August’s overall retail sales in the U.S. showed continuing resilience, with actual growth of 0.6% after economists polled by Reuters had predicted just 0.2% growth. However, the overall data masks some key data points that may be of concern to retailers, including data showing declines in discretionary categories such as furniture (-1.0%) and sporting goods (-1.6%). After posting robust growth for three straight months, including a strong July resulting from Amazon’s Prime Day sale and all the other retailers who offered their own “versions” of Prime Day, sales still fell short in August.
However, consumers are still spending, the labor market remains tight, and the Adobe Digital Price Index recently posted an overall 40-month low, an encouraging sign for online shoppers: Adobe reported that online prices fell for 11 out of 18 tracked product categories on an annual basis. Another positive sign: the Fed did not raise rates again in September, indicating inflation might be slowing further. And with less inflation, consumers will regain some spending power.
But there are possible headwinds on the horizon. If the job market begins to tighten, that would mean wage growth will too. And when the student loan repayment moratorium ends, that means even less disposable income for consumers to spend on discretionary goods and services. Plus, people are continuing to whittle down excess savings accrued during the pandemic, further putting a damper on consumer spending enthusiasm.
Bright spots do exist in an otherwise slightly gloomy and uncertain environment: Walmart posted strong Q2 results and raised their full-year forecast. As Art Hogan, Chief Market Strategist at B Riley Wealth, noted in Reuters, “The consumer is still alive and well, but clearly more price conscious this year than last.”
That quote can be a guiding mantra for retailers heading into the Q4 shopping season. Indeed, the notion of consumers finding the best deal and actively seeking out ways to save money is a repeating theme this year, as inflation (though slowing) persists — the CPI in August was up another 3.7% year-over-year.
The Price-Conscious Consumer
The greater propensity for bargain hunting was reflected even earlier this year with results from a Wildfire consumer survey. First, it found 74% of respondents had increased their money-saving methods for online shopping last year, such as using coupons or joining loyalty programs that delivered discounts.
Almost all (91%) of respondents reported shopping during promotional sales to save money, and 45% of the respondents expected to shop during sales more in 2023. The popularity of Prime Day, and the fact that it has effectively become an ecommerce event of its own, accentuates how saving money is a huge motivator for consumers.
Retailer loyalty programs are also a big factor in helping consumers save money: 84% percent of respondents reported getting discounts through retailers’ loyalty programs in 2022, and nearly half of those respondents indicated that they expect to join more programs in 2023.
Finally, smart shoppers employ technology to help them shop online and save, notably by using tools like browser extensions to identify coupons and earn cashback rewards. The survey determined that 72% of online shoppers saved money by earning shopping rewards via browser extensions, and furthermore that half of those expect to utilize browser-based shopping assistants more in 2023.
How Retailers can Respond
Retailers that balk at the thought of running extensive discounts need to balance the need to provide affordable products to their customers without cutting too deeply into their margins. It’s clear that most of today’s consumers aren’t willing to pay full price, but that doesn’t mean resorting to huge discounts across the board.
Instead, given the increased propensity of today’s consumers to leverage loyalty programs and cashback rewards for lower prices, retailers can selectively offer lower prices to loyal, tech-savvy shoppers. Ulta noted that 95% of its sales came from loyalty program members! Retailers should lean into their loyalty programs and make them accessible to encourage more customers to join, and they should definitely provide perks that make their programs more appealing, such as offering easy-to-earn and easy-to-redeem rewards.
Increased loyalty program participation has the added benefit of collecting additional shopper behavior data, contributing to a brand’s ability to create targeted and arguably more effective offers based on past purchases.
Retailers should also take advantage of their affiliate programs. For one, their guaranteed-sale marketing cost model, in which referring websites earn a percentage of actual sales (e.g. a commission) is a benefit and allows brands to control costs by adjusting the commissions they pay referrers. Affiliate publishers that distribute retailer coupon codes are vital for helping retailers expose these offers to a larger audience outside of their core loyalty program members, regular shoppers and discount-hungry consumers.
Affiliate networks typically power third-party cashback rewards programs such as Rakuten and Capital One Shopping. Given the increasing popularity of cashback offers, retailers should consider leveraging these programs to drive sales and customer engagement this holiday season.
In addition to approving publishers into their affiliate programs to ensure their brand appears to customers, it’s critical for retailers to make sure the data about their store and their offers are up to date in the affiliate networks they work with. This will maximize their earning potential for the busy shopping season. Because these publishers work with data provided through affiliate networks, if the details don’t match the reality of what’s available, retailers risk being excluded from promotions, especially those driven by algorithms and third-party platforms.
The price-conscious consumer is clearly here to stay, at least for the foreseeable future. Retailers that embrace loyalty programs, affiliate partnerships and targeted promotions will be well-positioned to delight deal-seeking shoppers this holiday season and beyond.
Michelle Wood is VP of Merchant Development at Wildfire Systems. She is a tenacious sales and marketing leader with a passion for building and leading successful teams that win. With over 16 years of experience in digital media, affiliate marketing and influencer media sales, Wood has worked with many of the world’s most notable enterprise ecommerce companies to acquire new and loyal customers and exceed revenue targets with positive ROI. Through collaboration, leadership and creativity, Wood has been known for developing and executing successful sales strategies that align with business objectives and revenue goals for high growth and scaling technology and ecommerce companies.