The Fight Against Inflation: Encouraging Consumer Spending in a Strained Economy
Consumers and retailers are facing an unprecedented challenge with rising inflation rates. February saw an inflation rate of 7.9 percent, an entire seven percentage points higher than the same month last year — and the surge is showing no sign of slowing down as we enter the spring season.
Goods are more expensive, and the purchasing power of a dollar is decreasing. In response, retailers are significantly cutting margins to offload inventory, and consumers are struggling to maintain their spending habits. But as we turn the corner into warmer weather and people look to shop for the latest spring and summer styles, consumers aren’t expecting to halt their spending. In fact, as of February consumers expect their spending to increase by 6.4 percent in one year’s time — showing that there are reasons to be optimistic about consumer spending, despite rising inflation rates.
Consumers are shopping smarter than ever, especially in strained economic conditions, and retailers will need to get creative with how they pull share of wallet. A survey in December showed that over three quarters (76 percent) of people resolved to be smarter with their finances going into the new year.
Shoppers will continue to spend, but they will do their homework to find the best deals available. Retailers can flex their creative muscles to offer incentives that stand out amongst the competition in some truly unique ways.
Let Us Pay You
Cash Back is a great strategy for retailers to provide their shoppers with attractive financial incentives without the brand challenges of heavy discounting. Instead of simply slashing prices, Cash Back provides consumers with a rewarding, winning feeling when shopping. Consumers actively seek out Cash Back sites to find discounts and discover retailers with the best incentives.
For example, a consumer might be shopping online for a new bathing suit to get ready for the beach season. They see one retailer offer a 5 percent off discount, while another retailer offers 5 percent Cash Back on a purchase of the same item. While the financial implications are the same, the experience of earning that money back on the purchase can often influence a shopper’s purchase decision.
Consumers want retailers to treat them like the smart shoppers that they are. They want to feel rewarded for their business — and especially during a time of rising inflation, they want to feel a sense of gratification when they open their wallets. Cash Back is a great way to deliver on that.
Stacking Rewards Incentives
While Cash Back is a great way to reward consumers, the most competitive retailers will leverage multiple strategies to incentive consumers. Retailers can look to stack different rewards incentives on top of one another to create truly unique and engaging offers.
There are several other ways that retailers can use this strategy to pull the attention of shoppers — including the ability to buy now and pay later, buy online and pickup in store, earn loyalty points or exclusive offers. Winning retailers will find ways to combine these strategies and create something greater.
This strategy is especially effective for bigger ticket items that have a larger impact on consumers’ wallets. Imagine shopping for a new TV. While shopping online, you come across the TV that you want with a steep 20 percent off at checkout. That’s undoubtedly an attractive offer, but you continue shopping to see what else is out there. You come across another retailer selling the same TV with a 10 percent Cash Back deal, but also the option to buy now and pay later without any interest and no impact on credit. While buying from the first retailer is actually the cheaper option of the two, the second offer might be more appealing or better meet the consumer’s needs.
Consumers want to make purchase decisions that make them feel like they’re winning and reinforce their identity of a smart shopper.
Making Back Margins
Retailers find themselves in a tricky position. In addition to combating rising inflation rates, they’re also suffering ongoing supply chain woes. If they haven’t already, retailers are going to feel pressured to increase their prices to make back some of the margins that they’re losing due to inflation. Leaning on incentives like Cash Back and other rewarding experiences can help incentivize consumers to continue to spend, despite price hikes.
Retailers who successfully create that experience will be able to make back some of those margins by earning shopper loyalty, thereby controlling share of wallet over the competition.