Date: Thursday, October 13, 2022
Source: Modern Shipper
Global inflation may finally be taking its toll on consumers.
A new survey of more than 8,000 consumers and 800 merchants in eight countries found that holiday shopping will be muted this year, with as much as $46 billion in total being cut from spending budgets.
The Holiday Shopping Trends Report: Winning Customers Despite Uncertainty, conducted by Auctane and Retail Economics for ShipStation (Auctane is the parent company of ShipStation), found a disconnect between shoppers and merchants.
According to the report, 58% of U.S. consumers expect to cut back on nonfood spending this holiday season. If consumers behave as predicted, this could mean a $30 billion elimination of consumer spend from the U.S. market and a 14% spend reduction year over year, ShipStation noted.
However, around half of merchants surveyed expect online sales to increase this holiday season.
The optimism was even greater in the apparel industry with 65% of merchants expecting higher order volumes compared to 2021. Yet, 25% of consumers expect their cutback on spending to come on apparel. Overall, 28.8% of consumer respondents cited inflation as a top concern impacting their spending intentions.
“Inflation and economic uncertainty are forcing consumers to rethink their spending priorities this holiday season,” said Robert Gilbreath, general manager of ShipStation. “To combat this, merchants should proactively formulate a holiday season game plan. This includes reexamining and improving the experience they offer from the moment an order is placed online through last-mile delivery.”
ShipStation provides e-commerce brands shipping software, including multicarrier and multichannel relationships with some of the largest shippers and marketplaces, including the U.S. Postal Service, UPS, FedEx, Amazon, Shopify and BigCommerce.
The report found that less affluent customers were more likely to cut back on spending, perhaps feeling the pressures of inflation more acutely. Thirty-four percent of respondents said they are facing “financial distress” heading into the holiday season.
The businesses are feeling the pressures as well.
Ninety-one percent of merchants said they expect business costs to be higher this holiday season, with 34.7% increasing the expense of delivery and another 26.2% extending delivery time frames in response. Another 10.1% are eliminating free returns, a particularly troublesome cutback for consumers purchasing apparel, which is returned at a much higher rate than other items.
“Consumers are concerned, budgets are under pressure, and households are intending to cut back this year,” said Richard Lim, CEO of Retail Economics. “We believe successful retailers will be those who double down on their value proposition and who use data-led marketing to sensitively communicate festive joy during these difficult times.”
Merchants of all sizes are expecting order volumes to rise this year, with 27% of small, 13% of medium and 11% of large companies expecting volume increases of 10% or more.
When it came to retail segments expected to be hit hardest, again the consumers and merchants differ.
Consumers expect to cut back on apparel (26%), electronics (22.3%), toys (20.9%) and home-related goods (19.8%). Whereas merchants expect order volume increases in most categories, with 43.5% anticipating rises in electronics and another 44.4% expecting volumes to be the same as 2021, for instance.
“Based on this research, consumer behaviors will vary this holiday season based on personal financial security,” the report said. “For instance, less-affluent shoppers show a propensity to shop more in physical locations within apparel and electronics due to money-saving objectives. This data also reveals a potential mismatch between merchants’ expectations for sales performances and consumer sentiments toward spending. This is likely to dampen holiday spending across the eight international markets included in this study.”