Retailers share how rising energy prices are changing consumer spending
Retailers and consumers are looking for ways to minimise their energy usage, so as to reduce their power bills.
The post Retailers share how rising energy prices are changing consumer spending appeared first on Inside Retail.
Energy bills are on the rise in Australia, and there appears to be no end in sight.
According to the Reserve Bank of Australia Deputy Governor Michele Bullock, the retail price of electricity and gas has increased by 10 to 15 per cent since the middle of the year.
There’s forecasted to be no relief next year, either, with Treasurer Jim Chalmers predicting that household energy bills will rise 56 per cent over the next two years.
A survey of 2,500 people by the Consumer Reference Group – reported by Energy Consumers Australia – revealed that electricity bills are set to increase by $300 for households, and $1,500 for small businesses.
So, what are the implications of rising costs – in particular, rising energy costs – for retailers and consumers?
According to the National Retail Association interim CEO Lindsay Carrol, a considerable amount of consumers have been adjusting their household budgets to account for cost of living pressures. They’ve done so by switching to cheaper brands, and cutting back on non-essential products.
She told Inside Retail that household savings from the pandemic has provided a spending buffer that has enabled customers to continue spending.
In addition, a historically low unemployment rate – combined with an atmosphere of pent-up demand following the pandemic – has contributed to resilience in spending throughout this year.
This is expected to continue toward the end of the year, with the Australian Retailers Association predicting a record breaking $66 billion in spending over the Christmas period.
But, Carrol anticipates a spending slowdown in early 2023, when the full effects of rising energy prices and other inflationary pressures catch up with household budgets.
“There is a lot of uncertainty surrounding energy prices, which makes it difficult for consumers and businesses to plan for the future,” Carroll said.
“As energy is an input into many of the goods and services people buy, businesses will need to increase their prices in response and consumers are already feeling the pinch.”
Shopping smarter and looking for value
Retailers and consumers are looking for ways to minimise their energy usage, so as to reduce their power bills.
This is reflected by the Consumer Reference Group report, where respondents disclosed that they would use no heating and lights, and shower every second day, to reduce costs. Further, consumer research provided to Inside Retail by Ikea revealed that 61 per cent of respondents are actively trying to reduce their energy and water usage to reduce bills.
Given that the higher cost of energy is likely to linger, Carroll believes that customers will look to invest in technologies that will save them money and energy in the long term. This is seen in the take up of electric vehicles, rechargeable batteries and solar panels.
She added that affordable, energy saving products have grown in popularity amongst consumers who are looking to control their energy usage. This includes items such as LED lighting, motion sensors for lighting and timers for temperature controlling devices.
But Carroll said that not all households are in the same boat.
“A reduced budget diminishes the ability of lower-income households to invest in energy efficient appliances,” she said.
“These consumers are taking extreme steps to control their response to rising energy costs by going without air conditioning and lighting, which has a detrimental impact on their ability to live comfortably and safely.”
According to eBay Australia’s Sophie Onikul, environmentally friendly toys that use less electricity are especially popular this year.
“Cost-of-living pressures are driving Aussies to look for ways to save on their budget,” she said.
“Ahead of summer, pedestal fans are up 65 per cent as Aussies shy away from using air conditioning in favour of a more cost-effective and environmentally friendly option.
“We expect to see Aussies shop smarter and look for value as the squeeze on household budgets continues to grow, with anticipated rising interest rates in early 2023.”
Conscious consumption
Head of sustainable business and corporate social responsibility at Winning Appliances, Alice Kuepper believes that conscious consumption will help people make better choices for their budgets in the long-term, which also has a positive effect on the environment.
Kuepper said that appliance energy efficiency is one of the most important considerations for customers when it comes to reducing household carbon emissions, with washing machines, fridges, freezers, heating, cooling and dishwashers being particularly big energy drawers.
She added that the brand has responded to a survey of 22,000 Appliances Online customers in 2021, which revealed that 86 per cent are interested in seeing more sustainable product options.
Meanwhile, Carroll said that a good starting point for customers who want to take control of their energy use is to pinpoint where they use the most energy, and where they might be able to cut back.
“Educate yourself on how to be energy sufficient and don’t be afraid to seek expert advice to guide your decisions,” she said.
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