The economy has been improving, yet consumer sentiment remains surprisingly low: consumers think inflation is worse than it actually is, and they are worried about their future. Younger people in particular are worried.
A recent McKinsey study on holiday shopping plans found:
- Consumers are trading down – buying fewer and less expensive items.
- They are looking for better prices and promotions (even more than usual).
- They are less likely to splurge.
(One interesting twist: many Gen Z consumers plan to pay extra for next-day or same-day delivery.)
Here are some of McKinsey’s recommendations for marketers (which I think will apply beyond the holiday shopping season):
- Inspire beyond promotions. As consumers grapple with whether to splurge or save this year, retailers have an opportunity to inspire their customers through storytelling. Focusing on the experiences that come with a purchase—such as crafting for the holidays, setting a beautiful table for family gatherings, or indulging in self-care—may motivate purchases more effectively than relying solely on discounts. To achieve this, retailers should tailor their communications by channel. For example, video content on social media that highlights the benefits of a product may resonate most deeply with consumers who are comparison shopping.
- See demand generation through the “ninth inning.” As shopping journeys are becoming increasingly omnichannel, retailers should meet customers where they are to capture them throughout the holiday shopping season. Retailers are using new technologies, such as AI, and communities, such as store employees and micro-influencers, to deploy curated and personalized content online and at scale. In-store experiences can be bolstered by digital enhancements, such as augmented reality apps and cashierless shopping. Meanwhile, live stream shopping is also gaining traction, especially with younger consumers.
- Personalize promotions for consumers. Leading retailers focus on targeted pricing and personalized offers to deepen customer loyalty, based on a comprehensive view of individual customers. This requires having a baseline understanding of when and what consumers buy and their sensitivity to price and promotions. As the holiday shopping window extends over a longer time period this season, a focus on driving customer loyalty is key. Targeted and personalized offers may also enable retailers to drive inventory sell-through while capturing incremental sales and profit.
Let’s find out what will resonate with your customers. Email me at info at bureauwest.com and we can discuss the best approach.
Sources: “US holiday shopping 2023: Consumer caution and retailer resilience,” McKinsey, 11/6/23; “Why are we so bummed about the economy?,” NPR Planet Money, 12/1/23