Consumer Credit Spending On A High But Purchases On A Low, New Global Study Reveals
Consumers are increasingly relying on credit, with 37% of global shoppers using their credit cards more than they did a year ago, according to Salesforce research. Additionally, 32% report using alternative credit services like "buy now, pay later" more frequently and 43% of consumers carry more debt compared to 2023. This trend is observed across all income levels.
However, this increased reliance on credit is not due consumers purchasing more items. The Salesforce Shopping Index reveals that online order volumes have been declining since 2022 and decreased by 2% year over year in the first quarter this year. In fact, 47% of shoppers say they are buying the same amount, while 40% are buying less compared to last year.
Consumer spending habits and preferences
When consumers do make purchases, they tend to trade down, buy discounted merchandise, and seek private labels. Only 15% of consumers reported making no trade-offs based on price. Consumers' credit balances are increasing because they're offloading inflation onto high-interest credit cards.
To counterbalance this risk, consumers are saving more than ever before. When asked about their disposable income priorities, most consumers ranked savings as their top priority, followed by physical goods and experiences. This contrasts with last year when savings ranked last behind physical goods and experiences.
Holiday shopping predictions
Salesforce predicts that Chinese shopping apps will gain market share during the holiday season as two-thirds of global shoppers report that prices dictate where they choose to shop. In the last six months, two-thirds of consumers from Western markets made at least one purchase on Aliexpress, Cider, Shein, Temu, or TikTok. Among these platforms, Temu is the most popular among Western shoppers.
Furthermore, middle-mile shipping costs are expected to put a strain on margins due to events such as Houthi attacks in the Red Sea and rising crude oil prices. Retailers should be prepared to offer reduced or free shipping during the holiday season but may need to incentivize customers to buy online and pick up in-store or return items in-store rather than through mail.
Use of AI
Another prediction is that shoppers will increasingly use AI for gift inspiration and search functionality. Retailers can benefit from embedding AI into their search experiences for better conversion rates.
For example, as Google embeds Generative AI into its search product, consumers will adopt and act in more conversational ways when they search online. This means retailers can transition from keyword searches to natural prompts to find products on their websites. As retailers increasingly embed AI into search experiences, we predict search will drive a nearly 3x better conversion rate compared to traffic not engaging with site search.
Black Friday becomes Cyber Friday
Black Friday is also expected to become more digital-focused as online sales take a larger share of in-store sales on that day. Retailers should prepare their websites and social channels for a Black Friday blitz. Last year, Black Friday gained back 4% of online holiday sales, establishing itself as the biggest online shopping day of the year.
The big news is that Black Friday is going to be the biggest day for digital. Salesforce research shows consumers will continue to lean into the convenience of online shopping on this busy day. Why wake early from your pumpkin pie coma to brave the elements and your fellow shoppers when you can quickly find and purchase gifts from the comfort of home? In fact, 72% of shoppers prefer to shop online, while only 31% like to head to the store on Black Friday. Why? Convenience, free delivery, and the ability to search for the best prices were consumers’ top three reasons for going online.
Retailers are tapping loyalists
Lastly, retailers will likely tap loyal shoppers to avoid skyrocketing digital marketing costs during the holiday season. Loyalty programs can add value for shoppers seeking low prices and exclusive perks. Salesforce research shows 46% of shoppers say earning and redeeming loyalty points is the second highest factor, behind price, influencing where they buy. They are seeing loyalty programs add even more value for shoppers who are already seeking out low prices. In fact, 63% of shoppers are making more purchases from stores where they can earn and redeem loyalty points.
It is recommended to use your loyalty data, including shopper profiles, preferences, and purchase history, and make it all accessible to store associates, call center agents, and the consumers themselves. Then you can incentivize loyalty members by offering exclusive perks like free expedited shipping, free gift wrapping, early access to sales, and exclusive merchandise.
Consumer reliance on credit has increased despite a decline in online order volumes. As the holiday season approaches, retailers should adapt their strategies to accommodate changing consumer preferences and market conditions.
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