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04/15/2022

Global digital sales make historic drop in Q1 2022

Dan Berthiaume
Senior Editor, Technology
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Online consumer spending started the year with a sputter.

Global online consumer spending took a dive during the first quarter of 2022.

Global digital sales declined 3% in the first quarter of 2022 compared to the same quarter a year earlier, according to the Salesforce Q1 Shopping Index. It was the first recorded drop in the nine-year history of the index.

Salesforces cited factors including inflation (it measured an 11% increase in average U.S. selling price in March 2022), ongoing supply chain issues, and economic insecurity as negatively impacting consumer purchasing power during the quarter.

The index also marked year-over-year declines in online traffic (down 2%) and order volumes (down 12%). Salesforce now expects consumer confidence and online spending to likely level off for the remainder of the year. Global figures include steep declines in Europe’s online sales (-13%) and order volume (-17%), driven by rising fuel costs and the Ukraine conflict.

Specific data points Salesforce uncovered for the quarter include:

  • Amid prolonged supply chain pressures and delays, SKU count was down 3% in the first quarter of 2022 compared to the first quarter of 2021.
  • Product categories with the greatest inventory decreases included toys and learning (-23%) and appliances (-12%).
  • Flexible payment options such as buy now, pay later (BNPL) are growing in usage. Nine percent of global first quarter 2022 digital spend was performed using BNPL, up 20% year-over-year and up 9% since the fourth quarter of 2021.

With exponential growth in fuel prices, increasing merchandise scarcity, and a continued rise in inflation impacting global spending habits, Salesforce advises retailers that a shift in consumer optimism may drive down discretionary spending for the remainder of the year. This would require retailers to balance between stimulating demand and optimizing margin in their promotional calendars.

JungleScout confirms inflationary impact on consumers
Recent data from JungleScout also indicates that consumer spending, both online and in-store, felt the pinch of inflation in the first quarter of 2022. Nearly all consumers (72%) are spending less due to recent inflation, significantly cutting out “fun” or “impulse buys,” according to the JungleScout Q1 2022 Consumer Trends Report.

Almost four in 10 (38%) respondents are spending less overall, and more than one-third (34%) are spending less online, the highest reported figures on decreased consumer spending in at least one year. Close to half (47%) of JungleScout respondents buy from their favorite brands due to affordability, which is ranked as the leading driver of brand loyalty over quality, familiarity, and sustainability.

“Inflation has finally caught up to bullish spending, with consumers buying fewer items from fewer retailers,” said Rob Garf, VP and GM, retail at Salesforce. “This likely isn’t a temporary mindset, but instead a signal of a larger consumer behavioral shift. To address this, retailers must remove friction between physical and digital channels to attract and retain loyal shoppers.”

The Salesforce Q1 Shopping Index analyzes the activity of more than one billion shoppers across more than 61 countries powered by the Salesforce Commerce Cloud. Several factors are subsequently applied to extrapolate projections and actuals for the broader retail industry.