With worries about a potential upcoming recession on plenty of consumers’ minds, brands have scrambled in preparation to answer the daunting question: how will consumer spending habits change?
At CommerceNext this week, Forrester analyst Sucharita Kodali said current gas spending data suggests that shoppers are “paying top dollar for wants and not needs.” A recent consumer survey from Pitney Bowes backs up this sentiment, indicating that 49 percent of consumers, including 60 percent of millennials, plan to buy more online in the next half year as companies mark down products like casual apparel, home appliances and furniture that have piled up in recent months.
“This summer will present both new challenges and new opportunities for brands,” said Vijay Ramachandran, vice president of market strategy, global e-commerce at Pitney Bowes. “Overstocks and markdowns will impact profitability, but also create new openings to sell as a large portion of consumers seek out deals — further aided by the return of Prime Day and other mid-year promotions.”
A Jungle Scout survey, meanwhile, said 52 percent of shoppers only buy products that are on sale or discounted, while 51 percent are more compelled to make a purchase when they receive a deal.
Target this month said it’s marking down more product and cancelling orders to tackle its glut of inventory. American Eagle Outfitters is introducing higher markdowns as well to clear through spring inventory, while Walmart has already turned to more “aggressive” price roll-backs on apparel in its first quarter, CEO Doug McMillon said last month.
And just weeks away is Prime Day, which 47 percent of Amazon Prime members plan to shop this year, Jungle Scout’s survey of 1,000 shoppers said. Ninety percent say they are likely to renew their Prime membership for another year, and 41 percent said the $ 20 annual membership increase doesn’t bother them.
That’s not to say everyone is going to be convinced to buy discounted products. According to Pitney Bowes, 15 percent of the 2,000 online shoppers it surveyed aren’t swayed by discounts even as they cut back on spending amid rising inflation and interest rates.
Shoppers split between spending more, spending less
Jungle Scout’s report seems to suggest that inflation is exacerbating retail’s bifurcation, with 32 percent of shoppers saying they spent less in the second quarter, while 24 percent spent more, a 4 percent bump from Q1. The lower-spending crowd also marks a decline from the 38 percent who indicated their spending had shrank in Q1.
Rising inflation has impacted 77 percent of shoppers’ personal spending, while 72 percent of shoppers are making fewer “fun” or impulse purchases due to the current economic indicators, according to Jungle Scout.
The report tied spending habits to brand loyalty, with 59 percent of shoppers saying they would buy a less expensive brand to cut costs. This is the biggest reason consumers are currently cutting costs, ahead of buying a more generic brand (51 percent), doing without some products (42 percent) and buying fewer of some products (38 percent). Additionally, the percentage of consumers who would switch from their favorite brand if a new one was more affordable rose 12 percent from the previous quarter.
Online spending slows, but shoppers still want to curb store trips
It appears if people are going to cut some part of their spending, it’s going to come from their online budget.
More people (38 percent of shoppers) say their online spending has decreased in the second quarter, Jungle Scout said, versus the 24 percent of consumers that said online spending jumped in the period.
When shopping online, some benefits are more important than others, with 74 percent agreeing that the lowest shipping price was their top preference. Sixty-nine percent said they’re looking for the product with the lowest price.
There is a difference between online shopping now and during the peak of the pandemic, when people were still shy away from shopping in stores. And in that time span, 56 percent said their motivations for buying online changed during the pandemic, according to Pitney Bowes.
The top reason why Pitney Bowes’ survey respondents shop online is to save a trip to the store, at 43 percent of shoppers of all ages. This includes 50 percent of baby boomers and 45 percent of Gen X, who do not mind waiting for delivery.
Shoppers of all ages cited several reasons for shopping online. The said they find better deals online (36 percent), enjoy the a bigger product selection (29 percent) and access unique product they can only find through the web (27 percent).
Fear of Covid-19 exposure, while significantly less of a deterrent to in-store shopping now, than early in the pandemic, is still on the minds of 15 percent of consumers.
“The fact is, we’re still waiting on the ‘new normal.’ 2020 saw unprecedented capacity constraints among e-commerce logistics networks. 2021 witnessed historic disruptions in the manufacturing supply chain. 2022 is shaping up to be the year of oversupply and price volatility, ”Ramachandran said. “That said, the pandemic has ingrained some online shopping preferences. Before the pandemic, shoppers were motivated by the convenience of online shopping as an alternative to in-store experiences; now we’re seeing the emergence of more consumers who’ve discovered they genuinely enjoy online shopping. ”
Consumer’s perception of shipping speed has evolved over the past two years. In its weekly Boxpoll consumer survey, Pitney Bowes asked respondents how likely they were to pay for fast shipping while making online purchases, compared to three months ago.
Two-thirds (67 percent) of consumers are no more likely to pay for faster shipping than they were three months ago, as “appointment buying” re-emerges with return-to-work and vacation plans. For those who are shopping online more now, 33 percent said they would be more likely to upgrade shipping than before.