With anxiety around the COVID virus on a downturn, shoppers were back to hitting the stores in person again earlier this year - until, of course, inflation hit a 40-year high this spring. Retail sales were less than expected in April and fell by 0.3% in May. As summer heats up and consumers grow anxious to return to leisure travel again, experts predict consumers will pull back on big-ticket retail items, like electronics, appliances, and clothing in order to afford rising gas and food costs. As prices increase with the temperatures, consumers will have to make some sacrifices and it looks like the retail industry may bear a lot of the brunt of impending customer spending cuts.
So where are consumers cutting? How are they prioritizing where to spend and where to cut?
Coming out of the pandemic, people are excited to take a long-awaited vacation or celebrate life events that have been put on hold. Some experts don’t expect big decreases in travel and leisure, despite the cost. Deloitte reports that 46% of Americans are planning a trip involving stays in hotels or other types of paid lodging this summer. For some shoppers, splurge spending is also on the rise as people treat themselves to some self-care and small indulgences after a day of worrying about finances. Sales of “affordable luxury” products like candles, soaps, and fragrances are seeing sales increases at retailers like Bath & Body Works according to a recent earnings call, thanks to the “lipstick effect” - when consumers spend on small luxuries even in a downturn. (CNN Business).
But treating yourself may also mean you have to give up something else in today’s financial environment and retailers should pay close attention to where their customers are prioritizing their purchases. Home improvements are more likely to be put on hold, eating habits will change, and unnecessary services like home cleaning and salon services may be deprioritized. When it comes to their everyday purchases, consumers are choosing value over loyalty to some of their favorite brands if the price isn’t right, with over a third of brand-switchers opting for more private-label goods (McKinsey).
As retailers prepare to plan for their critical second half of the year, experts say that leaders in this category should take note of these trends that will shape the back-to-school and holiday shopping seasons:
Holiday shopping will continue to start earlier. This is not so much a new trend as people started shopping prior to Black Friday for the last two years thanks to shipping delays and supply chain woes. This year, people will take advantage of earlier season discounts and promotions, like Amazon’s Prime Day and summer clearance sales, to start to stash away holiday gifts.
Price over premium goods. Shoppers were more willing to pay higher prices for the convenience of shopping from home during the pandemic but as people return to in-person shopping, they are more willing to shop around for the best prices. Salesforce reports that half of shoppers are expected to switch brands to save money. This creates a big opportunity for retailers with private-label goods to more heavily promote their own brands as consumers look for more budget-friendly products that fit their needs.
Shoppers are getting younger. Gen X, followed by Millennials, tends to spend the most during the holiday shopping season, while Boomers tend to be the most conservative. (Cloudways) This will obviously vary by location and income level, but retailers should keep demographics in mind when developing their holiday marketing campaigns and promotions.
More emphasis on mobile. Online shopping is also not a new trend, but retailers should take notice of the devices consumers are using for their online shopping. Statista reports that 40% of sales made online were made through a mobile device like a phone or tablet and over $64 billion was generated in mobile sales for the holiday season in 2019. Retailers must ensure that their e-commerce platform is optimized for mobile with simple design, navigation, and easy-to-complete forms or they risk losing customers to another retailer who is.
Give customers the content they want. Even with the return to in-store shopping, today’s shopper has grown accustomed to browsing the web and their social media pages to visit and ‘try on’ stores and products before they visit or buy - and this becomes even more relevant during the holiday season. Think with Google reports that 31% of shoppers said that they searched for images or videos prior to heading into a store to make their actual purchases and that YouTube has seen six times the ‘watch time’ growth since 2019. It’s become crucial for brick-and-mortar stores to find ways to capitalize on their online and social media platforms and drive engagement through images and video.
Implementing a research study that gives insight into your customers’ current pain points during these challenging times of inflation is a smart way to understand your weaknesses so you can better plan for the upcoming holiday rush. Are your customers unhappy with their current purchasing options? Where are they happy to purchase private-label versus splurging on big brand names? Do they want better customer service and support? All great places to start.
To make the right decisions that drive growth, companies need the right insights at the right time. Traditional market research firms deliver too much data, not enough insights, and it takes too much time. Trusting gut instinct takes little time but doesn’t ensure that decisions made will drive the growth expected.
Vennli executes agile market research and delivers fast, simple, and actionable insights on why customers make choices - because at the heart of growth is a customer choosing you over a competitor. For more information, please do not hesitate to contact us today.