What’s the impact: Inflation (with average selling price up 11% in the US in March), supply chain issues and economic insecurity have all impacted consumer purchasing power. This has led to a dip in online spending after several quarters of unprecedented growth.
Salesforce data indicates that with YoY global spend down 3%, traffic down 2%, and order volumes down 12%, consumer confidence and online spending will likely level off for the remainder of the year. Notably, Europe’s online sales (-13%) and order volume (-17%) are down significantly as people face surging fuel costs and a war on their continent.
The Salesforce perspective: “Inflation has finally caught up to bullish spending, with consumers buying fewer items from fewer retailers,” said Rob Garf, vice president and general manager of retail at Salesforce. “This likely isn’t a temporary mindset, but instead a signal of a larger consumer behavioural shift. To address this, retailers must remove friction between physical and digital channels to attract and retain loyal shoppers.”
Q1 by the numbers
With exponential growth in fuel prices, increasing merchandise scarcity, and a continued rise in inflation impacting global spending habits, a major shift in consumer optimism may soon be approaching. This could drive down discretionary spending for the remainder of the year – forcing retailers to delicately balance stimulating demand and optimising margin in their promotional calendars.