Shoppers are switching to online, but not all demographics behave the same
We analyzed spending data for 15 major retailers, including Walmart, Macy’s, Bloomingdale’s, and Apple. To assess the data, we broke up the spend into two components: online spend and credit card transactions at brick-and-mortar retail locations. (For a full list of retailers, please contact us). We wanted to see if consumers are reacting to rising gas prices by choosing to drive less and thus shopping more online.
Our data tells an interesting story, albeit not too surprising.
As the prices at the pump gradually increased from under three dollars to around four dollars per gallon, consumers shifted to online shopping overall. The trend is slightly obscured by the large seasonal spike in online spending from holiday shopping. But looking at the general levels of summer online shopping in 2021, as a percentage of total dollars spent, it was significantly lower compared to this summer. The reaction was gradual, unlike the more recent abrupt spikes in gas prices.
Notably, the reactions to these spikes are very different among consumers.
The average consumer did not change their online shopping behavior in any meaningful way from March to July of this year, a period in which gas prices experienced two sharp upticks. In fact, we see a small reduction in online spend (as a percent of total) in the spring, just after the first sharp increase in gas prices. In the following months, with gas prices at relative highs, the average consumer increased their online spending only marginally. This indicates that by-and-large, the average shopper is not super sensitive to short term volatility of gas prices.
But this lack of consumer reaction ignores the trends related to income demographics.
Breaking up the spend into three cohorts – top 25%, middle 50% and bottom 25% of spenders – tells a more nuanced story. Importantly, we use total spend per customer as a proxy for total income. Under this assumption, there is a high correlation between total discretionary income and total spend with the caveat being shoppers who spend more than they make, taking on debt to finance purchase.
Analyzing the spend for just the lowest quartile of income earners, we can observe a meaningful change in short term behavior immediately after the two gas price increases. This is potentially a reaction to the increased cost of travel.
Source for Gas prices: “U.S. Energy Information Administration (July 2022).”
Because this sharp increase in online spend is only present in the lowest income demographic, we can infer that that gas prices and online shopping are connected for some consumers – specifically it is the low-income shoppers who are more sensitive to gas price volatility.
About Our Data
M Science’s Corporate Retail data helps strategy, analytics, and market intelligence teams in the Retail industry track consumer spend across all various sub-sectors and demographics. Our clients use this data for benchmarking, market research, product marketing and positioning their brands for success through data-driven decision making.
About M Science
M Science is a global data-driven research and analytics firm, with nearly 20 years of experience uncovering new insights for some of the world’s largest corporations and financial institutions. We revolutionize research by discovering new datasets and pioneering methodologies to provide actionable intelligence. Learn more at: mscience.com/corporate intelligence. M Science is a portfolio company of Leucadia Investments, a division of Jefferies Financial Group Inc. (NYSE: JEF).
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