This article was based on the interview with Joe Shasteen of RetailNext by Greg Kihlström, AI and MarTech keynote speaker for The Agile Brand with Greg Kihlström podcast. Listen to the original episode here:
The landscape of consumer behavior is continually evolving, shaped by various factors, including economic conditions, technological advancements, and changing societal norms. One of the most significant influences on consumer spending in recent years has been inflation, which has prompted a shift toward what can be termed “intentional spending.” This concept is particularly evident in the context of retail events like Black Friday, where shoppers are increasingly making calculated decisions about their purchases rather than succumbing to impulsive buying behaviors.
Recent discussions in industry analyses reveal that the trends observed during Black Friday reflect a broader pattern of intentional spending driven by the pressures of inflation. As inflation rates have risen, consumers have become more discerning about their purchases, opting for fewer but higher-priced items. This shift is evidenced by a decline in units per transaction (UPT) alongside an increase in average unit retail (AUR). The implications of this trend are profound, affecting both consumer behavior and retailer strategies.
The podcast highlights two primary factors influencing this intentional spending. First, for consumers in lower socioeconomic brackets, the rising costs of goods due to inflation have necessitated a change in purchasing habits. As prices increase, consumers find themselves constrained by their budgets, forcing them to buy fewer items. For instance, if a consumer previously had $100 to spend, the same amount now buys less due to inflated prices. This trend is not merely a reflection of consumer choice but rather a direct consequence of economic pressures that have pushed costs onto consumers.
Conversely, consumers in higher socioeconomic groups are also adjusting their spending habits, albeit in a different manner. The podcast notes a trend of “trading down,” where individuals who typically purchase high-end luxury items are now opting for more moderate luxury brands. Despite this shift, these consumers maintain their willingness to spend on premium products, albeit in reduced quantities. This behavior indicates a strategic approach to spending, where consumers still prioritize quality but are more selective about the brands they choose, reflecting a nuanced understanding of value in the context of inflation.
The impact of inflation on consumer behavior is further underscored by the evolving strategies employed by retailers. In response to changing consumer preferences, retailers are adapting their offerings and marketing strategies to cater to this new landscape of intentional spending. The integration of price match guarantees and promotional deals is one way retailers are attempting to entice consumers to make purchases sooner rather than waiting for last-minute holiday sales. This shift not only helps retailers maintain sales volume but also aligns with the intentional spending behaviors of consumers who are now more focused on securing the best deals early in the shopping season.
As Black Friday evolves from a chaotic sales event into a more strategic shopping experience, the implications for retailers are significant. The decline in foot traffic, coupled with an increase in conversion rates, signals a shift toward a more deliberate approach to shopping. Consumers are no longer just browsing; they are making informed decisions based on a combination of necessity and value. This evolution necessitates that retailers remain agile and responsive to the changing needs of their customers, adapting their strategies to foster an omnichannel shopping environment that accommodates both online and offline preferences.
The interplay between intentional spending and inflation is reshaping the retail landscape. As consumers become more strategic in their purchasing behaviors, influenced by economic realities, retailers must adapt to these changes. The insights gleaned from industry experts provide valuable guidance in navigating this dynamic market. As we look ahead to future holiday seasons, it is clear that the evolution of Black Friday and consumer spending will continue to shape retail strategies, requiring brands to remain attuned to the needs and preferences of their customers in an ever-changing economic environment.
