“How do consumers feel about the current economic environment?”
The short answer is ... not great. On the heels of 40-year record inflation — 9.1% in June — the Consumer Confidence Index fell to 95.7 in July.1 This index rates consumer attitudes related to the economy, as well as their purchasing plans. Similarly, the Present Situation and Expectations Index suggests consumers weren’t positive about their short-term financial prospects in July.2
Concerned about inflation, consumers are changing buying behavior.
People are still spending, and that's good news for the economy. But 79% are concerned about inflation.3 Given the year-over-year price increases of everyday essentials like housing (19.7%)4 and rent (26.5% for a two bedroom),5 energy (41.6%),6 fuel (63% for regular unleaded)7 and food (10.4%),8 consumers are trying to stretch their budgets further. Moody’s Analytics Senior Economist Ryan Sweet estimates the current inflation rate is costing consumers an extra $500 or more per month.9
With the skyrocketing costs of basics, price-conscious consumers are re-evaluating purchase decisions. Figure 1 illustrates how they prioritized spending and where they shopped February – March 2022.
Source: McKinsey & Company, “How U.S. Consumers are Feeling, Shopping, and Spending — and What it Means for Companies,” May 4, 2022
It makes sense that food and home are still among the highest priorities. Over the last two years, people have spent an inordinate amount of time at home – including work and school. But with medical advancements to manage the pandemic, consumers are venturing out again.
Leisure travel is back – even with high inflation.
Consumers aren’t allowing the pandemic, high fuel prices, or tight budgets to keep them at home. Travel was second only to spending for groceries in February-March, and that trend is continuing. As of August 2, TSA check-ins were up 13% from 2021, and 73% since the same time in 2020.10 During the week ending July 23, U.S. hotel occupancy was 72.8% and room revenue was up just over nine percent (9.3%) — higher than since August 2019.11 In addition, all cruise lines were set to sail in July, with more than 380 ships and 90% global fleet capacity.12
Business travel hasn’t picked up as quickly as leisure. This may be due, in part, to the success of hybrid and remote work models. Some employers also remain cautious about hosting in-person meetings.
Paying less for household and personal care goods is one way consumers hope to save.
As prices for food and other packaged goods continue to rise, some consumers are not only prioritizing spending, but also trying to cut costs. A recent Statista survey asked consumers what measures they are taking to save money on expenditures, specifically household supplies, and personal care products. Responses ranged from clipping coupons to switching brands.
Have you found yourself doing any of the following things more than usual when shopping for household supplies & personal care products recently?
Source: Statista, “Consumers’ Behavior Change Household & Personal Care Goods Shopping in the U.S. 2022,” July 4, 2022
Some big box retailers have also observed that consumers are trying fewer new products and purchasing fewer items in smaller quantities.13
Get clients to come to you with four simple tactics.
Now is the time to really know your customer – beyond just demographics. What do they typically buy? How has that changed? Even in tough times, you can attract and keep customers when you align your business strategies with buyer behavior.
Know how and where consumers shop. It's common for consumers to bounce from mobile apps to websites, to physical stores before they ever make a purchase. And in between, they're on social media asking friends for recommendations. So, it’s important to know the spaces your customers and prospects frequent and create a connected, omnichannel experience that keeps your business top of mind.
Offer discounts and incentives. During high inflation everyone's looking for a good deal, and brand loyalty is softening. If you don’t usually offer print and/or digital coupons, or special pricing to do so now could tip the scales in your favor.
Accept a variety of payment options. Consumers now have multiple payment methods at their disposal, including digital wallets, cryptocurrency, peer-to-peer payment apps, and buy now, pay later. Be sure you can accommodate any payment method and channel they choose whether online, mobile, contactless, or unattended options. An all-in-one payment gateway with consolidated channel management, supported by your bank or merchant services provider, can help easily integrate multiple payment methods for your business.
Build positive word of mouth. Consumers take review scores very seriously – 93% use them to make purchase decisions.14 Deliver a positive customer experience, then encourage patrons to leave reviews to share with others. Remember to also carefully monitor your business’ scores and reply to feedback in a timely, professional manner. An integrated customer engagement solution can provide the customer analytics to support best practices and simplify social channel monitoring.
Consumers are making the most of available funds. Be sure you are aware of the buying behaviors that will lead them to your business. For a complimentary review to identify efficiencies you might be missing, simply complete a short form and a Synovus Merchant Services Consultant will contact you with details. You can also talk to your Synovus Representative or visit a local branch to learn more.
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
The Conference Board, “US Consumer Confidence,” July 26, 2022
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