First quarter retail data from Salesforce is indicating consumers have tightened the purse strings, as they did for most of 2023, and that trend is expected to continue for the rest of this year.
Caila Schwartz, Director, Consumer Strategy & Insights for Salesforce, said what we’re experiencing in Canada is a continued pullback in consumer spending, according to the 2024 Q1 Shopping Index.
“Inflation has remained pretty sticky even if we’re not seeing inflation at the same rates that a year or two years ago. We’re definitely not in a deflationary period. Consumers are still dealing with higher prices and we don’t know when when interest rates, or if interest rates, will come down,” she said.
“And I think that especially with the fact that borrowing money is a lot more expensive, and that’s not just hitting retail. That’s having a huge impact on mortgages, cost of living, getting a car loan, things like that. Consumers are having to make tradeoffs on where they spend. And so we’re seeing this recalibration where shoppers are focusing on what we would call either essential goods like food and beverage and health and beauty but more like the things you use every day for personal care and a pullback on luxury items.
“So we see luxury apparel, luxury handbags are underperforming. We also see that high ticket items are underperforming like furniture, electronics, appliances. And we also see that shoppers are swapping out for alternatives. For example, luxury handbags are struggling but general handbags is doing really well. If consumers are spending, they’re opting for a lower price alternative.
“It’s a continuation of what happened last year and I think as long as we remain in the current economic state, these trends will continue throughout this year as well.”
In this environment, Schwartz said retailers like Walmart with lower prices are benefiting from consumers who are spending more there.
She said research has also been launched by Salesforce, with the results coming in a few weeks, showing that shopping platforms like Temu and Shein are doing very well right now – 68 per cent of shoppers polled across U.S., Canada, Australia and the UK said they have placed an order on one of these shopping apps.
“The reason why they said they’re gravitating to these apps is because of price. They offer the lowest price and for the next six months especially towards the holiday season we asked do you anticipate starting your shopping there and 62 per cent said they are anticipating starting their shopping journey on these apps,” added Schwartz.
“That price conscious shopper is gravitating to these lower priced retailers like Walmart, like the Temu’s of the world. And they’re trading off on maybe quality for getting the lowest price.”
Salesforce’s Shopping Index found that digital commerce overall grew two per cent in the first quarter but the data showed a decline in per-visit average spend of $2.02 (down from $2.40 in the last quarter), and a drop-in conversion rate to 1.8 per cent (down from 2.3 per cent last quarter).
Bad survey question.
I placed a very small order with Temu when it first launched in Canada to check the quality. It was horrible. Two items went into the donation bag. One is in a gym bag being used to keep shoes separate. You can buy something similar at Dollarama and it will be better quality. I have no intention of ordering from Temu again.