What retailers should know about spending shifts in the crisis
The coronavirus crisis has significantly disrupted the financial lives of Americans, from their income to the ways they manage money to their optimism about financial recovery.
A survey of more than 1,000 Affirm users revealed some of the changes:
Half (51%) experienced a negative impact on family income
85% have changed their spending habits
55% remain optimistic about their financial prospects in 6 months
Nearly a third of respondents had annual incomes below $50,000, and a majority of this group reported a decrease in income because of the crisis. Self-employed and part-time hourly workers were among the most likely to report income damage (91% and 73%, respectively).
Shoppers are focusing on essentials
The change in spending habits favors essentials: 51% said they are spending more on everyday items like groceries. In fact, more people are buying groceries online than ever before. During May, when our survey was conducted, U.S. online grocery sales rose 24%.
The definition of what’s essential may have expanded as people spent more time at home. We saw increased Affirm sales volume in kitchen supplies (+70%), home office furnishings (+200%), and home fitness (+160%) during that time.
In addition, total spending actually increased for a small segment in the study. Of the people who reported altered spending habits due to the crisis, 17% said they were spending more than before.
Mattress maker Layla has seen some evidence of increased spending, as its average order value (AOV) rose 22% for Affirm sales since March.
“People are looking for a little bit more comfort in their lives right now,” said Gregg Dean, Co-founder and CEO of Layla. “So they’re adding a weighted blanket or an extra pillow—something that might bring a little more joy during a time that’s super challenging and stressful.”
How retailers can give shoppers what they want
Our research into the pandemic’s impact on consumer finances may inform how you interact with prospective customers and nurture loyalty during this time. Here are 3 tips to help you strategize:
Emphasize comfort and essentials. Our homes have become restaurants, schools, fitness centers, and offices during this crisis. Use marketing to highlight how your products or services make this transformation easier and more comfortable for your customers.
Build on expectations for the resurgence. More than half of consumers (55%) are optimistic about what their financial picture will look like in 6 months. In the meantime you can prepare for this possible increase in spending from pent-up demand. It may help in designing your holiday promotions, for example, perhaps with an incentive return to your store in December. (For more ideas, see our blog post on strategies to help your business through the recession.)
Give customers payment flexibility to increase their savings. The crisis has accelerated the personal savings rate, which hit a historic high in April. Shoppers are looking to buy what they want without a big outlay, and one way to help them is to offer flexible payments with Affirm. When shoppers have the option to pay over time, they perceive their total cost as more manageable, which can drive your sales. Our retail partners have seen up to an 85% increase in AOV from offering split payments with Affirm.
The changes we’re seeing in consumer behavior may continue into the recovery, so retailers who can adapt are likely to gain an advantage.
Learn more about how Affirm can increase sales for your business.
NOTE: The online survey was conducted by Affirm in mid-May 2020 with 1,023 Affirm users.