Digital River (credit image/Pexels/Andrea Piacquadio)Digital River has published a report that reveals how the cost-of-living crisis has affected the UK and US consumer habits. The research, conducted by Opinium, explores how UK residents’ finances and general spending have changed over the past six months.

eCommerce remains resilient

When surveyed, 17% of adults stated that they are struggling financially and more than a third (35%) are just ‘getting by’. Yet surprisingly, this was found to have a minimal impact on their willingness to shop online. Only 8% of respondents said that they were looking to shop more in-person. With a fifth (22%) expecting to shop online more frequently in future.

With online retail remaining strong, in-person shopping looks likely to suffer the most with people tightening their budgets. 33% of respondents have shopped online more frequently in the past six months. This compared to just 9% that have shopped in-store more often.

Although 58% of UK adults have reduced their spending on non-essential items in the last six months. 47% continue to make at least one online transaction a week.

Price comparison and payment flexibility play critical role

A critical factor in the resilience of eCommerce lies in lower prices and an ability to track and compare price changes. 29% of UK online shoppers state that it is easier to track prices online than in person. 29% of those planning to shop online more, claim items are cheaper online is driving them to buy this way.

Additionally, payment methods have evolved to meet demand. Now, 15% of UK adults use buy now-pay later (BNPL) services for online shopping. With 59% doing so to stretch their budget further. Two thirds of BNPL users have used this payment method more in the past six months. 49% say this is due to their tighter financial situation. Credit card use has remained steady in comparison, with 60% using this method the same amount as usual.

Time for retailers to step up

Although online shopping remains strong, 41% of online shoppers state that online purchases would be among the first things to cut if they needed to reduce their spending.

Half of UK online shoppers (50%) say they want more help from retailers to deal with rising prices. 32% cite delivery pricing as a barrier to online shopping. 48% state that free or cheaper delivery would offer the most help with the cost of living. Respondents also pointed to more online vouchers (38%). In addition to easier price comparison (31%) as ways for retailers to step up to the plate.

(Image credit/LinkedIn/Ted Rodgers)
Ted Rogers, Chief Revenue Officer at Digital River.

We have seen how inflation has impacted our economy, consumers told us they are decreasing their spending across the board. Most notably on special occasions, including holiday shopping and vacations,” said Ted Rogers, Chief Revenue Officer at Digital River.

“However, our research has shown the pace of online spending isn’t expected to slow down despite the squeeze on finances. Brands must ensure they have optimised their digital stores to make the shopping journey as transparent and friction-free as possible. This will ensure consumers are not surprised by any extra costs,” Rodgers adds.

The US Story

In the US, 39% say they are currently financially comfortable, compared to a quarter (25%) who are struggling. 34% say they are ‘getting by’. Almost half of US adults (45%) also say their financial situation has gotten worse in the past 12 months. 24% think it has got better and 30% say it has stayed the same. US adults are slightly more optimistic for the future. However, 38% expect their financial situation to get better in the next 12 months. 27% think it will get worse.

US adults expect to reduce spending on special occasions

38% expect to be spending less at Christmas this year, with 32% expecting to spend about the same as usual. 40% expect to spend less on holidays this summer, compared to 26% who say this will be the same.

In terms of more general ways to reduce spending, 67% say they have reduced spending on non-essential items in the past six months. This is followed by reducing spend on travel (49%), essentials (35%) and utilities (26%). Just 14% of US adults say they haven’t done anything to reduce their spending in the past six months.

Online Purchasing habit

42% say they make an online transaction at least once a week, compared to 52% who do this less than once a week. Looking at this in more detail, 20% say they typically make a purchase online once a week. 19% every two to three weeks, and 18% once a month.
Most online shoppers pay for products and services using debit (63%). 51% use credit and 12% use buy now-pay later (BNPL) for some online transactions.

For those who use Buy Now Pay Later (BNPL), 67% say they do this to stretch their budget. While 48% use it to make a high-value purchase. In comparison, those who use debit mainly use it to avoid interest rates on credit cards (64%).

Just over half (55%) credit card-users say they pay their balance off in full in a typical month, with 29% only paying a portion of their balance, and 14% who used to pay off all their balance but now only pay a portion.

Online vs In-Person Shopping

A third of US adults have shopped online more frequently in the past six months
39% say they have shopped online more frequently in the past six months, with just 17% having shopped in-person more. However, 41% say they have not changed the amount they shop online compared to in person.

For those who have shopped online more frequently, 59% say this is because it is more convenient. Followed by avoiding travel costs 37% and buying certain products unavailable nearby (33%). Those shopping more frequently in-person do so because of the convenience, in-store experience (both 42%), and avoiding shipping costs (38%).

A fifth of US adults also expect they will shop more frequently online in the future
30% say they expect to shop online more frequently in the future, with 14% thinking they will shop more in-person. However, more than half of US adults (52%) say they don’t expect their online spending to change.

When asked generally about barriers to shopping more online, 45% say not being able to see products in-person. This was followed by delivery pricing (35%), current financial situation, and high prices (both 30%).

Pricing was the primary factor in whether to shop online more. 57% say lower prices in general would make them more likely to shop online. Just under half (48%) would shop online more frequently if there were more discounts. 34% if delivery times were quicker, and 26% if there was a wider choice of products.

Enterprise Times: What this means for business.

This research from Digital River delves into online spending habits, payment trends, and what consumers now demand from online retailers. The key call out from the report is that consumers are looking for practical solutions to the dwindling pound and dollars in their pocket. With the cost-of-living crisis set to continue indefinitely, retailers need to be competitive and look for ways to help their consumers. This could be through the expansion of buy-now-pay-later or reduced delivery costs. The good news from the report and confirmed by virtually every similar industry report is digital is here to stay. Both US and UK consumers expect they will shop more frequently online in the future.

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