The following analysis demonstrates how consumer spending has changed over 10 years. Using data from from the US Bureau of Labor and Statistics and the US Census we’ll show why it’s increasingly important to recover and convert digital browsers in the shortest time period possible.
From 2007 to 2015 gross income raised 10% from $63,091 to $69,629. During this same time period, inflation was 17%. In other words, consumers lost approximately 7% of purchasing power over that same timeframe. (https://www.bls.gov/data/inflation_calculator.htm)
This is important because the number of businesses competing for customer dollars in 2015 didn’t stay flat. It increased significantly.
The food industry is a prime example where the number of options available grew faster than dollars spent on food. From 2007 to 2015 the total food expenditures per household grew relatively in line with income:
Since consumption dollars and earned dollars were inline with inflation, consumers spent approximately the same share of wallet on food. However, food options also increased over the same time period in line with food expenditures.
Consumers spend the same share of wallet to eat, but consumers also have 10% more options to choose from in less than a decade.
From a business perspective, the total dollars available to earn are slightly higher, but so is the competition for a customer. For eCommerce, every time a consumer leaves a website, that same consumer has 10% more options to choose from. The consumer is going to eat a single meal. The consumer is not going to start consuming 2 meals per dinner. Thus competition is increasing faster than total dollars available.
The entertainment industry also follows this pattern. Entertainment spending rose 5% over the same time period, while the total number of businesses servicing the category also increased by 5%. But with a smaller share of wallet in 2015 compared to 2007, consumers are more selective on where they spend their dollars and have more options to choose from.
Not all industries behave like this. Let’s examine Apparel.
There are numerous articles discussing the decline of retail and the rise of eCommerce. Nowhere is this more evident than apparel.
True apparel spending fell -2% over the same time frame. Consumers spend less of their wallets on clothing. This small change destroyed the apparel industry. Over the same time period, apparel and manufacturing businesses fell by over 31%. In 2007 there were 10,151 apparel manufacturers. By 2015 there were 7,021 due to a 2% decrease in spending. Granted by 2013, apparel spending had fallen by closer to 15% before rebounding in 2014 and 2015, but businesses closed two times faster than the declining rates of apparel spend.
This data supports many other articles suggesting consumers buy fewer articles of apparel from fewer brands and from fewer sources. During this same time period overstock sellers saw huge upticks in sales such as TJX which carried market capitalizations 4x greater in 2015 than in 2007.
With a consumer spending less and buying less frequently, apparel manufacturers face greater challenges manufacturing the right amount of sizes and styles, while creating urgency for users to complete their orders or risk having a consumer buy elsewhere. This pressure to capture more data about their web visitors and match each web visitor to the right message the right product is very real. As the data suggests, these customers may not buy again for a very long time.
The scariest trend, Healthcare. Healthcare spending is up 52% over the same time period going from $2,853 per year to $4,342 per year. With Healthcare costs taking away consumer dollars consumers are being forced to make otherwise unexpected adjustments to their spending.
Because competition keeps increasing, but not actual purchasing power nor share of wallet, winning the customer in the least amount of time will be the new battlefield in eCommerce. Businesses are continuing to open at rate similar to consumer spending without regard to inflation. This means competition will always be fierce and as the biggest players in each market Amazon, Apple, Netflix, continue to eat the lion’s share of purchases, the remaining merchants will battle for fewer not more dollars.
Why Customer Recovery Matters
Across the AddShoppers network of 5,500 sites -- from B2B to B2C, from buying tickets to an amusement park, credit card companies, web hosting services, or t-shirts to save the world -- approximately 17% of high intent to buy customers can be recovered and returned to the original site for purchasing using our methodology.
Clients have asked us before, “How do you know they weren’t planning on coming back and buying?”.
The answer is, we don’t know for sure. AddShoppers simply has a core belief that time kills all deals, and we prefer not to hope customers return to purchase organically on their own.
Hope is not our strategy.
Raw Numbers For Your Own Analysis: