1、RESEARCH REPORTHow Inflation and Collapsing Consumer Spending Are Disrupting the Customer JourneyNAVIGATING THE NEW NORMAL:DIGITAL SHELF INSTITUTE:NAVIGATING THE NEW NORMALP A G E 2 O F 2 4Rising inflation.Shaky consumer confidence.Radically and rapidly shifting shopping habits.Its no wonder many of

2、 us are asking a critical question:What comes next?Given the speed at which commerce is shifting,making firm predictions about what will happen in the future is likely a fools errand.The more important strategy?Gaining the information and insights needed to make informed decisions and develop resili

3、ent strategies for the future.Explore the impact inflation and falling disposable income are having on consumer behavior,how those factors interact with new pandemic-related shopping habits,and what it all means for brand manufacturers.Navigating the New Normal:How Inflation and Collapsing Consumer

4、Spending Are Disrupting the Customer JourneyP A G E 3 O F 2 4Deep Dive:U.S.Economic Outlook.4How Long Will Supply Chain Disruption Last?.5How Does Inflation Impact Wage Negotiations?.6How Will Interest Rates Impact Recovery?.6How Have Consumer Spending Habits Evolved?.6How Are Retail Sales Performin

5、g?.8How Have Inflation,Consumer Behavior,and the Customer Journey Changed?.9Keep Up With Consumer Consideration.13Build a Fluid and Flexible Research Process.13Position Your Premium Brand To Stand Out Online.135 Strategies To Survive and Thrive During a Recession.101.Give Consumers Permission.102.St

6、reamline Product Ranges.103.Give Premium Products a Boost.104.Demonstrate Value.105.Keep Marketing.10Take Control of Purchases and Services.14Consider Product Availability and Delivery .14Prioritize Omnichannel Commerce .14Explore DTC Opportunities .15Loyalty Programs .15Boost Brand Awareness and Di

7、scovery.11Maximize Your Ad Budget in 2023.11What Comes Next for Brands in This New Normal?.16Table of ContentsDIGITAL SHELF INSTITUTE:NAVIGATING THE NEW NORMALP A G E 4 O F 2 4Deep Dive:U.S.Economic Outlook When it comes to economic indicators,recent Federal Reserve Economic Data(FRED)insights show

8、a mixed picture.Real U.S.gross domestic product growth has remained positive at 2.9%in the third quarter,and unemployment is at a record low of 3.6%.However,inflation is currently at its highest level in almost 40 years though data from the Federal Reserve Bank of St.Louis highlights signs of it soo

9、n declining.Because inflation directly impacts consumer spending and sentiment,brand manufacturers are on the front lines.CNBC reports that inflation is at more than 8%and significantly higher in areas like food and energy.At the same time,real median wages,which are wages after accounting for infla

10、tion,have been steadily decreasing,putting downward pressure on disposable income and reducing consumer spending.Consumer sentiment is also desperately low,with consumers holding negative views about their personal financial situations,short-term economic health,and long-term growth prospects.So wha

11、t path will inflation take over the next six months?Despite some signs that it might be starting to fall,theres still significant uncertainty.Four factors will influence how the situation will develop:Supply chain disruption Wages Interest rates Consumer spending2019 Q2100500100-10100-101050-5105050

12、1002020 Q22021 Q22022 Q22019 Q42020 Q42021 Q412.50-8.408.6000.40013.0003.6009.80-5.6014.40-13.0016.40-9.8098.5056.10Real Gross Domestic Product,Percent Change From a Year Ago,Quarterly,Seasonally Adjusted Annual RateConsumer Price Index for All Urban Consumers:All Items in U.S.City Average,Index Q1

13、2019=100,Quarterly,Seasonally AdjustedUnemployment Rate,Percent,Quarterly,Seasonally AdjustedEmployed Full-Time:Median Usual Weekly Real Earnings:Wage and Salary Workers:16 Years and Over,Percent Change From a Year Ago,Quarterly,Seasonally AdjustedReal Disposable Personal Income:Per Capita,Percent C

14、hange From a Year Ago,Quarterly,Seasonally Adjusted Annual RateReal Personal Consumption Expenditures Per Capita,Percent Change From a Year Ago,Quarterly,Seasonally Adjusted Annual RateUniversity of Michigan:Consumer Sentiment,Index 1966:Q1=100,Quarterly,Not Seasonally AdjustedDIGITAL SHELF INSTITUT

15、E:NAVIGATING THE NEW NORMALP A G E 5 O F 2 4Figure 1:U.S.Economic DashboardHow Long Will Supply Chain Disruption Last?As pandemic restrictions let up and demand spiked,disruptions in supply chains worldwide caused huge inflation.The surge in demand combined with lockdowns in major Chinese ports,labo

16、r shortages,and high energy prices drove up costs,and major brands found themselves out of stock at major retailers.In 2022,a whopping 91%of U.S.shoppers reported feeling concerned about product availability and delays,product experience management(PXM)company Salsify reports.Too many consumers were

17、 chasing too few goods.But while constraints still exist,data from economic forecasting firm Oxford Economics shows that supply chains are heading in the right direction.DIGITAL SHELF INSTITUTE:NAVIGATING THE NEW NORMALP A G E 6 O F 2 4How Have Consumer Spending Habits Evolved?The textbook definitio

18、n of inflation is the average increase in prices across all goods and services in the economy year over year.For brand manufacturers,though,the reality of inflation is that it doesnt happen equally across all product categories.FRED data reports that in October 2022,for example,the inflation rate fo

19、r services was 5.4%,7.2%for durable goods,and 9.2%for nondurables,which was largely driven by gas,energy,and food prices.How Does Inflation Impact Wage Negotiations?The relationship between wages and inflation poses a serious dilemma for policymakers.As real wages fall,consumers have less money to s

20、pend.When workers demand higher wages to compensate,however,costs tend to rise,which drives up inflation.This dynamic is a double-edged sword for brand manufacturers:Falling wages mean that its almost inevitable that consumer spending especially on non-essentials will suffer a significant hit in the

21、 coming months.How Will Interest Rates Impact Recovery?In December 2022,the Federal Reserves attempt to quell inflation brought about a 15-year high in interest rates,according to the Wall Street Journal.High interest rates likely mean more expensive borrowing,a cooling housing market,and delays in

22、business investment.On the consumer side,rising interest rates make it more expensive to service credit cards and personal loans both of which increased significantly in 2022.High rates reduce consumer borrowing ability,putting further downward pressure on spending.Jan-2030.9%34.3%10.5%12.7%7.0%2.3%

23、2.8%7.4%20.3%21.6%69.1%65.7%Jan-20Jan-20Jan-20Jan-20Jan-20Oct-22Oct-22Oct-22Oct-22Oct-22Oct-22GoodsDurable goodsNondurable goodsServicesFood and beverages purchased for off-premises consumptionGasoline and other energy goodsDIGITAL SHELF INSTITUTE:NAVIGATING THE NEW NORMALP A G E 7 O F 2 4Figure 2:C

24、hanges in the Share of Personal Consumption ExpendituresInterestingly,durables like vehicles and household goods are up 28%and 17%,respectively,since the start of 2020 but have only risen a moderate 6%to 7%over the past 12 months.In contrast,some categories,such as apparel and footwear,have seen min

25、imal price increases overall.These vastly different inflation rates impact where people spend their money.In terms of consumption expenditure,food and beverages have risen from 7%in 2020 to 7.4%in 2022.Gas went from 2.3%to 2.8%,while overall spend for services fell from 69.1%to 65.7%.These might see

26、m like relatively small shifts,but at a macro level,they represent significant change.Food and beverages consumption expenditure have risen from 7%in 2020 to 7.4%in 2022JulJulJulJul20192020-9%-3%-1%1%1%1%1%1%0%-3%0%-2%1%1%4%1%3%4%-1%0%1%3%3%4%3%6%4%32%14%20212022JanJanE-commerce Real-terms Sales Gro

27、wthBricks and Mortar Real-terms Sales GrowthJanJanAprAprAprAprOctOctOct-1%DIGITAL SHELF INSTITUTE:NAVIGATING THE NEW NORMALP A G E 8 O F 2 4Figure 3:Retail Sales Growth(Excluding Inflation)How Are Retail Sales Performing?The COVID-19 pandemic caused an unprecedented rise in ecommerce adoption.Accord

28、ing to the FRED data,ecommerce spending in the U.S.increased by 42.5%in 2020 and 18.2%in 2021.It was on course to grow by at least 7.6%in nominal terms in 2022.In the third quarter of 2022,ecommerce alone accounted for 14.8%of retail sales,up from 11.1%in 2019.Removing inflation,however,slightly cha

29、nges the story:Ecommerce spending is actually slightly declining.That said,ecommerce spending has remained relatively steady since the initial jump at the beginning of the pandemic.Even as growth slows,total ecommerce sales are poised to remain much higher than pre-pandemic numbers.The pandemic not

30、only encouraged many consumers to try ecommerce for the first time but also led to consumers buying from new and more product categories.Industry research firm IBISWorld reports that online alcohol sales,DIGITAL SHELF INSTITUTE:NAVIGATING THE NEW NORMALP A G E 9 O F 2 4for example,rose from$1.3 bill

31、ion in 2019 to more than$2 billion in 2022 and are set to continue increasing.Two-thirds of those who buy alcohol online,Forbes notes,made their first purchase during the pandemic.A survey from market research firm GWI found that the number of people buying medicine and healthcare online has increas

32、ed by 71%since 2020.Consumers buying home furnishings increased by 34%,and those buying beauty and personal care products rose by 27%.More established online categories,such as electronics,saw more modest rises.Some categories,such as apparel,even saw artificial increases during the pandemic that ha

33、ve since returned to trend as people have become comfortable returning to stores.How Have Inflation,Consumer Behavior,and the Customer Journey Changed?The days of linear customer journeys are well and truly gone.Todays consumers follow complex,nonlinear paths across multiple online channels and plat

34、forms,moving back and forth between stores and ecommerce sites.To win business and grow,brands need to reimagine their business models through this omnichannel lens.They need to align supply chains,data-management practices,and marketing strategies with the way that todays consumers discover,researc

35、h,and purchase products.The impact inflation has had on shoppers disposable income has caused them to make different decisions at each stage of their customer journey.At the same time,the pandemic has fundamentally changed shopping attitudes and habits.U.S.ecommerce sales are on course to pass$1 tri

36、llion in 2022 for the first time ever,according to the U.S.Department of Commerce.A 2020 Digital Shelf Institute(DSI)report explored lessons that brands could learn from the Great Recession.While inflation imposes some different complications,todays consumers are dealing with similar lower disposabl

37、e income and increased insecurity as they were during that period.U.S.ecommerce sales are on course to pass$1 trillion in 2022 for the first time ever,according to the U.S.Department of Commerce.DIGITAL SHELF INSTITUTE:NAVIGATING THE NEW NORMALP A G E 1 0 O F 2 45 Strategies To Survive and Thrive Du

38、ring a RecessionHere are five things brands need to know to navigate recessions.1.Give Consumers PermissionAll consumers cut back on spending during a recession,even those without budgetary constraints.Marketing and branding should give them“permission”to buy by alleviating guilt and demonstrating p

39、roduct value.2.Streamline Product RangesMid-market brands face difficulty as price competition with private-label goods and cheaper alternatives intensifies.Streamlining product ranges reduces cost and appeals to consumers demand for simplicity in tough economies.3.Give Premium Products a BoostPremi

40、um brands can capitalize on high-income consumers by enhancing their premium image.4.Demonstrate ValueBrand loyalty and market share are up for grabs.Brands that demonstrate value can capture market share when consumers change their habits and reconsider their spending choices.5.Keep MarketingNow is

41、 not the time to cut marketing budgets.Brands that continue to spend during the recessions bounce back faster than those that cut back,notes the Harvard Business Review(HBR).DIGITAL SHELF INSTITUTE:NAVIGATING THE NEW NORMALP A G E 1 1 O F 2 4Boost Brand Awareness and DiscoveryWhen a downturn hits,ma

42、rketing budgets are often the first to go.As consumers become more value-conscious,however,marketing becomes increasingly important to maintaining and growing market share.After all,shoppers are more willing to try new brands and products if they see value in them.During the Great Recession,consumer

43、 packaged goods(CPG)manufacturer Reckitt Benckiser Group increased its marketing spend by 25%,the HBR also notes.At a time when its main competitors,the Procter&Gamble Company and Unilever,were seeing profits fall,its sales grew 8%,and profits rose by 14%.A recent survey from global management consu

44、lting firm McKinsey&Company found that 46%of U.S.consumers have recently tried new brands,an increase of 13%from September 2020,an already historically high level.Likewise,37%have shopped at a different retailer or ecommerce site,an increase of 9%.While price is largely driving this shift,consumers

45、also list novelty as an important reason for trying new products.Building value propositions around innovation and value are potentially winning strategies at the current moment.Maximize Your Ad Budget in 2023Todays consumers see more ads than ever before between 4,000 and 10,000 ads per day across

46、an ever-growing range of channels,reports Forbes.Its increasingly difficult for brands to cut through all that noise.Thanks to their environmental context,print and in-store ads tend to have better retention rates than digital ads.Digital out-of-home advertising,however,allows brands to capture the

47、benefits of traditional advertising but provide far greater control over targeting,measurement,and attribution.The same principle applies to branded product pages.Commerce media is nothing new.Brands have been paying stores for end-of-aisle displays or prominent promotions for years.The real change

48、is the rapid rise of retail media networks(RMNs).Todays consumers see more ads than ever before between 4,000 and 10,000 ads per day.46%of U.S.consumers have recently tried new brands.46%Source:McKinsey&CompanyDIGITAL SHELF INSTITUTE:NAVIGATING THE NEW NORMALP A G E 1 2 O F 2 4RMNs allow brands to d

49、isplay targeted ads close to the point-of-sale system,on their app,on their website,or on digital in-store displays.They can offer attractive returns on ad spend(ROAS)too.A McKinsey report estimates that consumer goods companies can increase their ROAS by three to five times by using RMNs.Amazon cur

50、rently operates the largest RMN in the world,with 160 million U.S.Amazon Prime users in 2021,reports Statista and owns purchase-level data for each of them.Walmarts RMN,Walmart Connect,brings together vast amounts of data on its customers shopping habits from across its brick-and-mortar stores and d

51、igital ecosystem.Brands with no or limited direct-to-consumer(DTC)capabilities lack the data required for a cookieless world.RMNs allow brands to leverage retailers first-party data to bridge the gap left by cookie depreciation.One major advantage of having this data is being able to deliver targete

52、d advertising at the point of sale.But brands and retailers can gain even more from collaborating,including product innovation and connected campaigns.Big CPG manufacturers like Reckitt Benckiser Group,The Kellogg Company,and Mondelz International are spending between 10%and 20%of total ad spend on

53、retail ads,reports MediaRadar.Global retail media advertising was forecasted to hit$75.1 billion in 2022,with year-over-year growth of 80.1%,according to global information services company NielsenIQ.Despite the benefits,RMNs do pose risks for brands especially if they become a mandatory part of the

54、 retailer-brand business relationship.For CPG brands,however,slotting fees,markdown money,and other charges are a feature of many brand-retailer relationships.Brands are often far more dependent on retailers than retailers are on specific brands.But brands can adapt their brick-and-mortar strategies

55、 to their RMNs by diversifying distribution channels,using social and influencer media to form direct customer relationships and brand loyalty,and gathering data on consumer purchasing habits.DIGITAL SHELF INSTITUTE:NAVIGATING THE NEW NORMALP A G E 1 3 O F 2 4Keep Up With Consumer ConsiderationModer

56、n consumers have access to unparalleled levels of information about the products they buy.Before making a purchase,consumers seek out influencers,browse product information,read reviews,compare competitors products,and search for the best deals.In the past,this behavior was more common in younger di

57、gitally native consumers.But today,nearly all consumers conduct some level of research before buying.In fact,digital literacy increased substantially amongst older people during the pandemic,according to The Economist.As inflation continues to impact income,consumers are likely to expand their resea

58、rch even further.Build a Fluid and Flexible Research ProcessAmazon allows users to check product specifications,read reviews,and compare prices.YouTube replaces the in-store experience,allowing potential buyers to get impartial information on performance and see the product in use.TikTok has become

59、a haven for product research and consumer recommendations.Each platform provides an opportunity to connect with and influence the customer as they look to make a purchase.To best reach customers,content should be native to the platform,consider user intent,and provide consumers with the information

60、they need to make an informed decision.When a customer finds your product,first impressions count.Product pages that contain detailed product information and high-quality media convey your products value.A Salsify report found that Amazon products with higher-quality product pages generated 2.5 time

61、s more sales than other products.Position Your Premium Brand To Stand Out OnlineConsumers become value-conscious during recessions which isnt quite the same as being price-conscious,though good deals certainly help seal the deal.According to the Salsify 2023 consumer report,96%of global consumers sa

62、y that rising costs are influencing the way they shop,and almost three-quarters are actively looking for discounts.For brands that typically sell through retailers,the online world provides new ways to communicate their value to consumers.Take The Bar from the multinational alcoholic beverage brand

63、Diageo as an example.The Bar showcases its alcohol products alongside recipes created by famous mixologists,with sales and fulfillment provided by the online marketplace Reserve Bar.DIGITAL SHELF INSTITUTE:NAVIGATING THE NEW NORMALP A G E 1 4 O F 2 4Social commerce,a massive phenomenon in China,is s

64、till in its infancy in the U.S.,but its growing fast.One University of Almeria study found that influencers not only helped boost brand engagement but also increased the expected value of the brand and the consumers intention to purchase.Several brands are experimenting with social commerce.Blooming

65、dales partnered with Bambuser,a livestreaming ecommerce provider,to create a shoppable red-carpet event as part of New York Fashion Week.Several fashion brands and retailers,including Gucci,Ted Baker,and Moda Operandi,have also experimented with livestreams,partnering with stylists and fashion desig

66、ners to enhance the shopping experience.Take Control of Purchases and ServicesBrand manufacturers tend to lack control of the purchase and delivery processes.To address this challenge,brands should identify the areas in which they have influence particularly in their retailer partnerships and build

67、programs that allow them to connect directly with customers via DTC channels or post-purchase loyalty programs.Consider Product Availability and DeliveryTodays consumers expect a seamless,predictable,and fast experience from when they add a product to their cart to when they receive their purchase.T

68、he battle to win shoppers has led to retailers offering a range of costly and,in some cases,untenable fulfillment services,including free returns and next-day delivery.But consumers dont value all services equally.By far,the most important factor that influences the purchasing decision is free shipp

69、ing.Brands should work with their retail partners to ensure that fulfillment processes meet consumers demands.Brands that control their fulfillment processes should consider scaling back costly offerings that dont significantly move the dial.Instead,they can reduce costs by using inventory managemen

70、t systems,partnering with third-party logistics providers,and optimizing delivery routes.Prioritize Omnichannel CommerceThe rapid rise in ecommerce caused many to predict the end of brick-and-mortar stores.That hasnt happened.In-store sales are well above their pre-pandemic levels,and todays shopper

71、s hop freely between online and offline channels.More than 80%of consumers have shopped on at least three separate channels in the last six months,according to advisory firm PwC.DIGITAL SHELF INSTITUTE:NAVIGATING THE NEW NORMALP A G E 1 5 O F 2 4But the physical store remains a key part of the purch

72、ase process for three-quarters of shoppers,including 27%of consumers who prefer hybrid online-offline shopping experiences like buying online and picking up in store,reports the IBM Institute for Business Value.The best retail partners are already engaged in digital transformation efforts.As those t

73、ake shape,theyll create new opportunities for brands to partner with retailers to create more interesting and engaging experiences.In the meantime,brands should be asking how they can link online campaigns to in-store events to create consistency across all channels.Explore DTC OpportunitesFrustrate

74、d by the lack of control over aspects of the retail experience,some brands are exploring DTC opportunities.Dyson,for example,has built a DTC strategy based on maintaining its premium image and enhancing the purchase process,notes Intelligence Node.It offers a number of benefits for buying direct,inc

75、luding price matching,a 30-day return policy,and authenticity guarantees.Other premium brands,including KitchenAid and Nespresso,are adopting similar strategies.Another major advantage of building a DTC channel is gaining access to first-party data.The threat of cookie depreciation and rising privac

76、y concerns are posing major challenges for brand marketers.At the same time,consumers are coming to expect more personalized experiences.Armed with data,brands can tailor their marketing efforts to deliver these experiences.Loyalty ProgramsLoyalty programs are another solution to collecting first-pa

77、rty data and delivering personalized experiences.The Pampers Club,an app and rewards program created by the Procter&Gamble Company,for example,provides cash-back rewards,personalized offers,and a wide range of content relevant to new parents.Digital loyalty programs work when theres a clear value ex

78、change.A survey from review software company Capterra found that 84%of online consumers are willing to share their personal data,but only if they know how its being used and have a reason for sharing.Sixty-five percent of regular online shoppers are willing to provide demographic data in exchange fo

79、r coupons and discounts,and 35%would share this information for personal recommendations.The lesson for brands?Limit your data collection to only the information needed to provide a personalized experience.A brand selling nutritional supplements may have valid reasons to ask members to fill out a su

80、rvey on diet and exercise.They probably dont need to know other forms of personal information,and asking for more can break consumer trust.84%of online consumers are willing to share their personal data,but only if they know how its being used and have a reason for sharing.84%Source:CapterraDIGITAL

81、SHELF INSTITUTE:NAVIGATING THE NEW NORMALP A G E 1 6 O F 2 4Gathering first-party data is only the first stage.Brands then need to build models that allow them to use that data to enhance the customer experience.As we enter an economic downturn,offering promotions is often a better long-term strateg

82、y than simply cutting prices,which risks damaging a brands perceived value.Promotions can effectively retain price-sensitive but loyal customers and attract new customers.A smart first-party data strategy uses data to determine which customers are most likely to respond to promotions and when.What C

83、omes Next for Brands in This New Normal?Will inflation peak and start to fall?Are we facing a prolonged downturn,or will the economy recover in 2023?How the economic situation develops depends on multiple interconnected factors,from geopolitics to interest rates and labor markets.The same applies to

84、 shopping patterns:The channels and platforms that are driving growth today are unlikely to be the same as those driving growth tomorrow.The digital world is constantly evolving.Innovations like augmented and virtual reality are already starting to transform the shopping experience.Recent advancemen

85、ts in artificial intelligence are showing how intelligent voice-enabled search can transform the discovery and consideration process.One thing is clear,though:To be successful,brands need to build agile and innovative organizations.Experiment with the latest technologies and ways of using data.Engag

86、e with your customers in new ways and on new platforms.In a world where margins are squeezed at every turn,brand and retailer partnerships can unlock mutual value.DIGITAL SHELF INSTITUTE:NAVIGATING THE NEW NORMALP A G E 1 7 O F 2 4Digital Shelf InstituteThe Digital Shelf Institute(DSI)is a community dedicated to developing and sharing the best actionable insights and strategies for brand manufacturers to win on the digital shelf.Become a Member