Aussie households reduce non-essential spending amid inflation

Australian households are tightening their wallets amid soaring living costs, leading to significant shifts in consumer spending patterns. According to recent data from the Australian Bureau of Statistics (ABS), non-essential spending has seen a decline of 1.9%, while essential spending has surged by 1.8% year-on-year. This development underscores the financial pressure on households due to persistent inflation.

The impact of rising costs has been evident in the retail sector, with many brands being forced to close down. Dion Lee, Booktopia, and Nique are among the recent examples of retail insolvencies. This trend aligns with the findings of the 2024 State of Returns report by Loops, which unveils key insights into consumer behaviour, particularly highlighting the impact of returns on retail revenue and customer loyalty.

Data from the report indicate a shift in consumer spending habits. Essential item spending has increased by 5.4%, while non-essential item spending has decreased by 0.6%. This pattern reflects consumers' increasing focus on value amidst ongoing inflation concerns. Additionally, November 2023 saw a 12% rise in spending, as shoppers deferred purchases to benefit from peak sales periods such as Amazon Prime Day, thereby moving much of their Christmas shopping forward.

Return reasons and patterns have also evolved, with fashion products representing a substantial 62% of all returns. Electronics and house/garden products follow at 14% and 9%, respectively. The incidence of returns due to a change of mind has doubled from 6% in 2021 to 12% in 2024, indicating a growing trend of post-purchase discernment among consumers.

The report sheds light on what consumers prioritise when it comes to returning items. Seventy percent of Australian shoppers value free return shipping, while 44% appreciate a quick and easy returns process. Furthermore, 41% seek fast refunds or immediate exchanges. Notably, 75% of respondents say they are unlikely or highly unlikely to repurchase from a retailer after a negative returns experience.

Sustainable practices, while not the top priority, are appreciated by some consumers. Thirty-three percent of shoppers value low-carbon emission shipping, and 25% favour sustainable packaging for returns.

Leveraging omnichannel advantages appears crucial for retailers looking to enhance customer experiences. The report indicates that retailers offering omnichannel experiences see a 30% higher customer lifetime value (CLV) and a 70% greater purchase frequency compared to those serving in-store-only customers. Additionally, 63% of shoppers prefer omnichannel retailers because they can see and experience products in person, thus building greater consumer trust.

The data suggest that adapting to these evolving consumer expectations is essential for Australian retailers to stay competitive. By leveraging emerging technologies, brands have the opportunity to transform the returns process into a strategic advantage, potentially reconverting customers and fostering long-term loyalty.