Consumers Deal Hunt as Retailers Focus on Promotion Strategy
Value will trump all this holiday season, including brand loyalty.
U.S. consumers are focused on finding the best deals rather than prioritizing experiences, brand loyalty or convenience, according to the 13th edition of the EY Future Consumer Index (FCI). It found that inflation and high interest rates continue to impact U.S. consumers’ wallets as they head into the holiday season.
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“Cost-strained consumers want to know they are getting a deal, or they simply won’t prioritize a purchase,” Kathy Gramling, EY Americas Consumer Industry Markets Leader, said. “Traditionally, brands and retailers have turned to big moments like Black Friday and Cyber Monday to drive holiday demand, but we’ve seen that many consumers are trying to manage their budgets and have been preparing and shopping sales all year round.”
Data points from the study show that 39 percent of consumers expect to spend less this holiday season, with 81 percent of U.S. consumers planning to buy fewer items across categories to save a buck. Forty-six percent said they’re only purchasing essentials, while 48 percent said they are shopping equally online and in-store for seasonal shopping and sales events. Forty-two percent said they plan to rely mostly on online for their shopping needs. In addition, 67 percent see private labels as a viable alternative to spending on higher-priced national brands.
Earlier this month, the U.S. Travel Association disclosed a summary of its latest economic, consumer and travel indicators. While total travel spending was $104 billion in September, spending growth slowed to 0.8 percent above last year’s levels, and was up 3.5 percent year-to-date. And while air travel demand was up 10 percent in September from year-ago levels, it also slowed slightly from June and July.
The FCI study also found that 67 percent of respondents see store-owned brands as an affordable option to save money. “Sixty-nine percent note that private labels satisfy their needs just as well as brands, with 57 percent claiming that private labels are increasingly better-quality products,” the EY survey found. “We are seeing a major shift away from brand loyalty, as consumers continue to re-evaluate their spending throughout the year.”
Isaac Krakovsky, EY Americas Retail Leader, said there’s an opportunity for retailers to leverage new technology, such as AI, to enhance consumers’ shopping experience both in-store and online. “Through AI, retailers can better anticipate customer needs, and orchestrate the right conversations to create personalized assortments, experiences and offers,” he said.
FCI data shows “moderate” or “complete” trust in AI-generated tools and content. It’s highest for product purchase reminders at 59 percent, followed by tailored promotions and deals at 58 percent. The use of augmented reality at 55 percent and personally customized recommendations at 53 percent rounded out the top four spots.
As for the hunt for deals, a Multichannel Marketing Report 2023 from DataFeedWatch (DFW) by cart.com—updated Nov. 6—showed that the e-commerce sector with the highest product shortages at nearly 39 percent is sporting goods. Furniture, at 48.5 percent, was the top ranked category with the highest average number of items on discount. Second was food, beverages and tobacco at 41 percent. Rounding out the top three was apparel and accessories at nearly 35.7 percent. Electronics offered the biggest average discount at 41.3 percent, followed by media at 38.7 percent and apparel at 38.4 percent.
The report also found that the average number of ad platforms used across categories in general declined in 2023 from 2022. Fashion had an average presence of 2.9 channels, down from 3.1 a year ago. The top two channels are Facebook in the top spot, followed by Google Shopping. Rounding out the top three is “custom channels,” representing niche, local platforms/channels. “Apparel retailers are more prone to invest in proven sales platforms,” the report concluded. Other platforms used in the fashion sector include Pinterest, Microsoft Ads, Criteo, Awin, Amazon, TikTok and Google Search Ads.
The DFW analysis found that retailers are being strategic with what type of products they’re giving higher value discounts to and which ones they are waiting to discount for the big sales events, such as Black Friday and Cyber Monday. The data suggest that e-commerce retailers will face fierce competition as competitors continue to adjust their discount strategies to maximize customer engagement and sales.
“Retailers of specific product categories are being strategic when deciding when to discount products and to what degree,” Jacques van der Wilt, general manager at Feed Marketing by Cart.com, said. “The largest retailers have scaled back significantly on their discount values in Q4 of 2023, while mid-size retailers have put more of an emphasis on end-of-year sales.”
