American consumers are facing a wave of economic uncertainty, with rising inflation, a potential recession and ongoing supply chain disruptions. This is leading to a shift in consumer behavior, with shoppers cutting back on spending and becoming more price-conscious.
“The unprecedented pressures facing American consumers are ever-changing, increasingly volatile and impossible to predict with authority,” said Robert Gorin, consumer practice leader at Getzler Henrich, in a recent report. “Between high inflation rates, a looming recession and persistent supply chain issues, if businesses haven’t already felt the reverberations to their bottom line, they soon will.”
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One of the key changes in consumer behavior is a decrease in spending. However, as pandemic-era savings programs are depleted and student loan payments restart, consumer purchasing power will wane. Shoppers will have less disposable income and will likely cut back on nonessential spending.
“They’ll buy less,” Gorin said. “Until recently, consumers have been resilient to inflation. July surveys showed that 65 percent of Americans have managed expenses by increasing credit card usage or diving into savings. However, as pandemic-era savings programs are depleted and student loan payments restart, consumer purchasing power will wane. Shoppers will have less disposable income and will likely cut back on nonessential spending.”
Another trend is a reduction in brand loyalty, Gorin said. Consumers are increasingly willing to trade down to cheaper alternatives, with 74 percent of shoppers already doing so at least once. This is due in part to the rising cost of living but also to a shift in priorities. Consumers are now more value-conscious and are less willing to pay a premium for brands.
Still, even as consumers prioritize bargains and defer to store brands versus premium ones, they will expect the same, if not higher, value for every depreciated dollar spent. To that end, negative experiences — from poor customer service to shipping delays — will more readily be factored into future buying decisions.
This shift in consumer behavior presents both challenges and opportunities for businesses. On the one hand, businesses will need to find ways to cut costs and offer competitive prices to attract price-conscious consumers. On the other hand, there is an opportunity for businesses that can offer unique value propositions and build strong relationships with their customers.
“To navigate this uncertain landscape, businesses need to focus on understanding their target audience and what matters most to them,” Gorin said. “They need to be agile and adaptable, and they need to be willing to experiment with new strategies. Businesses that can do these things will be well-positioned to succeed in the years to come.”
Here are some specific tips from Gorin for businesses looking to adapt to the changing consumer landscape:
Focus on value. Consumers are more price-conscious than ever before, so businesses need to find ways to offer products and services perceived as good value for the money. This could involve offering discounts, promotions or loyalty programs.
Build relationships with customers. In a time of uncertainty, consumers are looking for businesses that they can trust. Businesses can build relationships with their customers by providing excellent customer service, being responsive to their needs, and being transparent about their pricing and policies.
Be adaptable. The market is changing rapidly, so businesses need to be willing to adapt their strategies accordingly. This could involve changing their product mix, their marketing channels or their pricing.
Invest in data and analytics. Data can help businesses understand their customers and make better decisions about how to reach them. Businesses should invest in data and analytics tools to track consumer behavior and identify trends.
By following these tips, Gorin said businesses can increase their chances of success in the current uncertain market.
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