Retailers are operating in a dynamic environment where consumer spending patterns are undergoing significant shifts. Economic pressures, technological advancements, and changing preferences are influencing how and where customers spend their money. Understanding these shifts is crucial for maintaining competitiveness and profitability.
This guide uses recent market observations to outline key areas where consumer behaviour is changing. It provides practical considerations for retailers to assess their strategies in pricing, payment methods, and sales channels, ensuring they remain responsive to current market realities.
Economic Pressures and Consumer Debt
Consumers are facing increased financial strain, directly impacting their purchasing power. Global food prices climbed 5.8 per cent in September, with disruptions to maritime trade and fertiliser supply chains pushing international food commodity prices up 1.5 per cent month-on-month. This rise in essential goods costs leaves less disposable income for other retail categories.
Compounding this, consumer debt is increasing. Philippine credit card bad debts jumped to P68 billion as inflation bites, with non-performing card balances rising 11.8 per cent between March and June. This indicates a tightening of household budgets and a potential reluctance or inability to take on further credit for discretionary spending. Retailers must consider how these economic realities affect demand for both essential and non-essential goods.
- Monitor global commodity price trends, especially for food, to anticipate impacts on consumer budgets.
- Assess regional credit card debt and non-performing loan data to gauge consumer financial health.
- Evaluate the elasticity of demand for your products in response to rising cost of living pressures.
Evolving Payment Preferences and Digital Adoption
The way consumers pay for goods continues to evolve, with a mix of traditional and digital methods. In the Philippines, cash on delivery (COD) is projected to remain above 20 per cent through 2027. This highlights the continued importance of traditional payment methods, particularly in certain markets or for specific demographics.
Simultaneously, digital payment adoption is accelerating. Transactions using QR codes and bank transfers surged 198 per cent in the Philippines, even as digital wallets plateaued at 3 per cent growth. This indicates a strong preference for instant, app-based bank transfers and QR payments. Retailers need to ensure their payment infrastructure supports a diverse range of options, catering to both established preferences and emerging digital trends.
- Review current payment options to ensure they align with local consumer preferences, including COD where relevant.
- Integrate QR code and direct bank transfer payment solutions to capture growing digital transaction volumes.
- Analyse payment method data to identify regional or demographic shifts in preferred transaction types.
The Blended Retail Journey: Online and In-Store
Consumer shopping behaviour increasingly blends online and physical channels. Nearly 59 per cent of Indonesian consumers blend online and store shopping. A 2024 MarkPlus survey found 31.5 per cent of shoppers research goods online before purchasing in stores. This 'webrooming' trend means the online presence influences in-store sales, and vice-versa.
Retailers are adapting by integrating channels. South Korean food delivery apps Baemin and Coupang Eats are using idle rider capacity between meal peaks to ship discount cosmetics in 30 minutes, directly challenging CJ Olive Young. This demonstrates how companies are innovating to provide rapid delivery services for non-food items, blurring the lines between traditional retail and logistics. Alibaba also overhauled its cross-border platform, covering three billion products and adding 15 curated channels and artificial intelligence tools, with cross-border orders above RMB 500 rising 10 per cent. This shows the scale and sophistication of online platforms influencing consumer choice globally.
- Optimise online product information and reviews, recognising their impact on in-store purchasing decisions.
- Explore rapid delivery partnerships or in-house solutions for specific product categories to meet immediate consumer needs.
- Ensure consistent branding, pricing, and customer experience across all online and physical touchpoints.
Value and Luxury: Diverging Consumer Segments
The market shows a clear divergence in consumer behaviour between value-seeking and luxury segments. While some consumers are cutting back, others continue to seek premium experiences. Hong Kong developers cleared 360 flats in weekend price cuts, with Sun Hung Kai Properties and Yuexiu Property selling out new batches by trimming per-square-foot prices below secondary market levels. This indicates a strong demand for perceived value, even in high-value purchases.
Conversely, luxury brands are experiencing a downturn. LVMH, Hermès, and Kering shares fell up to 40 per cent since January, following a three-year downturn after the post-pandemic boom. Richemont shares remained roughly flat. Despite this, some luxury niches persist, such as Sony unveiling a $5,900 gold-plated Walkman for audiophiles. This suggests that while broad luxury spending may be soft, highly specific, high-value items with unique appeal can still find a market. Retailers must understand which segment they serve and tailor their offerings accordingly.
- Analyse sales data to identify trends in price sensitivity and demand for value-oriented products.
- For luxury goods, assess the specific appeal and niche market demand for high-end items.
- Adjust pricing strategies and promotional activities to align with the purchasing power and expectations of target consumer segments.
Technological Influence on Retail Choices
Technology continues to shape consumer choices and retail operations. The launch of Alibaba's Qwen Glasses N1 for 2,218 Yuan, with domestic sales reaching 909,000 smart glasses in the first half of 2026, shows consumer adoption of new tech. Chinese brands are undercutting foreign competitors on price in this segment. This highlights how new product categories and competitive pricing can quickly capture market share.
The broader tech ecosystem also impacts retail. Ericsson is betting on AI traffic and 550 million 5G users to drive India growth, targeting network upgrades driven by artificial intelligence. This widespread connectivity and AI integration will further enable sophisticated online experiences, personalised marketing, and efficient logistics, all of which influence consumer expectations and retail capabilities. Retailers need to consider how these technological advancements can be integrated into their operations to enhance the customer journey and improve efficiency.
- Evaluate the potential of emerging consumer technologies, like smart glasses, to create new product categories or enhance existing ones.
- Investigate how AI and 5G connectivity can improve customer engagement, supply chain efficiency, and personalised retail experiences.
- Monitor technological advancements in payment systems, logistics, and customer service to stay ahead of consumer expectations.
What to take away
- Assess consumer financial health by tracking local inflation and debt levels to anticipate spending capacity.
- Diversify payment options to include traditional methods like COD and surging digital options like QR codes and bank transfers.
- Integrate online and offline channels to support blended shopping journeys, from online research to rapid delivery.
- Tailor product offerings and pricing strategies to address the diverging demands of value-seeking and luxury consumers.
- Embrace technological advancements like AI and 5G to enhance customer experience and operational efficiency.
Questions & Answers
Q.How do rising food prices affect non-food retail?
How do rising food prices affect non-food retail?
Rising food prices, such as the 5.8 per cent climb in September, reduce consumers' disposable income. This leads to less money available for non-essential retail purchases, potentially shifting demand towards value-oriented products or away from luxury goods.
Q.What payment methods should retailers prioritise?
What payment methods should retailers prioritise?
Retailers should prioritise a mix of payment methods. This includes supporting traditional options like cash on delivery, which remains above 20 per cent in the Philippines, alongside rapidly growing digital methods like QR codes and bank transfers, which surged 198 per cent.
Q.How can retailers adapt to consumers blending online and in-store shopping?
How can retailers adapt to consumers blending online and in-store shopping?
Retailers can adapt by optimising online product information for consumers who research online before buying in-store. They should also explore rapid delivery services, as seen with food apps delivering cosmetics, and ensure consistent experiences across all sales channels.
Q.What impact does increasing consumer debt have on retail sales?
What impact does increasing consumer debt have on retail sales?
Increasing consumer debt, such as the P68 billion in Philippine credit card bad debts, indicates tighter household budgets. This can lead to reduced discretionary spending, a preference for lower-priced items, and a greater focus on essential purchases over luxury goods.
Reporting behind this briefing
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