We are in a Consumer Spending Bubble, but will it Burst?
I have spent my entire career in the retail space, always obsessed with the consumer and what is the driving force behind their purchases. More recently I’ve had the ongoing thought that “abundance is not always a good thing”. I have contemplated this in my head because things have become far too easy for our society. The US economy is primarily held together by consumer spending…simply put we like to buy things. And with the advent of technology (mini computers in our hands), social media platforms, sophisticated algorithms and the desire for more…the BUY BUTTON is at our fingertips and our orders reach our hands in a matter of days. So here are some thoughts that are top of mind for me as I survey the consumer landscape.
Lower barrier of entry: It has become much easier to create products. Supply chains used to be hidden behind the walls of big brands, but not anymore. There are networks of factories overseas that can manufacture products at all different quantities. You can slap a logo on an existing product and call it a day. Print on Demand has leveled the playing field for soft good printables. You got an idea? Publish that design on Amazon Merch on Demand or Etsy with Printify and you don’t even need to print or ship the product yourself. Which leads me to the next point…
Audience generation: You just need someone to buy your product. So on top of branded products, customers will buy products from their favorite teams, musicians, creators, influencers, you name it. Customers can easily amass a ton of stuff. So no longer is the actual product itself the differentiator, it is just the personality attached to it. If someone can build a dedicated audience, they can easily sell to that audience and that is what the influencer generation has done. Do ladies need Stanley Cups in all colors of the rainbow? Influencers are now a primary marketing vehicle for brands since traditional marketing is not as important. And there are the top influencers realizing they themselves are brands and create their own lines of product to control the narrative and not have to be at the mercy of brand partnerships.
Price is king: And stuff is incredibly cheap. Remember when fast fashion was introduced and things were just unrealistically cheap? I worked for Forever21 and the price points were insane and what kept the lights on was velocity…get the consumer to buy more and more because it is so cheap and we will achieve scale. Fast forward to today and we have players like Temu and Shein that have disrupted what we thought was already so cheap.
Buy Now Pay Later: A growing enabler to this trend. Where I think it will eventually come to a head is with the growing use of BNPL (Buy Now Pay Later). All over the news we see inflation is rampant and in my opinion, society is a bit drunk on amassing stuff, which is fueling the problem because people have been programmed by the algorithms and marketing to just “buy it”. If wage increases continue to be stagnant, the cost of living is increasing and consumers are utilizing BNPL more with default rates doubling over the last three years…things could get to a breaking point. I mean, the fact that a pair of socks on an ecommerce site can be purchased with BNPL is just wild.
This isn’t a doomsday call out, but the writing is on the wall that society is going down the wrong path. What it comes down to is making sure that quality product is the focus and money is spent on the appropriate amount of quality items and not on a bunch of crap. As a consumer we have to see if the product is made well and evaluate how much value it truly brings. But by no means am I immune to it, I get wrapped up into the same craze…I am just trying to be more conscious of it.