Consumers’ Shift From Wants to Needs Provides Road Map for Merchants’ Holiday Season
For months, inflation and the tales of consumers exhausting COVID stimulus, getting crushed by rising food prices, pulling back from buying coveted items, and trading down on the things they did buy have been with us.
But beyond all the noise, this is what that looks like by the numbers: In August, online shoppers spent 22 percent more on groceries and 66 percent less on luxury items than they did a year ago, according to e-commerce spending data compiled by Signifyd.
Call it the month of wants vs. needs. Overall online sales were flat in August, compared to August 2022, matching the performance of retail overall. And while the trend wasn’t without exception, Signifyd’s monthly report indicated that consumers were more focused on essentials than on purchases that could be put off.
Signifyd Chief Customer Officer J. Bennett spends his days talking to retailers about their challenges and goals — and about what they’re seeing in the market. He characterized consumers’ thinking amid persistent inflation this way: “I’m pulling back. My savings are down. My basic cost of living is up. Gas is expensive. Groceries are expensive.”
And so, while electronics had a good month — up 17 percent as students headed back to school — and outdoor and leisure sales increased 11 percent — potentially consumers trading down for at-home experiences — other categories slumped.
Apparel sales didn’t budge last month compared to August 2022. Home good sales, which for a time were red hot and have been in positive territory the last two months, dropped by 1 percent compared to last year.
However, no category saw as dramatic a plunge as luxury goods, which makes sense. When household budgets are stretched, grabbing those diamond earrings, that delicious designer handbag or the replacement for that luxury watch just don’t have the same urgency they did when savings rates were at record highs.
“I talk to a lot of retailers in the luxury space,” Bennett says. “What they’re finding is that people are willing to spend for a luxury item, but instead of once every six months, it’s maybe once every year or two.”
Consumers are definitely looking for places to cut. In a consumer survey this summer, 70 percent of respondents told Signifyd that inflation would cause them to pull back on spending for the rest of 2023.
The numbers are discouraging on their face heading into the holiday season. However, gift-giving is a powerful incentive to stretch budgets. Given August’s less-than-stellar numbers that incentive might need a boost from retailer discounts and promotions. That's not what many retailers want to hear, but what many consumers have come to expect.
“Promotion use and discounts are driving consumer behavior,” Bennett says of the current economic climate. “I think that bodes well for the holiday, because people are conditioned to wait for good deals. And if retailers are offering good deals for the holidays, people are saving up for that.”
With promotions driving sales, retailers can look forward to a good holiday season, but certainly not a great one. In fact, based on historic trends and current spending patterns, Signifyd predicts that holiday sales this season will be up 5 percent, with wide variations among specific verticals.
Mike Cassidy is head of storytelling at Signifyd, a commerce protection provider.
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Mike Cassidy is the head of storytelling at commerce protection provider Signifyd. A former journalist and a retail geek, he covers ecommerce, payments and the way technology is transforming digital commerce.