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Inflation has touched every corner of our economy this year with a surge in gas prices, higher interest rates, and widespread food shortages. As a result, consumers are modifying their spending habits and practices, especially when it comes to retail.
Higher prices across the board can deter potential consumers from buying from their usual stores. Recent studies have shown that 76% of buyers are spending less money. Entertainment and clothing are the main areas where consumers are cutting costs, prioritizing more essential needs. Businesses are less likely to be on the chopping block if they provide an irreplaceable value or experience to their customers.
Compared to the first quarter of 2021, consumers placed 12% fewer orders globally in this year’s first quarter. According to Salesforce, due to the rise in prices, 51% of buyers intend to buy fewer holiday gifts this season. As shoppers try to stretch every dollar, retailers should consider offering holiday deals and specials. This way consumers feel like they’re getting more bang for their buck.
Even without gift shopping, the holiday season can be a stressful time of year. Many shoppers are trying to minimize their holiday stress by completing their holiday shopping early. According to research done by Salesforce, 42% of the world’s shoppers plan on buying holiday gifts earlier than usual. 37% of American shoppers plan on starting the holiday shopping season earlier this year. To get ahead of this trend business owners should have their holiday items ready as soon possible.
Despite the rise in online shopping, American buyers have kept their steadfast love of in-person shopping. One of the main reasons U.S. consumers are still headed to brick-and-mortar stores is because they still greatly enjoy shopping in-person over buying online. In person stores now influence 60% of online orders. If mom and pop shops still offer customers a physical opportunity to interact with their goods, they’ll still have skin in the holiday game.
Salesforce research shows that half of all consumers will switch to new brands this holiday season due to an increase in prices. So, an estimated 2.5 billion shoppers could swap their usual brand for a cheaper name brand competitor or a generic brand to save money. The best way business owners can counteract this trend is by emphasizing the value their brand gives consumers. If shoppers are satisfied with a brand’s product, they are less likely to jump ship to another brand, especially if it’s of lower quality.
On top of these consumer behavioral changes caused by inflation, retailers have other struggles they must expect this holiday season. Labor costs have increased significantly. These costs are expected to grow this winter. Salesforce predicts workers may face a possible 200% surge in costs to work such as gas, meals, and clothing adding more pressure to the retail industry. Adding to these challenges, many companies overbought inventory in 2021 and now have a surplus they must get rid of.
Although inflation has caused many challenges for the retail industry, there are solutions to help overcome these obstacles. Prioritizing customer satisfaction, both online and in-store, is vital. If businesses can maintain and increase positive shopping experiences, they are more likely to retain customer loyalty. A loyal and satisfied customer is much more likely to return to a retailer regardless of costs. It’s also important that retailers impress first-time shoppers with a positive experience to grow their consumer base.
Contact Elavon to learn more about how we can help your retail business with a variety of expert tools and support this holiday season.