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Is the values-oriented consumer being replaced by the value-oriented consumer?
That’s what a new study by ecommerce delivery firm Asendia set out to determine.
With inflation continuing to be elevated, there are clear signs that shoppers are more mindful of what they pay for an item. In the survey of 8,000 global shoppers, Asendia found that price was now the top factor in buying decisions for 52% of consumers, followed by value for money, which was a factor for 44% of shoppers.
This inflationary behavior reflects a period when consumers are seeing prices rise. Yet it also follows a moment when sustainability rose as a factor for many consumers, and is remaining there. Over three-quarters of American shoppers considered themselves to be sustainability-minded, and 85% of millennials identify as such.
Yet with price rising to the top of the list, it seems that the more immediate price pressure is slightly outweighing wider-scale global impacts – at least for now.
These factors are not just weighing on consumers’ minds. Retailers are seeing how it impacts their own bottom lines. The survey found that 58% of retailers indicated that shoppers were buying less frequently over the last year, and added that basket sizes are down.
While price is top-of-mind right now, it's not an either-or between cost and planet. The truth is that both dynamics co-exist in the mind of the shopper. And it is likely that both factors are changing consumption patterns. The survey found that 70% of shoppers are planning to cut back due to “economic uncertainty,” yet they are at the same time rethinking buying habits to minimize their environmental impact.
There is even more pronounced dissonance when it comes to the preferences of sustainability-minded shoppers. The survey found that plenty of consumers are eying sustainable products. Findings indicate that 47% of consumers are buying organically, and 24% are opting for vegan goods.
Yet they also want items delivered fast, which is a practice that stands to increase carbon footprints. Yet despite the concerns about price, there are signs of willingness to pay more in this area. The survey found that 48% would pay more for faster fulfillment. Yet 23% would pay more for greener fulfillment options, even if an item took longer to arrive at their door.
Meanwhile, 26% of Gen Z shoppers who said they are sustainability-minded still shop fast fashion, which is known to have big environmental downsides.
Asendia Global Chief of Business Development Renaud Marlière said the survey results indicate that “shoppers aren’t prepared to put price entirely before principles in their consumption habits.”
“This is creating what we’ve coined the conflicted shopper; consumers who seek value for money – acting with price-sensitivity and spending-caution on one hand, but want to consume in line with their values on the other, opting for eco-conscious decisions across their buying journey, from product choice to fulfillment methods,” said Marlière, in a statement. “Retailers now need to cater to both ends of the conflicted shoppers’ value spectrum if they are going to win customers, loyalty and lifetime value.”
In the end, delivering on both value and values still matters.
Trending in Economy
The retailer's marketplace is expanding quickly.
When it comes to ecommerce growth, was the pandemic a blip or a new trendsetter?
As we move further from the height of COVID-related closures, it’s a question that will start to be answered through the lens of history.
So far, the narrative of ecommerce growth in the U.S. from 2019-2022 has gone like this: Ecommerce’s share of overall retail saw a huge spike at the height of the pandemic in 2020-21, when goods in general were in demand and online shopping was necessary to preserve health and safety. Experts looked out and saw a permanent exponential change in the penetration of ecommerce as a share of retail that would last beyond the pandemic. Then, in 2022, everyone went back to stores and the trendline came back to 2019 levels. Growth was no longer exponential. There was still growth, but it was not happening as fast as during the pandemic period.
With this in mind, it’s worth pointing out that 2023 is the first year that there likely won’t be a pandemic-influenced swing to influence ecommerce growth. It is also a year where demand has suffered challenges amid inflation and interest rate hikes.
So as we seek to determine the importance of ecommerce to overall retail, it’s worth it to continue taking a close look at what growth trends retailers are seeing now, whether ecommerce is remaining resilient amid consumer pullback and how retailers are preparing for the future.
The latest example arrived this week from Macy’s. It’s a fitting one for the times. Overall, Macy’s is seeing a slowdown as consumers pull back on discretionary purchases, with sales declining 7% in the first quarter versus the same quarter of 2022. Digital sales were down 8%.
Macy’s is particularly susceptible to the macroeconomic headwinds that many brands and retailers are facing, as spending among the middle-income consumers it counts as a primary customer base is particularly softening, said GlobalData Managing Director Neil Saunders.
But while ecommerce is slowing overall, the importance it gained to Macy’s business during the pandemic is remaining in place.
In 2019, ecommerce made up 25% of Macy’s revenue, CEO Jeff Gennette told analysts on the company’s earnings call. That jumped to a high of 44% in 2020. By 2022, digital reached 33% of sales after the pandemic boom. In the first quarter of 2023, it remained at 33%. So, while the trend line dipped after shoppers returned to stores, ecommerce share still settled in at a higher post-lockdown point than it was before the pandemic.
This came in a quarter in which traffic was “relatively good” across both online and in-store, Gennette said. It was “flattish” online, and slightly up in stores.
“We do expect that this is the reset year with the penetration between them,” Gennette said. “But we do expect more aggressive growth in digital in the future versus stores as we think about '24 and beyond. And that's going to be foisted by a lot of ideas and strategies.
Over the last year, the retailer has made investments in boosting ecommerce, even as shoppers returned to stores. In a bid to boost the assortment of goods available online, Macy’s launched a marketplace in September 2022 that welcomes goods from third-party sellers.
The marketplace had an “outstanding” first quarter, said Macy’s President Tony Spring, who is poised to succeed Gennette as CEO next year. Gross merchandise value increased over 50% when compared to the fourth quarter of 2022, while the average order value and units per order for marketplace customers was 50% above those not shopping at the marketplace.
Macy’s is continuing to build the marketplace even as it racks up sales. The retailer added 450 brands, ending the quarter with 950 brands.
This is helping to draw in new customers, as well as younger existing customers who are buying more items, resulting in increased basket size.
“We're very excited as to how marketplace is really attracting the Gen Z customer, particularly in categories where it was not economically feasible for us to carry in the past,” Gennette said.
In the end, Gennette said a strong digital and social presence is key to attracting younger consumers. That's a different type of shopper than other age groups.
“We know the younger customer starts first online,” Gennette said. That behavior will still be in place as the generation gets older, and gains more buying power in the process.
Going forward, Macy’s is seeking to expand the model to other retail banners in its portfolio. Bloomingdale’s will open a marketplace in the early fall.
The Macy’s ecommerce trajectory isn’t that different from the wider U.S. ecommerce narrative detailed above. With one quarter of 2023 data, there is evidence that ecommerce share settled out at a higher point after the pandemic than where it started before COVID arrived. There is flattening now, but the retailer is taking it not as a sign of a slowdown, or a signal to change course. Rather, it sees changing consumer behavior as a reason to build for the future.