Earlier this year Ikea’s head of sustainability suggested the West was approaching “peak stuff” – the idea that consumer appetite to own ever more goods was probably waning.
Indeed it seems that we’re seeing a fundamental shift in consumer behaviour from buying products to spending money on experiences. We’ve been keeping an eye on this trend at Visa through our monthly Consumer Spending Index and our data certainly points to strong evidence for this trend.
While overall spending has grown steadily over the past year, holidays, cultural experiences and eating out have driven the real growth. Indeed, spend on holidays, meals out and rounds at the pub have grown at an average monthly rate of 8.5 per cent over the past year. Spending in the leisure sector – on cinemas, theme parks and holidays among other things – grew at 6.8 per cent on average too.
Compare that to spending on “stuff”. Clothing and food has seen much slower growth over the past year. Last month for example, clothing retailers saw sales drop 2.8 per cent year-on-year, while spending on food and drink slowed to a five-month low of 1.7 per cent.
Clearly, something significant is happening to the shape of the UK’s economy. But what’s causing this shift?
The first thing to note is this trend is occurring at a time when disposable income is rising for many. Strong employment, low inflation and low interest rates have left people with more money to spend on things they enjoy.
But secondly, it’s worth considering the way we buy from some of the biggest brands in Britain today. Consider the rise of rental and subscription services like Spotify, or the growth of services like AirBnB, which make spending on experiences easier and more customisable to your preferences.
"Fear of missing out" (FOMO) may be having an impact too as people share their meals and glamorous nights out on social media. Nice to share for sure, but it’s also becoming a better way to show off to friends, and free marketing for companies in these sectors to boot.
This doesn’t mean owning things is dead by any stretch – spending at Christmas last year broke records according to our data. But it does signify a shift, driven by the habits of younger generations in particular.
Looking ahead, summer will provide further momentum for restaurants, hotels and other experience businesses. But traditional retailers may be about to get in on the act too. A report we commissioned last year on the future of retail examined how high street stores are changing the shopping experience to be just that – an experience, rather than a transaction (to return to Ikea for example, they are increasingly famous for their meatballs).
The debate on spending in recent years has been focused on where we spend our money – online versus the high street. Now perhaps, it’s time to focus on what we buy as well.