What you need to know

• This holiday shopping season, consumers will focus on home-based activities, as indicated by spending data from Commbank IQ and Zenith's Imagine Panel.
• Online marketplaces like Amazon, eBay, Temu, and Shein are experiencing a remarkable surge in usage, with penetration up nearly 14 per cent and frequency of shopping up 5 per cent among consumers.
• Significant increases in spending have been noted in food delivery and streaming services, reflecting a shift towards a "homebody economy."
• Younger Australians are particularly inclined to increase their streaming service usage, with 33 per cent of Gen Z and 28 per cent of Millennials indicating plans to do so.
• Despite rising costs, consumers are opting for streaming services as a more affordable entertainment alternative compared to dining out.
• Older consumers (60+) are seeing increased spending, although this is partly due to unavoidable costs such as healthcare and insurance.
• There are notable differences in spending trends across age groups, with younger individuals still spending less compared to previous years. Spending by younger consumers is down 5 per cent in real terms. Older consumers are spending more, and those in the messy middle are also spending more, but not enough to keep pace with inflation. 
• On that last point, the good news is there is evidence the big broad price rises that triggered the cost of living crisis have largely washed through the economy.

Even as the cash registers are still ringing out the final sales for the Black Friday to Cyber Monday shopping bonanza, merchants are already turning their attention to the Christmas shopping season and looking for any hints in the tea leaves. Spending data from Commbank IQ and Zenith's Imagine Panel data indicates another subdued season where consumers are looking to stay close to home.

But there are zones of resilience, according to Wade Tubman, head of innovation and analytics for Commbank IQ.

Spending in areas like food delivery and streaming is up, suggesting a couch-potato ethos underlying family budgets this year. And the most dramatic change in spending is the shift to the use of online marketplaces like Amazon and eBay, and increasingly Temu and Shein.

The most recent monthly data from the September Zenith Imagine Panel is also consistent with the Commbank spending data.

According to Simon Schoen, co-national Head of Strategy and Panning at Zenith Australia, "We know that consumers are likely to be cutting back on attending events and big experiences this holiday season [especially with no Taylor Swift this summer]. Nearly a third say they are planning to spend less visiting the cinema, attending live sport or music festivals, and travelling internationally."

His advice for brands in the event and travel space is, "The total experience will need to be communicated to demonstrate value, as consumers are already in a hesitant mindset. Going deep and showing them exactly the experience they are buying through content will help them overcome these hesitations."

The panel data also comports the Commbank IQ data when streaming. "Contrary to common belief, early indicators suggest that Australians will actually be more accessible through media channels during this upcoming Christmas holiday season. Many particularly intend to spend time on SVOD, which aligns with the expectation that people will have more freedom to binge-watch content while also saving money on experiences."

Per Schoen, "Younger Australians are especially likely to be found spending more time on SVOD, with 33 per cent of Gen Z and 28 per cent of Millennials reporting intended increased usage. This is compared to only 12% among Baby Boomers."

Green shoots

As CustomerX noted in a recent Chart of the Week featuring Zenith consumer panel data, consumers appear to be getting sick and tired of being sick and tired. 

Happily for long-suffering merchants looking for any evidence of green shoots, there are some hints of optimism. For starters, with the notable exceptions of insurance and healthcare, the inflation that underpins the cost-of-living crisis has largely washed through the economy according to Wade Tubman, head of innovation and analytics at Commbank IQ, and declines in real spending are decelerating. 

Australian consumer's use of online marketplaces is increasing dramatically, according to data from CommBank IQ. That was one of three stand-out trends in the company's most recent quarterly spending report. Add to that increased spending on streaming services, and home food delivery services, and a picture emerges of a growing homebody economy.

Speaking on the shift to online marketplaces, Tubman told Mi3, "They were increasing strongly last quarter. This quarter, [it's] up almost 20 per cent which represents a big shift."

The trends beneath the headline are just as interesting, he suggested. "Mostly, we're seeing existing customers in those marketplaces shopping more. Frequency is up about 5 per cent, so over a year, on average, Australians are shopping 5 per cent more often with these marketplaces.

But the big driver according to Tubman is penetration, which is up almost 14 per cent. "The growth of online marketplaces, which stands out in the whole report as one of the most significant areas, is being driven by customers who previously didn't shop with them now shopping with them. It shows how our habits change over time. "

That raises important questions and challenges for brands, he said. "How do either get on these platforms or partner with these platforms? Or do they compete with these platforms? The hypothesis is that the driver of this is not just the price, but convenience. And in particular, for the more domestic consumers, it's same day or next day delivery."

Spending on streaming is also up, although that partly reflects increases in streaming subscription costs, said Tubman. But it also indicates these are price rises consumers are willing to bear.

"If you'd asked me this time last year, the average Australian might have had a couple of streaming services and with cost of living pressures, they might have looked to cut back," Tubman said. "But on the numbers that are coming through, I'm saying it's doing the opposite of that. We're seeing a substitution of out-of-home experiences for budget-friendly in-home entertainment. When you think about the price of a streaming service, you could probably get all the streaming services for less than a night out for dinner. They are relatively affordable home entertainment."

Eat, don't move

The third area where spending is up is food delivery. The overall category for which combined dining out and food delivery is up, said Tubman, but it's food delivery that is driving the whole sector.

Given the cost of home deliveries, Mi3 asked if that might seem counterintuitive.

"We've spoken to clients about this, and it's about the whole occasion. When you go out you're not only buying the food, you're buying the drinks. Or it might be tacked on to another event like going to the movies," Tubman responded.

"Last year we saw really strong growth in out-of-home entertainment, people attending concerts, sporting events, movies, things like that. It seems that a lot of that was a bounce back from Covid [and Barbenheimer]."

A question for domestic FMCG brands according to Tubman is, "How do we capture those at-home occasions?"

Zenith's Schoen said in the summer of 24 and 25, "Home is where the heart is."

"Brands can build positive associations and drive outcomes by adding value in meaningful ways, bringing people together to facilitate united experiences. This can even include taking a more ‘traditional’ approach to media. SVOD is the standout channel for new test and learn or partnership approaches," he said.

Overall, the Christmas period presents considerable opportunities for brands to reach and improve connections with younger audiences, especially through SVOD.

Where's Goldilocks

There are significant differences across age cohorts when it comes to total spending, according to the Commbak IQ data. For instance, when inflation is taken into account, young people are spending about 5 per cent less year on year, whereas spending is up among 40 to 60-year-olds but not enough yet to keep pace with inflation.

"Older consumers however may be leading the way out of the doldrums with spending up above inflation although that's partly due to unavoidable costs such as health and insurance,"
Tubman continued. His analysis suggests while it's too early to call it spring, at least the ice is melting.

"With young people, spending is not as bad as it was a year ago when it was significantly down. It is less down now, but, still negative in absolute terms. Their spending is down 2 per cent, inflation is almost 3 per cent so that represents a 5 per cent."

Young people can't wear the price rises and they have been especially hard hit with rising rental costs, especially in the cities, Tubman said. "It's a continuing trend, but it's a less worse than it was.

"Those middle ages, the 40 to 60-year-olds who represent the peak spending years, they are spending more than they did last year, but they're not keeping pace quite with inflation."

"The over 60 are spending more and again that's a trend we've seen in prior reports that's continuing."

Sometimes though, even good news has a sting. "They [older consumers] are wearing some big insurance increases, no one cheers at that," Tubman said. "But when we look at discretionary and essential items they are increasing spending both. So they are dealing with headwinds, like insurance and medical, and they can't avoid those, but equally, they do have, on average, the ability to spend on travel and on eating out and retail services."