Consumers’ confidence to spend greater than retailers think, says report
Senior retail leaders are more pessimistic about consumers’ confidence to spend in the face of inflation than consumers themselves indicate.
Over three-quarters (77%) of retail executives believe consumers are moderately to extremely concerned about recession, while 57% of consumers expressed the same concern in a report conducted by First Insight in partnership with WWD. The retail executives also think that consumers are cutting back more significantly than consumers say they are across multiple categories, potentially creating a more promotionally-driven —and therefore less profitable — holiday season than may be warranted.
The disconnect between retail leaders and consumers is most apparent within the apparel, footwear and accessories categories, according to the report. For example, 66% of retailers think that consumers will cut back on jewelry, with only 32% of consumers in agreement.
Similarly, 57% of retail executives believe spending on handbags will be reduced, aligned with just 29% of consumers. And 45% of the executives assume consumers will spend less for formal or more dressy apparel, while only 20% of consumers agree.
The report also found that retail leaders’ top three priorities for 2023 are growth strategies, customer acquisition and retention, and store operations. Although consumers have been returning to in-person shopping, 49% of retail executives will spend more of their budget on e-commerce technology investments and less on in-store enhancements.
Increasing prices, reducing inventory and moving excess inventory are the top three ways retailers say they are combatting inflation and increased costs.
Other highlights from the report are below.
• Retail executives largely believe that rising prices have changed consumers’ shopping habits to focus more on promotions, sales and discounts. But that presumption is not supported by the data, the report found, noting that 58% of retail executives think that consumers are shopping more for deals, but this is true for only 40% of consumers.
• Forty-three percent of retailers think consumers are buying less overall, yet only 29% of consumers admit that this is the case.
• Forty percent of retail executives think consumers are using more coupons, compared to only 24% of consumers.
• Consumers’ top three inflation pain points are grocery prices, gasoline prices, and the high cost of dining out. Retail executives believe the three categories most vexing to consumers are high prices at the pump, grocery prices, and rent or mortgage payments.
•Sixty percent of retail executives believe Voice of Customer and assortment/pricing predictive analytics software is important or very important to their business.
“Our data clearly indicate that Executive Decision Makers are not in sync with the consumers they serve, most likely due to a lack of information,” said First Insight CEO Greg Petro. “The Retail Executives’ perspectives demonstrate a risk-averse approach leading to a suboptimal outcome. In this case, I hope they are not getting their ‘head over their skis’ in anticipating a situation which may never transpire.”
Download the report to see all the findings here.