Consumers trading off because of inflation

U.S. adults are making changes to their spending habits. One of the most-discussed changes — purchasing more low-cost store brands — topped Big Village Insights’ survey list in 2022. Forty-seven percent of consumers participating in the survey said they bought lower-cost brands last year due to the increased cost of living brought on by inflation.

According to the survey, this year, spending habits also will change, but perhaps not as drastically as in 2022. This year, 44% of consumers plan to purchase more low-cost brand items. Some 40% of U.S. adults plan to dine out or order less takeout food this year, while about 31% will postpone the purchase of discretionary items. Other ways they plan to save:

1ne: 77% plan to do more comparison-shopping research.

2wo: 35% say they will consider cutting streaming services or cable to combat rising prices on items across the board.

3hree: Forty percent of those surveyed said they would settle for purchasing brands with better value rather than the brands they prefer

4our: 35% will shop at more mass-merchant and value-added stores than boutique retailers, and 30% will shop more online rather than traveling to stores to save on gasoline.

What about retailers?

So far, early holiday results have been better than some economists and retailers feared. Sales from Nov. 1 to Dec. 24 rose 7.6%, according to MasterCard SpendingPulse, which measures in-store and online retail sales across all forms of payment. The figure includes restaurants and is not adjusted for inflation, which rose 7.1% year over year in November.

There are also signs that shoppers may be running out of gas. Credit card balances have ticked up. Personal saving rates have fallen. And sales of big-ticket items like jewelry and electronics have weakened.

About new car payments.

Amid rising interest rates and elevated auto prices, the share of new car buyers with a monthly payment of more than $1,000 jumped to a record high, according to Edmunds. For the first time, just over 15% of consumers who financed a new car in the fourth quarter of 2022 committed to a monthly payment of $1,000 or more — the highest level on record — compared with 10.5% one year ago, Edmunds found.

According to a separate estimate from J.D. Power and LMC Automotive, the average price paid for a new car in December set a record of $46,382. While there are signs the market is cooling, sticker prices are up 2.5% from a year ago.

The interest rate on new car loans reached 6.5%, up from 4.1% a year earlier, Edmunds data shows. As the Federal Reserve continues to raise interest rates to combat persisting inflation, auto loan rates could tick even higher. However, consumers with higher credit scores may be able to secure better loan terms.

Marketers must wake up NOW and stop waiting for news headlines or FED action. Empty wallets and savings accounts mean consumers are looking for deals, and brands that raise prices will lose a significant share.

About richmeyer

Rich is a passionate marketer who is able to quickly understand what turns a prospect into a customer. He challenges the status quo and always asks "what can we do better"? He knows how to take analytics and turn them into opportunities and he is a great communicator.

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