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With the rise in energy prices, interest rates, rents and utility bills, consumers don’t necessarily have the same purchasing power as they used to, leading to a shift in their behavior. Consumers now have a new scale of preferences, with luxury almost out of reach for most of the population.
Small and large businesses are already feeling the impact. According to reports from Salesforce, global same-website sales were down 3% year-over-year in the first quarter of 2022. Significant contributors to this decline are traffic (2%) and shopper spending (1%).
New holiday season. New consumer.
As we quickly move into the most competitive and profitable time of the year, retailers are shifting their priorities. Consumers are more selective in buying decisions, so impulse buying is less common. The current inflation rate also has an effect when it comes to maintaining profit margins.
According to Numerator’s 2022 Holiday Review on Consumer Trends, nearly nine in ten (89%) consumers expect inflation to impact their 2022 holiday shopping. Fifty-nine percent expect the impact to be moderate or significant, and more than 15 million U.S. shoppers (15%) are unsure they’ll buy any gifts this year.
How can a business thrive with frugal shoppers? Let’s begin by understanding the shift in consumer buying habits.
What’s the shift?
There’s record-high uncertainty among shoppers regarding the price of goods. In Justuno’s 2022 Holiday Consumer Behavior Report, while 35% of consumers plan to spend the same as in 2021, a staggering 17.6% are not planning to spend at all.
Comparing holiday gifting budgets, over 56% of shoppers budget $500 for a holiday gift, compared to the $648 average budget in 2021. A $148 difference in just one year shows how consumer purchasing power influences shopping habits.
However, growth-oriented retailers can turn these challenges into opportunities — if they can make deliberate and strategic decisions. This way, they can mitigate the effect of recession on their business.
Below are three predictions to consider regarding the shift in consumer behavior for the 2022 holiday season:
1. Early holiday sales
In the past, consumers and retailers alike marked late October as the start of the holiday season. From Black Friday, Halloween, Cyber Monday, Christmas, to Thanksgiving, there is no shortage of sales and deals during the last quarter of the year. But not this time. With the warning that inflation will likely worsen toward the end of the year, consumers are shopping early to avoid price hikes.
According to Salesforce research, more than 37% of U.S. consumers plan to start buying gifts earlier this year, making it the most significant behavioral change. Justuno’s survey of 250 consumers corroborates this research, as more than a quarter of U.S. consumers planned to start holiday shopping before September.
2. Price over brand loyalty
It’s an understatement to say people’s living costs determine their spending habits. So it’s not surprising that in times of crisis, consumers quickly pivot budgets toward necessities that matter in their everyday lives.
In a report from Food Dive, lower prices of substitute brands influenced the decisions of more than 65% of shoppers. This means consumers will do anything to save money, including moving to lower-price store brands instead of their preferred brands. More than eight in ten (85%) consumers are looking for cheaper alternatives when shopping. This figure rises to nine in ten low-income households.
3. In-store shopping takes the lead
Physical store owners had their fair share of bad luck during the height of the pandemic in 2020 and 2021. With consumers shopping from home, some stores went bankrupt and closed down. But with stores fully reopened and inflation on the rise, the tide is turning in their favor.
According to Numerator’s report, in-store shopping is the most preferred option for holidays— Christmas being the exception. The real advantage for retailers here is order fulfillment. Recent reports suggest that physical stores influence nearly 60% of online orders. This means omnichannel e-commerce brands can fulfill more physical and online orders, leading to more overall sales than brands with only online stores.
Capitalizing on the shift for more sales
These predictions will only give you foresight into what to expect from consumers during this holiday period. Capitalizing on the shift to make more sales is up to you. Below are three tips that’ll help you drive more sales in this price-sensitive economy:
Market on Amazon’s turf
Amazon’s prime deals are some of the best of the holiday season. Shoppers will quickly buy out products on sale, giving you a window to fulfill orders for shoppers who couldn’t get what they need on Amazon. Retarget your organic and paid campaigns toward Amazon users and snap up their sales.
Optimize your website performance
Walmart, Costco, and J. Crew had their fair share of website crashes during the Q4 season that cost them millions of dollars. Walmart lost $9 million in 150 minutes. J. Crew lost $755,000 in about 5 hours. Costco lost $15 million.
Your site will crash and ruin shoppers’ experiences if you’re unprepared for the holiday rush. To prevent this from happening, ensure you:
- increase your website’s page speed
- improve your user interface and experience
- cache your website on a CDN
- run your store on a headless server
Personalize shoppers’ experience
Consumer data is critical, but only in the right hands. Customizing each shopper’s experience from product recommendations based on location, search history, likes, wish lists, etc., can increase revenue. Not only will the consumer appreciate their product, but they’ll also enjoy the seamless shopping experience and return for more — all of which build brand loyalty over time.
Undoubtedly, this year’s holiday season will set new records for retailers and consumers. And while the country is battling inflation, there’s hope that this level of uncertainty will be a thing of the past for a long time. That said, employing the abovementioned strategies will help you navigate the shifting tide of retail during economic uncertainty.