Consumer Reactions to 2023 Economic Headwinds

In 2022, consumers faced significant economic pressures, like record inflation followed by price hikes. As a result, many shoppers have adjusted their spending behaviors and cut costs. These habits will linger into the new year, with consumers more willing to wait for a bargain on discretionary spending or delaying a large purchase altogether.
“On necessities like groceries and clothing, consumers will look for more affordable options,” Marly Sohr, VDX.tv’s  lead of industry solutions for retail, told Retail Leader Pro. “Retailers will be mutually incentivized to offer deep discounts to unload excess inventory they’ve been holding onto since the pandemic boom in demand.“
The uncertain economy moving into this year also will continue to put an increased focus on ways for shoppers to stretch their dollars — this includes savings and discounts, conscious buying and more comparative shopping.

“In order for retailers to engage and retain shoppers under these conditions, they should consider offering customers an additional incentive to facilitate the checkout process,” Hector Pantazopolous, SourceKnowledge’s, co-founder and chief retail officer, told Retail Leader Pro. “Purchase incentives, such as discount codes, exclusive member benefits or free shipping, can help increase purchasing power.”

Data from a recent study shows that 90% of consumers are more interested in getting discounts, such as coupons or cash back rewards, given rising prices; and 82% are more likely to complete a purchase when they have a coupon or discount code. 

“By partnering with discount-oriented publishers such as coupon sites, deal-centric influencer and BNPL services as well as by offering valuable incentives throughout the checkout flow, retailers can increase traction and ensure they get in front of shoppers looking to save this holiday season and beyond,” Pantazopolous said.

Strengthening of E-commerce

Almost 20% of total retail sales occur online, and online sales are projected to hit 24% by 2026. As online shopping continues to grow in popularity, it may be worthwhile for retailers to improve their digital presence to ensure a seamless shopping experience for their customers.

“Creating an easy and more personalized experience for shoppers will help to increase brand loyalty and differentiate them from competitors,” Pantazopolous said. “Consumers are attracted to the convenience of offers like free shipping, next-day delivery and easy returns, which help create a quick and easy shopping experience.”

While in-store shopping still makes up the largest share of retail spending, growth in online shopping will persist into the new year. And, in terms of customer experience, consumers will continue to demand convenience. Buy online, pick up in-store (BOPIS) and other convenient purchasing options that were once thought of as novel have become the expectation.

“Many shoppers have shifted exclusively to purchasing with retailers that offer free and fast shipping options,” Sohr said. “Consumers also want multiple purchasing options at the click of a button, so they can shop wherever they are at home, in-store or on the go. To keep up, retailers will need to push boundaries on technical capabilities and omnichannel solutions. A focus on mobile purchasing options and extensive app developments can help retail marketers shorten the path to purchase and keep customers happy.” 

This year, retailers also are expected to rely more on zero-party data or information a consumer voluntarily shares with a brand. “We’ve already seen this utilized by marketers in traditional marketing campaigns like emails or websites, but we’ll start to see it incorporated more transparently in digital advertising,” Cindy Brown, ViralGains chief revenue officer, told Retail Leader Pro.

For example, retailers are asking consumers questions about their preferences and opinions via surveys within digital ads to then serve them future digital ad content based on their responses. 

“It’s a win for consumers, because they’re getting more relevant advertisements based on their proactive feedback, but also a win for retailers, because their campaigns can now be optimized to what the consumer is actually looking for in the market,” Brown said. “We predict that more retailers will be building their own audiences instead of relying on cookies, and can include those in increasingly popular places like data clean rooms. It will be a highly utilized, privacy-friendly approach that ensures an improved customer experience.” 

Throughout the retail sector, influencer marketing also has dominated as a vastly popular option for brands to promote their products. Forming an authentic and personal connection with a brand is certainly valuable; however, for those not as immersed in the social media sphere, there are other options for brands to get attention.

“As technology and its capabilities continue to progress, shoppables have become an increasingly popular method of product promotion,” Janine Pollack, MNI’s  marketing director, told Retail Leader Pro. “From Peloton demoing pop-up ads allowing users to ‘Shop the Instructor’s Look’ to Walmart experimenting with shoppable content, such as shoppable recipes, it’s clear that this trend will continue to emerge and evolve in 2023.”

This article originally appeared on Retail Leader.

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