American consumers are having to become savvier about how they spend their hard-earned dollars this fall. Faced with inflation, supply shortages, and other economic headwinds, shoppers are still willing to spend — in fact, U.S. consumers have $3.3 trillion more in savings now than they did in 2019, according to a report from McKinsey — but they’re being conservative about prices.
While most shoppers are not planning to drastically change their buying plans, new research from YouGov and The Trade Desk suggests that they are increasingly looking for value and being more strategic about what they’re buying. According to the survey, 66 percent of Americans are planning to purchase non-luxury apparel and shoes during the holidays, the highest commitment to any retail category. Brands must keep up with these consumer spending patterns, says J. Walker Smith, consulting division knowledge leader at Kantar, a data analytics and consulting company.
“Consumers are talking about value, but what they’re really talking about is that they’re prioritizing harder than ever,” Smith tells The Current. “Brands have to figure out ways in which they can stay in this priority, value-added bucket.”
Many advertisers followed those cues by increasing their ad spend. In fact, spend rose by 9 percent during the first half of 2021 to the first half of 2022. The rise in ad spend is even more dramatic in retail, which saw an 18 percent increase, according to advertising analytics firm Standard Media Index (SMI).
“Advertisers want to try and take advantage of this moment,” Smith says. “And as we head into the holiday season, they’re anticipating there is a residual of money out there that they want to try and capture.”
For both consumers and advertisers, these shifts have been accelerated by the COVID-19 pandemic. The pandemic further pushed many people to look for value and try new brands, according to Matt Kleinschmit, founder and CEO at full-service research consultancy Reach3 Insights, which led him to label the contemporary shopper as “very resilient and flexible.”
Today, consumers are better able to navigate through inflationary conditions, adds Kleinschmit. “The American shopper is probably better prepared for this environment than ever,” he tells The Current.
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Meanwhile, online shopping has surged following the pandemic, especially among millennials. Research from GWI shows 59 percent of millennials prefer to shop online versus in store, 10 percent higher than the national average.
And advertisers have followed this trend. Online retailers’ ad spend is up 25 percent in the first half of 2022, compared to the first half of 2021, according to SMI. Apparel and accessories are up a staggering 42 percent during the same time period.
“Marketers are using digital advertising channels to more specifically target end consumers in a much more frequent fashion, so that their brands stay top of mind in a culturally relevant way for those shoppers,” Kleinschmit says. “When they’re ready to buy, their brands are top of mind when they’re ready to pull the trigger.”
Many advertisers also realize they must be anchors of stability to keep market share and stay at the top of shoppers’ minds.
“First and foremost, advertisers will be following the money,” Smith says. “Secondarily, they’re saying, ‘Let’s make sure that we don’t lose any momentum during all this by disappearing. Let’s stay in front of people so that we can come through this, hopefully sometime next year, in a strong position for growth after that.’”