Cost of Living Impact
The Changed Consumer Landscape
Price Changes of Consumer Goods and Services, World Economic Forum
An extended period of inflation that has yet to end leads to changes in consumer behaviour. OvN analyses the impact of inflation on people’s values and behaviour and solution that businesses and design can offer.
Inflation is an economic term used to describe rising prices. Inflation occurs when people spend more on the same amount of goods and services compared to, for instance, a year ago. In every economic environment, there are winners and losers, and inflation is no exception.
Food and energy are the main drivers of the current inflation, and rising costs have eroded global living standards. The cost of living crisis has multiple root causes, such as the war in Ukraine, fuel prices, long-term economic trends, climate change, etc.
A “soft landing” of 2% inflation in 2025 is what many economists hope for, but current developments could lead to the scenario of a decade of inflation. To reduce inflation, the FED raised interest rates from zero to 4.5% to 4.75%, the highest level since 2007. This could continue to interest rates of 6%. Higher interest rates can lead to lower inflation but a fall in inflation alone will not reduce the cost of living.
The cost of living crisis establishes an imbalance between high- and low-incomes and the difference between the rich and poor further increases. The middle-income sections are careful with shopping and cutting expenses; they try to earn more by taking on extra work. Less purchasing power hurts low-income households the most; gasoline and food make up a much more significant portion of budgets, leaving less for discretionary spending. While the crisis affects everybody, particularly vulnerable groups such as women and children, people with disabilities and minority groups are more affected.
Prices have increased, but wages have not increased since the financial crisis. Minimum wages need to be revised to protect low-paid workers' living standards. People who employ should solve this and not be willing to get people at the cheapest level possible.
1/ Social Realism
Collective struggle
Due to high inflation, a large and growing group of citizens are struggling to make ends meet. Compared to Covid, there is less support from governments and less solidarity.
Companies have made significant profits despite the higher costs they have; the profit seems to be for the companies and the costs for society. Supermarket group Ahold Delhaize has made a profit of 2.5 billion euros, the highest amount in ten years; the dividend is paid to shareholders. This evokes a sense of unfairness; the box office prices could also rise less.
This recession has turned its back on the culture of capitalism. A global mistrust of business has given birth to purpose-driven companies. Businesses should serve real people, and more people are experiencing dealing with the reality of the great divide.
According to Thomas Piketty, there is rising support for redistribution among highly educated, high-income individuals. During this recession, people and brands will focus on social realism; this can be seen as one of the most profound changes of this decade.
Broken Capitalism by Jaye and Mihov
Left to right, Who can afford to be critical? by Alfonso Pereira de Matos, The Hackney School of Food, Skip home by Harrison Marshall, La Boutique sans argent Paris
Uncertainty
At the moment, one in four people is struggling financially. People have less free time and shop less; they save on food, electricity, and heating. According to French sociologist Pierre Bourdieu, low-income people make practical choices and prioritise accessibility and entertainment and seek out things for their utility. Middle-class people are motivated to gain social and cultural capital. Cultural capital refers to a person’s access to resources such as education, skills, and knowledge.
Brands have to assess or reassess their strategy for managing the cost-of-living crisis. The pressure on incomes affects about every product and service people buy and affects people as customers and as employees. Uncertainty and fear are the fundamental emotions underpinning the cost of living crisis. When people are scared or uncertain, they look for things that give them the feeling of control. Brands have an opportunity to assist their customers with being and feeling in control by offering fixed prices.
Left to right, Boots everyday, Sainsbury walk-in freezer concept store, research by ethical skincare brand UpCircle Beauty
Budget-friendly ranges
Amidst the current complexity of the crisis, brands have an opportunity to be clear on how they provide value. How brands act to reduce the burden is critical. Offering accessible essential products of good quality is a clear strategy. Boots launched a range of 60 ‘essential’ products for £1.50 and under, a no-compromise range as quality products should be accessible to everyone.
Consumers seek help from brands to ease the burden of the cost of living crisis. Brands should connect and listen to their customers to ensure they understand how the crisis affects them and what change they experience. Identify what people are worried about through a survey. As soon as it is clear what people need, strategies can be adjusted accordingly.
2/ Young people
Collective struggle
In the era of the poly-crisis, young people are still finding themselves in who they are, their financial goals, and their future careers. These younger generations are expected to navigate the world the same way as their parents and grandparents, despite fewer opportunities to build their desired futures.
Constantly being confronted by this reality via news and personal experiences, young people are hyper-aware of their situation and can easily identify the problems surrounding it. With a strong online presence, they use their collective voices to affirm each other’s experiences and support one another. Mental health struggles are widely acknowledged, and seeking therapy is not as taboo as it once was with previous generations.
Forced to survive together, they not only accept their position as born-into but also simultaneously press for change. The smaller, achievable, everyday things in life are being utilised as an outlet for combatting financial struggles, celebrating cultural diversity, and representing individual uniqueness. In the event of continuous disruption, young people are willing to stick it out together and press on with hope for change.
Younger generations are seeking ways to elevate their day-to-day lives and connect to others on a deeper level. Easier modes of living are the key takeaway, as they want the burden of job-seeking and financial distress to be lifted. Outlets of support have a chance to stand out with this group. Be open, willing for change, and accepting of authentic personalities.
Left to right, University of Kent’s “Campus Pantry” is a on-site foodbank for students, Photo by Kent Nishimura, Young people are forced to take on side-hustles/Photo by Anna Shvets, UK loneliness research by Ipsos
Delayed adulthood
Dealing with the cost-of-living crisis has forced many young people to take up extra work, move back with their parents, and reduce the time of going out with friends for work and to save money. Focused on pure survival during this time, young people are delaying adulthood and social activities to pay for the essentials. There traditional milestones of entering adulthood, such as a steady job, owning a home, and finding a life partner, have become challenging. Now, whole generations are ‘falling behind’ on hitting these life goals not purely out of choice but because it isn’t possible to sustain in this economy.
Many students fall deeper into student debt in the cost-of-living crisis. By the end of 2022, the total student loan debt in America totalled to $1.6T, as confirmed by the Federal Reserve Bank of New York, with 51% of students graduating with an average of $21,000 in debt. Students are forced to live with a stretched budget for day-to-day needs, sometimes even skipping meals to deal with the situation. It can be challenging to progress in the future with a debt to deal with. At times like these, students in communal living situations will come together and support each other when they can. Almost everyone in their circle is experiencing the same pressures, and finding comfort in each other can help to strive past it.
Left to right, Transdimensional Control by Cameron Platter, outfit by Bode, Sony’s 2023 Walkman nostalgic and a chance to disconnect, 777 Thrift secondhand shop powered by thredUP
Seeking individuality
Gen Z consumers are a demographic that developed the skills to balance a limited budget with the desire to be unique and celebrate their individuality. Thrifting and online resale marketplaces provide the ability to endlessly browse through affordable, curated, and highly exclusive or rare clothing items that match their personalities. Apps like Depop, Vinted, and Vestaire Collective are popular and easy to approach. Users can determine the value of their pieces and discover new styles using in-app suggestions.
Combining individuality and valuable experiences, young people have taken up the mantle of DIY craftsmanship; crochet, knitting, sewing, and creating custom pieces for themselves or to sell. Not only are they developing a new creative skill, but the results are one-of-a-kind and gratifying. Alongside other aesthetics, home crafts and slow fashion are embraced. The cycle of nostalgia has shortened, and most consumers reflect on 2019 as a simpler time in contrast to the uncertainty nowadays.
3/ Home and Family
Home is an essential human need
Housing is a basic human need., everyone should have access to a safe and warm home, enough food on the table, and opportunities to create a better life, but the cost of living crisis is challenging for many people. A lack of affordable housing to buy is fueling a global housing crisis, and rents are also exceptionally high.
Rising housing costs mean that people have less money to spend on other essentials, such as groceries, bills, transportation and taking care of their families. It is harder for people to get by. Unaffordable housing also fuels homelessness.
Hobbies and interests outside the home are negatively affected by the cost of living crisis. After years of enforced lockdowns for our health, people have to stay home again to cut costs. Our spaces have to work harder than ever, and our homes remain multifunctional spaces where we work, rest and play.
As people spend more time at home, businesses can focus on the home, supporting the family and moving entertainment into the house. There is a DIY attitude to home improvement and cooking.
Illustration by Janna Morton
Left to right, The Trampery Fish Island Village studios and social spaces, Three Generation House by Beta, Live in mothers, photo by Fabrice Trombert, Stay at home daughter on TikTok
New family constructs
Two out of five households in the US have a woman as the breadwinner; women have multiple roles in life and therefore need financial support. The gender pay gap is essential amid a global cost-of-living crisis that particularly exposes women because they have fewer savings and wealth than men and more debt. As a result of the gender pay gap, many women have to work harder to make ends meet, with very little room for discretionary spending or savings once they cover the cost of daily necessities.
Changing political and economic times now require Western societies to reconsider intergenerational living and contemplate care and connection between generations. New family constructions can be seen with live-in moms and stay-at-home daughters and choosing not to have kids. A model for solidarity can be the set up of warm hubs or spaces across local areas to provide a warm place for people to go. Remote work is an ongoing social experiment and also puts more emphasis on the home and all its functions.
Left to right, BikeFlip kids bike service, Milliebag kids clothing rental service, Celsious clean laundry, Happy Money by Ken Honda
Life assistance
There are opportunities for services that guide people with the tools they need at different stages of life, such as renting clothes and bicycles, especially for children growing up. Also, initiatives that make it possible to take back products when children have grown out of them and can be exchanged for suitable items, these initiatives solve a need, and are sustainable and circular.
Research shows that spending money to save time makes people happier. We are used to hiring a handyman at home, but people have more needs to be fulfilled and save time and money. A hairdresser at home who cuts the whole family, or a tutor who supervises several children at home together. Laundromats can be cheaper and more energy efficient than washing at home when the most energy-efficient washers and dryers are used.
4/ Sustainability
The climate and cost of living can be wrapped in one
The cost-of-living crisis is a symptom of an underlying system driven (in part) by a dependency on carbon-based energy. The cost-of-living crisis stimulates alternative lifestyle decisions in food, transport, energy, and products. These changes can help navigate this storm and adapt and move towards a more sustainable and ultimately regenerative future.
Research shows that “The state of the economy and household finances are a more significant concern to people across the globe than climate change.” (The Annual Life at Home Report by IKEA). Due to rising prices, people are more aware of their energy and water consumption; they save on utilities and opt for products that do not require water, for example. They change their cooking habits to energy-efficient cooking methods with resource-efficient products. This helps the planet and can also save money. The demand for solar panels has increased tenfold, and people save water and collect; all this also has a positive environmental effect.
Gen Z is hit hardest by the cost of living and climate crisis as they have the least wealth and resources of all generations.
Orsted cover of the New York Times during COP27
Left to right, smart home technology by Jung Home, Residential energy use by appliance by EIA, water-activated personal products by OWA Haircare, tracking climate impact of food by GreenSwapp, Kelvin wireless smart thermostat
Commodities
People are interested in products that save on utilities, including products that require less water or don’t require heat; these also positively influence the climate. People are changing lifestyles and cooking habits with water-efficient and energy-efficient kitchen appliances such as kettles, microwaves, air fryers, pressure cookers, and slow cookers. In general, things that make you warm cost money, such as boiling water, and using smaller appliances helps save water and money.
Homes are made more efficient to lower household bills with energy-efficient measures such as new windows, more energy-efficient fittings, insulation to the floor or attic, and solar panels. People have become very conscious of their energy consumption and are changing their habits. Smart meters show the relation between energy and money and small changes can save money, such as setting household appliances on standby. Innovations in electric heating design and the acceleration of alternative heating technologies with electricity are being promoted by lawmakers as the heating energy of the future.
Left to right, sneaker repair at Golden Goose Milan, TAKT Chair by Pearson Lloyd, Carhartt WIP x Faye Toogood, Niwaki tools
Designing durability
Rapid consumption and the pressure to make more products within a limited time have lowered the quality of products. Gradual material and design changes have made products less durable. There is a turn towards products for life that can be repaired en resold. A strategy to not promise low prices but instead focus on durability is adequate for the climate and for the cost of living crisis as well. These items remain of value when sold.
Chinese millennials are almost three times more interested in ‘the latest products’ than their British counterparts. This is not to say that affluent Western consumers will suddenly turn into anti-materialistic people pursuing a simple life. But as the social function of material possession becomes more eroded, individuals will have less need for limitless consumption. In more secure societies, people place increasing importance on post-materialistic values such as self-expression and aesthetic goals and less emphasis on material accumulation.
5/ Wellbeing
Personalised Healthcare
The pandemic has made people pay more attention to their health, and today’s cost-of-living crisis also impacts health and well-being. Living in cold houses, lack of nutritious food, financial stress and social isolation all have an impact.
People’s health and income are closely intertwined. The cost of food and energy both have direct health implications. Higher food prices mean people can afford less nutritious food, including fresh fruits and vegetables. Higher electricity prices mean that individuals are less able to stay warm in cold weather or cool down in hot weather.
Financial vulnerability and worry are strongly associated with poorer mental health. Many people struggle to make ends meet and constantly worry about how they will cover their monthly expenses. This affects mental health, leaving people feeling anxious and stressed.
The effects of the cost of living crisis on people’s physical and mental health will increase the demand for healthcare. New solutions to provide care on demand with more regular, accessible and personalized interactions of people’s healthcare services.
People also look for connections with others to share their sorrow. They search for small pleasures to cope with the stress of everyday life.
Photo by Alycia Fung
Left to right, Lego releases five new Lego Friends figures with physical disabilities and neurodiverse psychological conditions, Wondermind is an online platform for mental health discussion, Photo by Lucas Ottone, Graph from SocialSphere
Sense of belonging
Achieving work-life balance is essential for caretaking one’s mental health. 75% of Gen Z have left their work as part of mental health reasons, compared to 34% of older generations (Cigna). There is less time to socialise with others or spend time on leisure activities. The time for social gatherings is either spent on their work or generally unaffordable. It is essential for companies to be aware of this; creating a sense of belonging, support, and inclusion will be a long-term benefit towards a loyal and productive team.
During times of struggle, younger generations are very open to discussing boundaries and healing. Developing emotional maturity is now a necessary skill for oneself and others. Medical professionals and therapy are evermore prevalent online for those pursuing a more positive outlook on life and the future. These tools and online discussions are an alternative to gain some confirmation from the wider public and build more open and collaborative relationships with those experiencing the same.
Left to right, Human Library International Denmark, The Lab for Listening, friendship app for women Gofrendly, Soft Machines by Sarah Brahim
Seeking connection
Socialising during the cost of living crisis has become a matter of affordance, and this should be a serious cause for concern. Connections to one another are an essential part of our mental and physical health. There are long-term studies that show not having friends is as bad for your health as smoking. Contact is important to flourish. At a community level, there should be intergenerational strategies to connect with one another and promote volunteering acts.
The loneliness epidemic stretches amongst all age groups. Research from the International Journal of Behaviour Development found that household income and size, health, spouse, and frequency of socialising were predictors of loneliness in all ages. Dating is another expensive activity that people have been forced to cut back and some have skipped it totally. If people date they go for cheap options outdoors, such as a walk or picnic in the park or at the beach where people each bring home-cooked food, and outdoor activities such as walking or cycling dates. Seeing people as a group saves on the cost of meeting up one-to-one.
Left to right, A Year in My Kitchen by Skye McAlpine, image by Kristen Kilpatrick, Spiritual baths on TikTok
Sense of escapism
Last year, UK Prime Minister Rishi Sunak described beauty as an “essential service”. Beauty brings a sense of confidence and self-esteem. During the cost-of-living crisis, people look at little indulgences and small pleasures that bring joy, such as mixing cocktails at home. The sales of spirits, the key ingredients in cocktails, remain strong even during the cost-of-living crisis. This suggests that the worse things get, the more people mix and drink. According to research, 25 per cent of people plan to swap their salon treatments for DIY fixes: cutting and dyeing their hair at home, trimming instead of visiting a salon for a wax, and buying UV gel lamps for longer-lasting manicures (DIY gel nails now has 2.4 billion views on TikTok).
People are not going out to restaurants but level up the enjoyment of home cooking and other local daily activities. Because we have spent so much time at home during the pandemic, there is an element of fatigue with baking and cooking certain meals at home. Occasionally people bring luxury from outside, inside the home and reframe the cost of home cooking versus an out-of-home eating experience.
