It’s a tough world out there right now, to put it lightly. And the retail industry is seeing the effects. Inflation is at its highest level in nearly four decades, with average prices rising nearly 7%, although many individual categories, such as food and cars, have risen much more. In the meantime, there is a juxtaposition in retail where constant and strong consumer demand for goods has met with supply chain bottlenecks. Rising inflation has also had an impact on consumer confidence levels, which have fallen to their lowest level in decades.
Meanwhile, Americans’ credit card debt rose $ 17 billion in the last quarter, a side effect of more than half – 57% – of American consumers living on paychecks and borrowing money. funds to make ends meet.
Taken together, the sum of the economic parts is that of increasing pressure that begins to emerge in the form of increasing delinquency rates, deferred spending, or other cuts or cutbacks.
âOf course, it all depends on the state of the pandemic. If the omicron variant were to increase infection rates in a sustained trend, consumer sentiment would suffer,â PYMNTS said.
The gift that keeps on giving
Against this backdrop, retailers faced with their own supply chain and inflationary pressures have passed the rising cost of doing business on to consumers and, in the meantime, individuals and families tend to cut spending a bit this year.
Namely, the latest retail sales data for November – which included Black Friday and a period earlier than usual – which rose anemic 0.3% for the month, an economic stall that was felt by department stores and electronics and home appliance dealers, in particular.
“The Grinch is creeping into the room – in the form of inflation – threatening to upend the holiday spending that so many retailers have gambled on,” PYMNTS reported last week regarding the intersection of inflation with shopping for holidays.
Perhaps this is the reason why consumers – even those who are financially stable – are turning more to the buy now, pay later (BNPL) financing models when checking out, rather than incurring additional debt at home. indefinite duration, a reality clearly reflected in the 230% peak in BNPL usage over the past year.
The question remains: what are consumers buying in terms of gifts for friends, family, colleagues and beyond this holiday season?
One answer is gift cards; this holiday season could arguably become âthe year of the gift card,â as PYMNTS reported last month. Gift cards are straightforward, they take the guesswork out of guessing, and if purchased online, they’re transparent and contactless. And with the supply chain problem, more and more consumers are finding empty shelves in places like the grocery store and beyond, defer buying until the shelves are restocking, and then using a gift card can make sense.
Up to 41% of consumers plan to do so this holiday season, with the average consumer now purchasing a total of 15 prepaid gift cards during 2021. The latter number represents a 50% increase from 2020 and a% increase compared to 2019.
The way consumers buy gift cards is a bit more intimate, with some companies responding to this with personalized âexperimentalâ gift card sets, so shoppers can combine gift cards however they want. Or, allowing consumers to purchase gift cards effortlessly through QR codes. Or allow customers to buy crypto for someone via a gift card.
Getting back to the concept of inflation, a key point is that because inflation rises, so too are the prices of gift cards. It remains to be seen to what extent this will impact future gift card purchases.
Amazon, Walmart and Target dominate consumer spending habits
When you examine some of the findings for this year’s Black Friday sales, consumers don’t seem in a rush to close deals. According to data from PYMNTS, most consumers (61%) said they did not wake up early that day to grab items for fear they might run out. Most baby boomers (over 77%) said they didn’t feel the need to run to buy something. About half of Gen Z consumers said they also didn’t wake up on Black Friday to close deals sooner.
Looking at consumer spending habits so far, 31% of Black Friday shoppers who have purchased toys, hobbies and musical instruments have done so in-store. Most Black Friday Walmart shoppers – 59% – walked into a physical store. Most Black Friday shoppers in general – 66% – have shopped online. The Amazon and Walmart websites were the most popular places to shop for Black Friday. Consumers made 71% of their Black Friday purchases on Amazon.com and 41% on Walmart.com.
âThe battle between Amazon and Walmart for control of consumer retail spending is neck and neck, with the e-commerce giant and the Arkansas box store chain each holding about 9% of total sales in the United States. retail in the United States, âdata from PYMNTS 2020 showed.
Given this competitive and constrained environment, retailers need to think carefully about how best to serve consumers looking to shop in a struggling economy. It might sound too simple, but easy, quick, and inexpensive are three words that will dominate consumer shopping this holiday season – and beyond.
It has been said that if you are lucky you can only get two of the three as a consumer which means any trader who can deliver on all three fronts is set up to not only win the sale and the day, but will keep consumers coming back. for more if tough times persist.