Inflation Is Changing the Way Consumers Spend Money. Here’s How Retailers Can Cope.
Inflation Is Changing the Way Consumers Spend Money. Here’s How Retailers Can Cope.
Greg Walthour, CO-CEO • Intero Digital • April 30, 2021
With prolonged inflation, hiked interest rates, and an economic downturn, it’s no wonder average consumers are feeling an increased amount of stress when making purchases or buying services. And with the holiday season quickly approaching, many are rethinking their spending habits more than they already were.
In fact, 60% of consumers say their priorities keep changing as a result of political, societal, and economic turmoil, an Accenture study found. Shopping trends and economic uncertainty lead to changing consumer spending habits and perceptions. As such, consumer spending and inflation are the major drivers for retailers, and a careful understanding of both will benefit both your customers and your business.
The Impact of Inflation on Consumer Trends
While some business leaders claim that an economic recession is already here, others predict a recession will not hit until next year. Regardless, today’s inflationary environment impacts sales, and an economic recession will only cause sales and consumer spending to decline further. More than 72% of consumers in an Accenture survey say external factors such as climate change, inflation, and social movements are impacting their lives more today than in the past.
Further, recent data from management consulting firm Escalent showed that 42% of consumers said they feel confident they will achieve their holiday shopping plans – down 24% from last year. And with only 16% seeing themselves spending more this year compared to 2021, 32% expect to spend less this holiday season.
What Current Consumer Spending Habits Mean for Retailers
An inflationary environment and looming recession have created cause for concerns and strains for retailers. Lowered consumer spending and consumer weariness mean companies will see a much lower end-of-year revenue.
With changing consumer spending habits and supply chain issues, many retailers are facing overstock on inventories that did not sell. Thus, many are moving toward massive markdowns. Some retailers are now defaulting on competitive promotions to deal with overstock, lowered consumer spending, and rigid sales goals.
Three Ways Retailers Can Plan For the Holiday Season
Despite the many challenges that come from economic uncertainty and a wary consumer base, retailers can utilize several essential solutions to help consumers overcome their pain points while also maintaining revenue expectations. Here are three ways retailers can cope with the shifting consumer buying behavior.
1. Build momentum.
As a business with several products, you need visibility to convert. Lowering inventory price helps your conversion, but you will be unable to convert more potential customers if your brand visibility remains poor.
Instead, you should focus on boosting your brand’s visibility to wider audiences and more potential customers. This may look like investing in influencer marketing or selling your products as a retailer on Amazon. As many retail competitors start their holiday promotions, it can be hard to stand out against the masses. Now is the time to get creative in your marketing strategy and how you build your brand’s momentum before the holiday season reaches full swing.
If everyone is doing the same tactics to attract customers, then the way to make a difference is to be more visible. Something like flashy and personalized advertisements on contextual webpages in conjunction with special sales can create higher visibility. If you build momentum earlier, then pushing harder during the holiday season with the right strategy will be easier.
2. Plan ahead.
With supply chain issues causing product shortages and shipping delays, retailers are facing several inventory-related hardships, especially amid the holiday season. One solution to supply chain issues is to order products earlier and plan ahead to avoid potential delays.
Spend more and be more aggressive during this time. You do not want to fall behind and not have enough inventory the day before Black Friday. Start early and prepare long before your competitors so that your brand is ready to cater to the needs of consumers.
3. Use visual selling to your advantage.
When looking at Christmas online shopping trends, you will see that customer experience is everything. Retailers can woo customers with an excellent purchasing process and superb visual design. How your products are displayed and branded makes all the difference when a customer is choosing between your product and a similar one right next to it — especially with online retail. In the digital age, visual merchandising is not just window displays. It is also the appearance on the screen that will sell.
For the holidays, visual selling can be easy. Take advantage of the festive spirit and create a visual experience that entices customers. This could look like a targeted Instagram ad featuring typical winter activities or a Facebook banner featuring people using your products during the holidays. Remember that visual merchandising must engage shoppers, reflect your brand, and push your customers to make the purchase.
Retailers must give customers a reason to choose them — whether that be the special sales you can provide, superior customer experience, or personalized advertisements. Do not miss out on revenue because you are doing the exact same thing you do the rest of the year or the same thing as your competitor. This season, think about how to wow your customers. Your customers will thank you, and your bottom line will, too.
This article was originally published on TotalRetail.
CO-CEO, Intero Digital
Greg Walthour, CO-CEO of Intero Digital, is a pioneer to the digital marketing space. He began his career as a commercial real estate broker and in 1996 took on the challenge of getting this website to rank higher in search engines. Greg has over 20 years of experience in digital marketing and enjoys camping, ATVing, traveling, and coaching football. Greg also has a passion for photography.
