Essential for pharmaceutical companies
Keeping up with the constantly changing consumer preferences and behavior has always been a challenging task for businesses, but even more so in recent years as the forces driving these transformations have multiplied. The phenomenon is notable all over the world and the U.S. markets make no exception.
Despite businesses and analysts’ best efforts at getting into consumers’ minds and predicting their behavior and what new trends might occur to help them stay ahead of the curve, the U.S. consumer has proved to be an elusive entity, defying expectations time and time again. In the early months of the Covid pandemic, with the effects of the recession still fresh, U.S. shoppers rushed to fill their (mostly virtual) carts and spend big money on all sorts of high-priced products. This caused asset prices to surge and markets to experience unexpected highs in a year that was dominated by fear and misery. It was a rather chilling spectacle to see financial markets thrive while the world’s health systems were in shambles and the future looked so uncertain.
After the World Health Organization (WHO) declared an end to the global health crisis, an era of revenge spending took over as people were eager to make up for the lost time and do all the things they weren’t able to do during the lockdown. These trends prove the point that no amount of research and investigation can accurately predict how consumers are going to react, given their intricate motivations and ever-changing circumstances.
Now that we’ve left those dark times behind and the pandemic is slowly fading into oblivion, shopping habits in the U.S. are once again shifting, but this time there’s caution and concern in the air.
U.S. retailers provide insights into shifting consumer behavior
One might find it hard to believe that the shopping frenzy and enthusiasm in the U.S. is starting to die down since the economy is in a better place today than it was a few years back. However, financial reports from major retailers like Macy’s, Kohl’s, Foot Locker and Nordstrom clearly indicate that U.S. consumers are not as keen on spending their money, and this reluctance could amplify in the near future.
So, what could be the factors prompting shoppers to limit their expenses? Long-term inflation seems to be the most significant contributor to this frugal approach, alongside dwindling savings accounts. This is making consumers rethink their spending habits and focus more on purchasing products that cover their basic needs instead of splurging on any item that crosses their path.
Overall, spending has remained strong so far this year, so the situation doesn’t look so bleak for retailers just yet. In fact, July sales exceeded expectations, fueled by a strengthening labor market and wage increases. But even retailers whose income remained within the projected values started to see signs of change in consumer behavior, indicating increasing economic pressure for low-income Americans.
Companies offering low-priced goods usually register higher revenues in times of financial instability as consumers start to tame their shopping impulses and turn their attention to more cost-effective products in an attempt to stretch their budgets. That’s exactly what’s happening at the moment. Discount variety stores like Dollar Tree, TJX, Walmart and others have seen their bottom lines increase as consumers are no longer throwing their cash away recklessly but looking into discounts and sales to check basic goods off their shopping lists.
By comparison, regular shops and high-end retailers all across the U.S. are not seeing the same foot traffic numbers as discount department stores. Macy’s, one of the oldest and largest department store chains in the U.S., has reported a notable drop in sales of discretionary goods. This goes to prove that consumers are clearly favoring the latter.
Another aspect that points in the direction of lower purchasing power is the increased rate of missed credit card payments and shoplifting. Macy’s, Kohl’s and Nordstrom have all been experiencing higher-than-normal credit card delinquencies. It’s normal for these types of phenomena to surge when people are struggling to make ends meet, which is precisely what analysts think is happening.
Other notable shifts that retailers should keep an eye on
Whether or not retailers should worry about a major drop in sales in the months to come remains to be seen. For now, the data only suggests that consumers are less inclined to spend their money rashly and are more mindful when they add products to the cart.
However, there are other changes in consumer behavior that retailers should take note of if they don’t want to be caught off guard. For starters, recent research suggests there’s an increased interest in purchasing products via social media apps. With social media becoming an integral part of people’s daily lives, it’s not in the least surprising that customers are starting to use these channels to do their shopping.
Support for small businesses is also on the rise as a notable trend, or better said a continuation of a trend that started during the pandemic years. Consumers are looking to support small local brands due to the numerous benefits they provide, including product diversity, a more personalized shopping experience and the feeling of bringing a contribution to the local community.
Another trend that started to take shape a few years back and continues to pick up pace is consumers’ growing interest in shopping from companies that support the causes they’re interested in such as sustainability and environmental protection. Therefore, gaining insights into customers’ needs is absolutely crucial for retailers, but it’s just as essential for pharmaceutical companies and other enterprises operating in niche industries.
Final thoughts
Keeping up with consumer behavior trends is crucial for any business, no matter the size or industry. At present, all signs point towards a period of transformation for the U.S. markets with consumers taking more time before making purchase decisions and being more selective about the products they choose to buy. Given the economic context of the moment, it’s likely that this trend will continue in the following months, keeping retailers on their toes.
