD
With UK PrimeMinister Theresa May preparing for next week’s triggering of Article 50 to start the two-year process of leaving the EU, that near-equal mix of optimism and pessimism highlights the polarised views that were seen in last year’s referendum result.
But regardless of how well-off some consumers feel, inflation does not appear to be a problem. The headline inflation figure is already over 3% but the impact of import costs on fashion businesses could see much higher rises. And luxury brands moving to ‘harmonise’ UK prices with those of Europe following the pound’s fall will also have a big effect at the top end of the market. While this means tourists will get less of a bargain by visiting the UK for the luxury goods, they will still find savings from hotels and restaurants.
But local shoppers will not be able to take advantage of cheaper hotels and will only see price rises. But if they are prepared to take price hikes on the chin up to 10%, how far above that level will they start to rain-in their spending on premium brands? The survey showed that 21% of shoppers would switch products, leaving a still-significant 79% prepared to buy.
However, while Britons appear to be prepared to shell out quite a lot of extra cash for their favourites, they are parsimonious when it comes to delivery charges and 57% said they would not be prepared to pay more for online delivery.
BUYING LESS TO AFFORD BRANDS
Digging deeper into Britons’ intentions around buying premium brands, the research showed that while some consumers remain confident that their spending on premium brands will remain buoyant, a similar number are cautious and believe Brexit will have a negative effect. Exactly half of shoppers expect to spend the same or more on premium products post Brexit, but 39% say they will spend less on these items. This suggests that while they will still buy from their favourite premium brands, many will buy ration their spending on them.
And looking to foreign-produced premium brands that could see bigger price rises than domestic ones, respondents were generally more pessimistic than optimistic about a drop in spending. Almost a third (29%) expect there could be reduced spending, and a further 10% expect a large reduction in spending on these products. Only 16% expect to spend more.
The worst news for the wider fashion sector is that while 38% think that Brexit will make no difference to consumers’ trust in premium brands produced outside the UK, a third think there will be a ’large‘ or ’some‘ loss of trust. This is largest for handbag, casualwear, and formal clothing brands but lowest for laptops, tablets, and smartphones.
Mark Haviland, EVP Global Development at Rakuten Marketing said: “While sentiment suggests that people will still purchase premium products if prices rise slightly, the viewpoints on what Brexit will do to spending on these brands overall is completely polarised. The customer segments marketers target are likely to be completely split in how they approach shopping over the next few years.”
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