In 2024, consumers are spending more strategically than ever before, but they’re not afraid to splurge for the right incentive. According to the latest consumer research from impact.com, brands need to be more strategic to influence these budget-conscious decisions. American shoppers are adjusting their buying habits, reserving discretionary spending for sales-heavy seasons. Here are the five key insights that can help you reach more customers and secure a coveted spot on their wish lists in 2024.
1. Strategic Spending in a Budget-Conscious Environment
In 2023, American shoppers adjusted their buying habits significantly. With inflation and economic uncertainties, many consumers have become more cautious about their spending, reserving their discretionary income for specific periods when they expect substantial sales and discounts. However, this shift doesn’t mean consumers are unwilling to spend—they are simply more selective, choosing to splurge when they perceive a strong value proposition.
These new habits provide a unique opportunity for retailers. With four out of five Americans leaning towards more affordable brands and better discounts, consumers are left with more cash in their pockets, ready to spend on the right offers. Brands must focus on convincing shoppers that their products are worth the investment, especially in a climate where every purchase is scrutinized.
For lesser-known brands, partnerships offer an essential avenue to compete with household names. By collaborating with trusted partners, these brands can increase their visibility, reduce purchase risks through discount codes, and offer incentives that make their products more appealing.
To capitalize on this trend, brands must thoroughly understand changing buyer behaviors and identify the most effective strategies to tap into them. The 2023 Consumer Trend Benchmark research study by impact.com provides valuable insights into these shifts, offering data that can help brands navigate the current economic landscape.
2. Intentional Buying Takes Over Window Shopping
In 2023, consumer behavior saw a marked shift towards intentional buying. Brands experienced a 32% increase in conversion rates despite a 29% decline in clicks. This indicates that while consumers are clicking less, they are more likely to make a purchase when they do engage. Popular sale events around Mother’s Day, Father’s Day, and Easter saw fewer clicks than the previous year, with April seeing a 56% decrease and June a 42% decrease.
Despite this, conversion rates during April and May mirrored what was typically seen during November holiday periods. In April, conversion rates increased by over 100% compared to April 2022, and by 66% in May compared to May 2022. These statistics reveal that consumers were more focused on finding deals for items already on their wish lists, rather than engaging in casual browsing or impulse buying.
Partnerships may have played a crucial role in this trend, helping consumers curate their wish lists before sales began and saving them the time and effort of window shopping. However, November and December saw a deviation from the rest of the year, with an increase in clicks but a decrease in conversion rates. This suggests that while more people were shopping online, they were still searching for the best deals before committing to a purchase.
Deloitte reported that over half of consumers planned to take advantage of as many deals as possible during this period. Categories such as apparel, shoes, and accessories saw significant conversion rate boosts during November and December, as 70% of consumers focused on these areas, expecting to find the best deals.
As shopping behaviors continue to evolve, it becomes increasingly important for brands to capture consumer attention and earn a spot on their wish lists well before major retail events.
3. Inflation Drives Up Cart Values
Despite consumers becoming more cautious with their spending, average order values (AOV) continued to rise, driven largely by inflation. The modest 2% annual increase in AOV suggests that rising prices are pushing up cart values rather than an increase in the number of items purchased. This trend was particularly noticeable in categories such as health and beauty, where consumer spending dropped by 13% despite a 19% increase in AOV.
Consumers who needed to buy more items found other ways to cut costs. One in four shoppers reported switching to lower-priced brands in 2023, while half were willing to buy in bulk to save money. Others chose smaller pack sizes that were more affordable.
These trends help explain why AOV remained stable and even dipped slightly during Q4’s heavy sales season. However, the dip in end-of-year AOV could also be attributed to brands offering significant discounts to stimulate purchases.
As consumers looked for ways to save on essentials throughout the year, many splurged on categories such as arts and entertainment. This category saw unprecedented AOV levels since the pandemic began, with an 89% year-over-year increase in October and a 29% increase for the year compared to 2022.
This surge in purchase intent suggests that arts and entertainment brands strategically aligned with suitable partners, positioning themselves in front of audiences more likely to make such purchases.
4. Strategic Splurging on Selective Luxuries
Despite rising prices, 40% of shoppers indicated their intention to splurge on selective purchases, such as high-end grocery items or travel. While overall consumer spending dropped 5% year-over-year, some categories saw unexpected increases. For instance, consumer spending in arts and entertainment rose by 36%, while home and garden, and sports, outdoor, and fitness brands saw a 6% increase.
These brands also experienced significant conversion rate increases in Q4, demonstrating how strategic spending throughout the year allowed shoppers to splurge on non-essentials when they found the right opportunity and offer.
The decelerated spending during Q3 indicates that shoppers may have been gearing up for the big discounts they expect during retail events and holiday sales. Categories that typically offer exceptional deals during Cyber Week, such as apparel, shoes, and accessories, saw higher conversion rates and consumer spending than usual in Q4.
Brands may want to consider offering significant discounts throughout the year rather than waiting for holiday and shopping events. By doing so, they can inspire buyers to make non-essential purchases and potentially boost their yearly revenue.
5. Incremental Increases in Advertising Spend Yield Results
While advertiser spending remained largely consistent in 2023, brands that slightly increased their partner commission rates saw corresponding increases in consumer spending. For example, home and garden, and sports, outdoor, and fitness brands saw a 6% increase in consumer spending following a 6% boost in advertising spend. Similarly, a 7% increase in advertising spend resulted in a 36% increase in consumer spending for arts and entertainment brands.
As advertising costs rise, brands may seek to maximize their ROI through performance-based channels, such as partnerships. These partnerships offer a cost-effective way to increase brand awareness, boost purchase intent, and motivate even the most selective shoppers to convert.
Securing a Spot on Shoppers’ Wish Lists with Partnerships
Last year’s shopping trends demonstrate that today’s discerning consumer is more willing to spend than brands might expect. Instead of pushing consumers to spend more, brands have the opportunity to help them shop more strategically through partnerships.
Performance-based partnerships allow brands to reach new customers, gain more clicks, drive sales, and only pay for results. By working with partners, brands can increase awareness and build credibility, earning a coveted spot on shoppers’ wish lists.
Paying partners based on results helps maximize advertising budgets and increase ROI, all while building trust with new customers. As inflation stabilizes and consumer spending increases, partnerships can ensure your brand remains top-of-mind when shoppers are ready to buy.
2024: A Year of Opportunity for Retail Partnerships
The desire to save on essentials is driving shoppers to explore new brands, presenting a significant opportunity to reach new customers. At the same time, these savings allow consumers to splurge more selectively. In both cases, shoppers want an easy way to find brands they can trust, and that’s where the power of partnerships comes in.
Partnerships are no longer just a “nice-to-have” but have become essential for driving revenue in today’s challenging economy. By leveraging partnerships, brands can ensure they are well-positioned to capture consumer interest, build long-lasting relationships, and thrive in the evolving retail landscape of 2024.
