Discerning Brits seek value, rewards and personalisation

After two years of post-pandemic recalibration, consumers are getting back in the shopping habit once more, but far more cautiously, with growth concentrated in categories like fashion and beauty that align with quality, convenience and affordable indulgence.

So says The State of Spend: Retail Report from advertising platform Cardlytics, based on insights from over 24 million UK bank accounts.

The company, whose partners include Samsung and Iceland, reveals shoppers are still active but are applying more scrutiny to where and how they spend. The report examines three key sectors – retail, grocery, and household – and how consumer behaviour differs across each.

From value-driven and feel-good spending in fashion and beauty, to more cautious grocery shopping and increasingly selective investment in household essentials, the report has revealed consumer habits are evolving, and brands must keep up.

In the retail sector, high street fashion and beauty categories are holding firm, buoyed by brand loyalty and a desire for small feel-good purchases. Beauty spend rose 5% year-on-year, with transaction volumes outpacing spend, indicating shoppers are still indulging, but doing so more often in smaller amounts – aligning with the so-called ‘lipstick effect’ of customers turning to smaller and more affordable luxury items in times of uncertainty.

Department stores, by contrast, continue to lose relevance – and sharply. Spend declined 4% in 2024 and a further 5% in early 2025, reflecting the challenges of a one-size-fits-all model in a market where consumers are seeking out more targeted, brand-led propositions.

Meanwhile online fast fashion, which flatlined in 2024, bounced back with a 13% uplift in Q1 2025, helped by discount-led promotions and the return of trend-led buying. This suggests that price and novelty still hold sway, particularly when brands can meet both at speed.

Grocery spending showed clear signs of behavioural change. While supermarkets saw a 3% fall in spend in Q1 2025 – following 9% growth in 2024 – the number of transactions remained steady, indicating that customers are not shopping less frequently, but are spending more cautiously with each shop.

The data points to an overall shift away from spontaneous top-up shops and towards more deliberate, planned larger trips. This resonates with grocery delivery’s rise of 13%, extending on from last year’s gain of 16%, which reinforces that online ordering is no longer a pandemic-era habit but a permanent fixture in UK households.

Meanwhile, household spending cooled as consumers took a more selective approach to purchases. DIY spend fell 1% in Q1 2025, but transaction volumes held steady, suggesting that whilst customers are still investing in their homes, they are favouring smaller-scale projects over major upgrades.

Electricals saw a sharper drop of 6% in total spend, although this was offset by a 6% rise in average transaction value. As such, rather than scaling back completely, it seems shoppers are waiting longer between purchases and upgrading when they do buy, favouring quality and longevity over cost alone.

Cardlytics’ analysis suggests the retailers performing best are those offering perceived value – not just on price, but through experience and personalisation, meaning brands need to combine a strong in-store presence with data-led, targeted cashback rewards to drive loyalty and capture spend.

Cardlytics SVP UK partnerships Lucy Whittemore said: “We’re seeing a more discerning consumer – still spending but doing so more selectively and looking for clear value, trusted brands and a sense of reward. Physical retail is regaining momentum for brands offering something distinctive, and in a more competitive, cautious environment, loyalty won’t be won by price alone. Targeted offers, personalised rewards and a clear brand proposition will be key.”