The drop in consumer spending is definitely affecting retailers. “Americans tend to resort to cash in troubling times” according to credit expert Howard Dvorkin and reported earlier this week in Money Magazine, “and they spend 30% less when paying cash than when paying with a credit card." So, retailers are seeing lower transaction volume and lower average tickets. E-tailers are being hit worse, since cash is not an option for purchasing online.
Even the most gung-ho Web enthusiasts are spending less online according to a 10/24 report on Yahoo! Tech News. Desperate to goose their sales, e-tailers are sending email more frequently. Internet Retailer's recent survey of 174 Web retailers, including those that operate stores, found nearly half have increased the number of monthly e-mails they send compared to a year ago.
At the same time, or as a result, consumers are becoming annoyed with e-mail in general. As unsolicited commercial e-mail volume increases, Forrester reports that consumers are turning increasingly to social networking sites, texting and other communication channels. Ironically, while e-tailers are more dependent on email than ever, they are also reducing its effectiveness and speeding the adoption of Web 2.0 social networking tools.
The payments industry is also hurting as a result of the shift to cash. All credit card company stocks are down sharply.
What changes should consumers expect to see in the purchase experience as a result of declining retail sales and credit card volume? Here are my predictions:
- More sellers and merchants accepting PayPal online and off, creation of new PayPal payment tools and solutions like the PayPal Pay Later option introduced in May, and introduction of new solutions like eBillMe
- Return of the layaway plan, the ultimate loyalty program. While Wal-Mart phased it out in 2006, Kmart, TJ Maxx, Marshalls and Burlington Coat Factory, have reintroduced layaway plans this year, and I suspect others to follow
- Emergence of sites like recently launched eLayaway.com, luring consumers with iPod Touches for “as low as $42.23 a month”
- Banks and credit card companies offering double points for gas, groceries, and other sweeteners to get us to use our cards!
- E-tailers conducting more frequent, richer promotions to entice online shoppers to continue spending/shift more of their spending online
Between new payment products and Web 2.0 social networking solutions, we have some good tools to take our minds off the economy and the election, at least for a few mintues.