How High Prices and Economic Uncertainty Have Impacted Consumer Behavior

Consumer shopping behavior is changing. Because of an uncertain economic environment and record-high prices, today’s consumers are changing where they shop, when they shop, and how they shop to save money. They're more reliant on existing tactics like loyalty programs and expanding the set of technological tools they use such as digital coupons, cashback rewards programs, and browser extensions, to save even more.

In this article, I’ll explore the changes and trends in consumer shopping habits gleaned from a survey of 1,000 U.S. consumers that Wildfire conducted in partnership with Big Village earlier this year. The findings point to consumers being more creative and intent on using a variety of tactics to save money. Our survey found that   74 percent of respondents increased their use of money-saving approaches for online shopping last year, including taking advantage of sales, shopping at discount retailers, earning discounts through retailer loyalty programs, using coupons, and earning cashback rewards for shopping.

We also found that respondents already using these tactics will continue to do so in 2023. For example, 47 percent will use coupons or promotional codes provided by retail brands, and 50 percent will earn cashback rewards or points for shopping.

Shifting Spending Preferences

Consumers are also shifting where they spend their money. For example, the Wildfire survey found that 45 percent of respondents said they spent less on non-essential items or activities, such as dining out or travel in 2022 vs. 2021, and 79 percent reported purchasing more generic brands and discount products in 2022 than the previous year. It also revealed that 70 percent of the respondents were more interested than ever before in shopping at a discount retailer such as Kohl's, T.J.Maxx, Ross, or JCPenney last year because of inflation and the uncertain economy. These findings align with the April 2023 edition of JPMorgan’s Cost of Living survey, in which they reported that 75 percent of U.S. consumers said they expect to reduce non-essential spending by 6 percent or more this year.

Cashback vs. Coupons

Using cashback and digital coupons to save money is becoming increasingly important to consumers looking to stretch their budgets. We found that 75 percent and 73 percent of respondents, respectively, who shop online say they're more interested than ever before in cashback or coupons due to inflation and the uncertain economy. When asked which they use the most to save money online, 45 percent reported they used cashback the most, while 33 percent preferred coupons. Only about one in five reported using neither, illustrating the popularity of these money-saving tools.

Consumers like coupons and cashback for different reasons. Consumers often receive their cashback reward a month or so after the purchase, so cashback rewards provide delayed gratification. PYMNTS reports that retailers use these perks to entice customers who want to believe they're getting the best deal and the best value from a store. On the other hand, since they're immediately used at the point of purchase, coupons provide instant gratification. Retailers can use this style of incentive to entice "deal hunters" who seek out the best deals upfront while making their purchase.

How Can Retailers Adjust?

Today’s tech-literate consumers are comfortable with next-generation money-saving technologies that enable cashback and coupons. In fact, 72 percent of the survey respondents reported having earned cashback rewards through browser extensions, and of these, 74 percent report using extensions frequently to save money online.

Since consumers said they're more interested in cashback and coupons than ever before, while also indicating familiarity with technologies that power rewards, including browser extensions, retailers can help them stretch their budgets further while also enhancing their own key performance indicators, such as sales conversion rates, customer lifetime values and average order values. Merchants should strive to offer shoppers (and prospective customers) multiple ways to save by empowering them with tools like these, and participating in the networks and platforms which enable these types of tools.

Michelle Wood oversees the merchant network side of the Wildfire Systems platform, which helps companies monetize their users with white-label cashback and coupon services.