Is Inflation Really Cooling Off? In the Current Uncertain Economy, Smart Consumers (and Merchants) Are Adopting These New Habits Despite recent positive news about inflation "cooling off," prices remain high, and consumers still have trepidation about spending money. More than ever, they are seeking discounts and other money-saving tactics. Here's how businesses selling online can respond.
By Jordan Glazier Edited by Micah Zimmerman
Opinions expressed by Entrepreneur contributors are their own.
The lingering economic uncertainty that started with the pandemic contributed to significant changes in shopping patterns over the past several years. Consumers now more than ever seek money-saving incentives such as discounts, shopping rewards (cashback) and digital coupons when shopping online. Not only have U.S. consumers stepped up their attitudes and expectations about rewards and savings, but it is also testing the resolve of online businesses to meet these new expectations and provide these online incentives.
JPMorgan's April 2023 "Cost of Living" survey found that 75% of U.S. consumers expect to reduce non-essential spending by 6% or more this year. Despite recent positive news about the country's low unemployment rate and inflation "cooling off" slightly, interest rates and prices remain high leading to consumer uncertainty.
Economic reports only reinforce our findings that retailers must work harder to capture shoppers' preference for savings in light of higher prices and economic uncertainty. A 2023 survey found the majority (74%) of respondents reported more interest than ever in earning cashback rewards for shopping due to inflation and the shifting economy, and 73% are interested in using online coupons and discounts.
Even more interesting is that these habits are becoming ingrained: 87% of shoppers expect to stick with their new shopping habits that take advantage of money-saving opportunities.
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How shopping behavior is changing
In 2020, a drastic shift to online shopping was originally spurred by the global pandemic. That trend remains, with 35% of survey respondents claiming they expect to spend more online than in person in 2023. Only 15% of purchasers expect to check out more at brick-and-mortar retailers this year.
Consumers nowadays are also always in search mode when it comes to finding ways to save. The Wildfire survey found 74% of respondents had increased their money-saving methods for online shopping last year.
A vast majority of respondents (91%) reported shopping during promotional periods and sales to save money. Furthermore, 53% of those reported that they shopped during sales more in 2022 vs. 2021 - and 45% of the respondents expected to shop during sales more in 2023. Only 12% of shoppers expect to buy full-price items more in 2023 than in 2022.
The survey also revealed that more consumers are showing a preference for discount retailers: 70% of consumers reported shopping at discount retailers more in 2022, with 40% of these expecting to shop with discounters even more in 2023. Another facet of this discount-shopping mentality is the tendency to buy generic or store-brand products rather than higher-priced name-brand items. For example, 79% of respondents agreed they purchased generic and discount products rather than brand-name products last year.
The survey also showed the value of loyalty programs and their role in helping consumers save money. Eighty-four percent of respondents reported getting discounts through retailers' loyalty programs in 2022. Price-conscious loyalty program members expect to participate in even more loyalty programs to save money. Of the consumers who reported belonging to retailer loyalty programs in 2022, 38% indicated that they expect to join more of them in 2023.
Finally, today's consumer is very comfortable with technology and leveraging it to drive value. Smart online shoppers have discovered digital tactics and technology to help them shop and save. One way commonly used technology helps consumers to save money is by using browser extensions. The Wildfire survey reported 72% of online shoppers had earned shopping rewards through browser extensions, and 50% of those expect to take advantage of browser-based shopping assistants more in 2023.
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Improving online merchant appeal
Retailers and merchants that offer rewards programs and savings for online purchases, especially in the current economy, will increase their appeal to savings-hungry shoppers while also improving their own bottom line.
Based on the Wildfire survey, online businesses can benefit from improvements to several key performance metrics, including:
- Retailer preference: 58% of consumers are more likely to shop with a retailer offering online coupons, and nearly half of them are more likely to complete an online purchase when cashback rewards are available.
- Units per transaction: 33% are likely to purchase more items when they can earn cashback rewards
- Average order value: 30% are likely to spend more money when they can earn cashback rewards.
- Conversion rate: 48% are more likely to complete a purchase when they earn cashback rewards
Then there is word-of-mouth that can travel at the speed of social media. Almost 40% are more likely to recommend a retailer to friends and family if the retailer offers cashback rewards vs. a retailer that does not.
As further evidence of the benefit to merchants, Commission Junction conducted a study that found that shoppers who use a browser extension that automatically finds and applies coupon codes at checkout generated 16% more revenue than shoppers who did not use an extension. As a bonus, the revenue generated by those connected customers was 39% higher 12 months after they interacted with the extension compared to customers who shopped sans extension.
Capitalizing on changing consumer shopping behavior
Consumers undoubtedly plan to continue using new saving-oriented shopping behaviors. These include an affinity for discount merchants, adopting coupon and cashback rewards programs, and using browser-extension-based shopping companions.
By presenting easy-to-access shopping incentives, online merchants can meet the demands of today's value-driven consumers. Through such programs, they positively influence consumers' purchase behavior and provide some much-needed budgetary relief.
It is critical for any business selling online to engage these technically-adept customers and provide the tools and tactics to enable more online savings programs like cashback and digital coupons for online shoppers. Merchants that offer rewards programs and savings, especially now, can increase their appeal to cost-conscious shoppers while improving their own results.
