Despite the washout summer along with stubbornly high interest rates, Brits have upped spending on small luxuries, such as pastries and cosmetics, in what is being coined as the “sweet treat economy”.
According to Barclaycard, around half (47 per cent) of people surveyed by Barclays said they were continuing to spend on small luxuries, even when trying to make cutbacks. Overall, consumer card spending rose by 1 per cent in August after two months of decline.
Karen Johnson, head of retail at Barclays, said there was “an emerging trend of consumers indulging in retail therapy for mood-boosting pick-me-ups, often in the form of sweet treats and cosmetics”.
Baked goods were the most popular form of affordable pick-me-up. Barclays said shoppers may well be influenced by viral snacks on social media, such as the “Dubai chocolate bar”, a chunky chocolate bar filled with pistachios and knafeh.
Another baked good that has gained popularity thanks to the internet is the “crookie”, a hybrid croissant and cookie, which Barclays highlighted as another top seller.
Barclays’ data showed a 7.3 per cent jump in spending at health and beauty retailers last month, the biggest rise since January 2023.
Barclays said the increase in spending on treats was an example of the “lipstick effect”, whereby people spend more on affordable luxuries during times of worry. Leonard Lauder, the former chairman of beauty giant Estée Lauder, proposed the theory in the wake of the Sept 11, 2001 terrorist attacks in New York. Sales at his company fell in the wake of the shock, but lipstick was up.
Retail spending grew for the first time since March. Grocery spending, too, saw a promising rise, up 1.9 per cent – its largest uplift since March.
Additionally, consumer confidence among those surveyed by Barclays rose by five percentage points in August. 70 per cent said they were feeling more confident in their household finances, while 73 per cent said they were more confident in their ability to live within their means compared with the prior month.
Optimism may have been sparked by the first cut to interest rates in four years, which happened last month. Economists reckon the Bank of England may reduce borrowing costs even further before the year is out.
Johnson added, “It’s encouraging to see that Brits are feeling noticeably more confident in their personal finances – a strong indicator of future spending as we approach the crucial festive period.”
Additionally, Barclaycard said many shoppers were now noticing what it called “double-dip” shrinkflation, where products have shrunk in size more than once despite the price remaining the same – or in some cases rising.
Shrinkflation has been employed by food and drink companies in recent years to shore up profits in a period where the cost of manufacturing and labour has soared. Chocolate, crisps, biscuits, snack bars and sweets were the products most commonly reported to have shrunk more than once.
