Online spend among American consumers on the wane? Vaccine Economy retail priorities need to be examined

It’s Amazon Prime week and bargain-hunting shoppers are heading online in search of a good deal. It’s also the week in which new research suggests that a combination of factors is resulting in US consumers stepping away from retail websites.

According to e-commerce specialist Attest’s Direct-to-Consumer (D2C) Report 2022 - based on the findings of a poll of 2000 adult consumers in June -  around a quarter of Americans have cut down on their online spend over the past six months.

Clearly a lot depends here on context. As has been seen in the financial results of various retailers in recent weeks, a common theme has been the slowing down of digital sales growth rates across the board, with the obvious driver for this being the relaxing of COVID restrictions and a return to the physical store for consumers who, when under effective house arrest at the height of the pandemic, made a mass societal shift online.

As has been noted several times on diginomica, it was always going to be the case that those COVID-powered year-on-year growth numbers for online retail were never going to be sustainable in the Vaccine Economy.  While short-termists on Wall Street have adopted the all-too-familiar Chicken Little role and started squawking about the digital sky falling in, the new reality is that the search for the ideal omni-channel mix has never been more important and finding that balance is now - or should now be - the top corporate priority.

Online still 

There are some things that people still want to buy online, while other retail categories display a desire to opt for the physical store. So, for example, gifts and technology are two areas where online dominates, cited by 69.4% and 59.6% of respondents respectively, whereas if you’re after furniture (64.6%), beauty products (58.1%) or pet products (53.1%), a trip to the store is preferred.

And the thing that Americans most want to go to the store to buy is groceries, cited by over three-quarters of respondents (76.6%). The rise of the online grocery business was arguably the most COVID-driven retail sector, but there was always a lingering question of how sustainable that would be longer-term. While the likes of the UK has long had a strong online grocery sector, it took a global pandemic to get many Americans used to the concept.

While the headline finding that a hefty chunk of Americans have cut back on their online spending has caught the eye, there’s actually a lot of retailers to be positive about while they seek to achieve the omni-equilibrium that they need.

A third of respondents actually state that they’ve spent more online in the first six months of this year, although how much of that is due to inflationary pressures on pricing is a moot point. While 20% of respondents think the amount they spend will decrease, that’s balanced out by 29.8% who said they think it will increase. That said the report does strike a note of caution:

We should temper our optimism; this data probably doesn’t indicate a spending spree. More likely, people think they’ll favor online shopping over in-store as a way to find better deals, or they’re anticipating having to spend more simply because of the rising cost of products.   

Price is ranked as the most important factor in making purchasing decisions, according to the study, ahead of quality. While D2C brands have been perceived to be cheaper than physical outlets, that assumption isn’t holding up. Back in November 2020, 35.8% of respondents thought that D2C sites were more price competitive; today that’s down to 31%.

It’s perhaps indicative of the volatility of the current macro-environment that the most common response is essentially a form of ‘don’t know’, with half of those polled (49.9%) stating that they think they’ll end up spending the same online in the second half of 2022 as they did in the first half.

Things of note

Some other stats of note from the study:

• 65.4% of respondents spend more than $50 a month online, while 30.3% spend more than $100, with the latter group being the most likely to believe they’ll spend more in the second half of the year.
• 47% of respondents say they buy items online at least once a week, with the 25-34 age group being the most active - 27.4% shop online more than once a week - followed by 35-44 year olds on 23.6%.
• Choice ranks highly in the appeal of D2C brands with 45.4% of consumers citing the ability to view and access a retailer's entire inventory as a major advantage. Back in 2020, the most cited benefit was the ability to discover new products.
• Mobile devices are the most popular platforms for online shopping, with 65.9% of Americans  overall saying this is the most frequently used method, rising to 79.3% in the 25-34 age group. Only one percent cite smart speaker devices, such as Alexa, as an online shopping enabler. Savvy D2C brands needn’t worry too much about voice at this point, it seems, but mobile optimization is critical.
• Delivery is an increasingly important aspect of the online shopping experience. Again this is likely to be a side effect of the pandemic, but over half of respondents (50.5%) cited delivery times or costs as an inhibitor to purchasing from a D2C firm. Some 46.8% of Americans expect to receive a package in 3-5 days. Interestingly, given the focus on next day delivery by a number of major retailers, this facility is only cited by 5.2% of respondents. As for same day delivery, that doesn’t even feature in the study’s findings.
• Amazon and other marketplaces are still the main starting point for the majority of consumers (51.5%). This means D2C firms may need to swallow their pride and have a presence on retail’s ‘Great Satan’.

My take

Some reasons to be cheerful and some cautionary notes for D2C retailers to be found here.

The main takeaway for me, as has been the case in so much of our retail coverage of late, is just how much flux there is out there. What omni-channel retail looks like in the Vaccine Economy has not been determined.