Talk of Recession and Rising Inflation
This week we are looking at the elephant in the…well, the elephant in the next room over: Recession.
We will get some context from what’s going on in the marketing and media, and then hear what some customers are saying about all of it.
There is not always a silver lining when it comes to a topic like this, but there are angles that businesses can take to better navigate a downturn.
Business Perspectives:
Starting off with an excerpt from Barron’s
Consumers sense a recession is right around the corner and are starting to behave like it. They are becoming unhappier by the minute and are pinching pennies at the cash register.
This was from July. So this line isn’t new, but well nurtured by this point.
According to Axios, we are also trading down from Target and Walmart to discount stores:
Dollar General's store-on-every-corner strategy is accelerating as consumers seek relief from inflation.
Why it matters: Price increases are prompting shoppers to trade down to less expensive products or stay closer to home — and that plays right into the hands of discount retailers like the nation's largest dollar-store chain.
Driving the news: Dollar General announced Thursday that it'll open another 1,050 stores in 2023, after posting an 11% sales increase in the third quarter compared with last year, and an 8% jump in net income.
"The fact the business model is firing on all cylinders has given Dollar General the confidence to continue its rapid pace of physical expansion," GlobalData managing director Neil Saunders wrote.
Dollar General’s growth is fueled by a weakened economy?
That people are trading down to save money points indicates the middle class is slipping into financial instability.
Double-plus ungood.
On the other hand, we got the opposite signal from Harley Finkelstein, President of Shopify this week:
This BFCM, Shopify merchants shattered records.
They did $7.5 billion in sales on Shopify in just 4 days, and a historic 52 million consumers purchased from a Shopify merchant.
Sales peaked at $3.5 million per minute on Black Friday at 12:01 pm EST and the average cart price hit $102.10 USD Globally for the weekend.
Harley makes it sound good, but…
It was reported on the Marketplace podcast that most of the sales during the BFCM shopping bonanza came from household with over 100k in yearly income.
Are these warning signals for what is ahead?
Customer Perspectives:
With inflation, people have less buying power, as Meghan (a real hero) explained.
With inflation I needed to not necessarily spend less on food, but spend the same amount as I had been spending, which required buying less overall food as prices rose.
And I thought it would result in a lot more packaged and processed foods but funny enough I ended up eating a lot healthier because it made me more conscious of what I was purchasing, how much I was eating, and how often I ate out or ordered out.
Utterly mundane but a pleasant surprise as there is both the benefit of savings and health.
A pleasant surprise indeed. Meghan got creative in the kitchen and ended up with a more healthy diet.
During lockdowns, people practiced “retail therapy.” People often reported that in the end they realized that over-buying was wasteful.
Becca (who is on the podcast) points to changes that are deep than just saving money.
I think consumers especially are digging deeper and trying to find ways that we can shift our demand from these throw-away plastics and disposable culture to sustainability and community.
There is more nuance to the change in consumer behavior than what media outlets let on. Which is important to keep in mind, because now is not the time to be pessimistic.
Pessimism is the enemy of creativity, and that is exactly what you need to find the light at the end of the tunnel.
What we are seeing today is not a reduction in spending, but a prioritization in spending.
What perspectives are you seeing in your industry or from your customers, and what actions should we take?
It's interesting, she spends the same amount cause inflation, but ends up eating healthier. Unexpected.