Recent figures show that prices in the UK are now rising at an annual rate of more than 3%, brought on by the vote for Brexit. We've also heard warnings that the price of champagne will increase and seen Tesco resort to temporarily not stocking Marmite. Furthermore, there's talk of 'Buy British' buttons being added to websites to filter out foreign produce.
So when the trigger is finally pulled by Theresa May on Article 50, what will this mean for luxury shopping trips?
We recently worked with the Centre for Retail Research on a report to understand how premium brand retailers should engage shoppers in the post-Brexit era. It revealed that Brexit still presents a very uncertain picture for people and indicated that the polarised views reflected in the referendum result will likely influence spending patterns in the coming months too. For example, over the next six months, 37% of people are 'very' or 'quite sure' they will be better off, whilst 40% think they will be 'worse off' or 'not better off'.
We're faced with a premium retail market where shoppers are completely divided in their opinion. 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.
Will love for luxury win out?
Whilst the outlook on spending is uncertain, our research revealed that people will not stop purchasing from premium brands even if the price of that purchase changes due to Brexit. When faced with a price increase of even up to 10%, only 6% of Brits claim they would refuse to buy the item, whilst 62% would buy their premium brand anyway. Shoppers have a limit though; a rise from a 10% increase to a 15% price increase is expected to make over a fifth (21%) of shoppers switch products.
The importance of 'Brand Britain'
38% of people think Brexit will make no difference to trust in premium brands produced outside the UK, but a third think there will be a 'large' or 'some' loss of trust. This is largest for handbag, casual apparel, and formal clothing brands but lowest for laptops, tablets, and smartphones.
The loss of trust expected in foreign owned brand suggests 'buying British' could become more on trend this year. If people are more aware of purchasing from 'Brand Britain', then we could see more retailers use this in their marketing.
Equally, looking to the international market, British goods have always been well received by shoppers abroad, particularly those shopping for luxury items. Now with the value of pound making British brands accessible for people abroad, UK luxury retailers should assess their export strategies to uncover even greater opportunities.
Personal, considered communications
After taking the temperature on consumer attitudes to retail spending in the coming months, the picture is just as uncertain as it was on referendum results day. However, when opinions are completely split and market conditions could change quickly, it's even more important that retail marketers can address audiences in a way that takes into account their varying opinions. Brands must have accurate data insights about how customers are behaving and be able to respond based on how shopping habits change. They can then build campaigns that not only take real time sentiment into account, but target audiences in the right way.
Over the next few years, people's spending habits are likely to be as divisive as the referendum debate, meaning luxury brands will also need to tailor their messages to successfully communicate with shoppers. Whilst a slight price increase for a handbag may not deter customers, there is a polarised outlook that brands need to be wary of and prepared for.