Like e-commerce companies, consumers are retrenching. They’re becoming more discerning, more value-conscious, and thriftier. Below, a look at recent shifts in consumer behavior and how the e-commerce industry is responding.
Over the past two quarters e-commerce companies took out the hatchet as online spending normalized from pandemic peaks. Consumers are cutting back too.
Today’s economic environment is as confusing as a stocking with a lump of coal next to a Rolex. It’s sending lots of mixed signals. Much to the Fed’s chagrin, wage growth is strong, unemployment is near record lows, and there are over 1.5 job openings for every unemployed person looking for work. Though cracks are emerging, especially in tech — cue the world’s smallest violin — the US labor market is on solid footing. Despite this, folks are in a glum mood, with consumer confidence at generational lows.
Helped by stimulus checks, Americans are sitting on over $1.5 trillion in savings accumulated during the pandemic. However, this buffer is evaporating as consumers have more options for where to spend — restaurants, travel, karaoke bars — and inflation makes everything more expensive. In October, Americans saved just 2.3% of their post-tax earnings, the lowest level since July 2005. This compares to savings rates of 6–8% before Covid and over 20% during the pandemic.
As savings rates decline, credit card balances are mushrooming. In the third quarter, US credit card balances increased by $38 billion sequentially, or $115 per capita. This includes new consumption and balances carried over from previous quarters. Year-over-year growth of 15% was the highest in over twenty years (though helped by a low base). Like most US economic statistics, trends are not evenly distributed. Outstanding balances for low income borrowers (quartile four below) are above December 2019 levels, while balances for high income borrowers remain lower. Like credit card balances, delinquency rates are creeping up as well, though remain skimpy by historical standards.