How to win over pessimistic consumers
A new survey reveals negative consumer sentiment toward the economy, along with some potential strategies to compete in this environment.
According to the new "Consumer Spend Report" from cash back app Upside, despite a cooling inflation rate, 56% of surveyed consumers perceive the economy as worse than it was in 2023. Nine-in-10 (89%) respondents are relying on coupons or promotions to control spending, with younger consumers aged 18-24 and larger households expressing the most pessimism with their own financial situation.
In addition, 81% of respondents said they are comparing grocery prices across stores, resulting in smaller purchases from a wider selection of retailers. According to Upside analysis, this has resulted in a 3% decrease in inflation-adjusted revenue per grocery transaction in June 2024, year-over-year and a 7% decline compared to June 2022.
Revenues are tracking downward at a sharper pace in the quick service restaurant and convenience verticals. Upside analysis shows that in the QSR space, the average daily revenue per restaurant, adjusted for inflation, was about 6% lower in June 2024 than it was one year prior and about 10% lower than in June 2022.
Adjusting for inflation, convenience store revenue was down 12% year-over-year in January 2024, according to Upside. Compared to three years prior, it was down 19%. Upside attributes revenue declines at convenience stores largely to decreases in foot traffic.
Loyalty, pricing offer hope
This consumer environment poses major challenges to retailers. Upside identified a couple of possible areas where retailers could make efforts to drive sales. One is loyalty programs.
Upside data indicates that more than 90% of consumers consider loyalty rewards when choosing where to shop and 72% of consumers agree it is important to earn loyalty rewards or cash back at a given retailer.
However, since a majority of consumers belong to multiple loyalty programs and shop for different offers at different retailers, Upside advises retailers to focus loyalty efforts on the 22% of members who are "super users" of a specific program and account for roughly half of all of a typical retailer’s overall sales (not just loyalty sales).
In terms of pricing, Upside advises that a majority of consumers disapprove of "dynamic pricing" strategies that adjust prices based on time of day or demand levels for specific product. However, 45% of surveyed consumers said prefer to shop retailers that offer tailored discounts, making this a viable strategy to attract customers and convert sales.
[READ MORE: Survey: Discounts help consumers discover, stay loyal to brands]
"This inaugural Spend Report sheds light on important shifts in consumer behavior — the most significant being the rise of the uncommitted customer," said Upside co-founder and CEO Alex Kinnier. "When we think about our own buying behavior, we’ll understand 'the uncommitted customer' is actually how most of us predominantly shop today and the resulting impact on the marketplace."
Upside research included the analysis of 1.1 billion transactions from over 8,000 retailers and two national surveys of 3,700 U.S. consumers. The report also incorporated findings from more than 3,400 consumer interviews.
