As digital marketers it is our job to keep track of consumer shifts in the market and pivot as needed. 2023 is proving to be a challenging year for many small business owners and we wanted to take a moment and address what we are seeing and how to navigate these shifts in consumer spending and sentiment.
If it feels like lately you are spending more and getting less in return, you’re probably right. We understand that the times, and finances, are challenging. We’ve seen over the course of this year that, collectively with our clients, we’ve had to work twice as hard and spend twice as much to get the same marketing results as in previous years. But this shift goes way beyond the marketing space. We are facing a unique set of financial circumstances that seem to be shaping a consumer-led recession. Let’s take a moment to break down the factors driving this recession, why it matters, and what we can do to navigate it.
A Perfect Storm of Factors
In the post-pandemic era we have heard about the recession looming on the horizon. We’ve seen inflation affecting everything from gas prices to groceries and utilities. According to Moody’s Analytics, in July of 2023, households spent an average of $709 more on the same goods and services they did just two years ago. Mortgage rates have hit a 23 year high, raising mortgage payments significantly. This spike in rates has pushed more people to the rental market which in turn, has contributed to higher rental rates. American consumers have spent down the entirety of their excess savings from the pandemic, which at one point totaled over $2 Trillion. For many, there is no cushion to fall back on.
The Plastic Predicament
Credit cards are so easy to tap or swipe for an easy solution. But consumer credit card debt is at an all time high, hitting $1.03 Trillion in Q2 of 2023. While consumers may be carrying higher balances to help compensate for rising prices, it is a double edged sword. Interest rates have risen with APRs at a record 20.63%. Banks have noted an increase in delinquencies as consumers cope with financial burden and exhaust their savings. Card issuers may turn to lowering credit lines in order to minimize their exposure, further exacerbating the situation.
The Student Loan Shadow
Add to this mix the return of student loan payments after a three-year hiatus. A recent survey paints a worrisome picture: 56% of student loan borrowers are anticipating a tough choice between paying rent, buying groceries, and meeting their financial obligations. This is a sobering situation that could have ripple effects throughout the economy.
The important thing to remember is that we are in this together. We have a challenging road ahead, but there is also an opportunity for growth and adaptation. By crafting innovative strategies, focusing on providing value, and aligning your offerings with changing consumer behavior, your business can weather this storm and come out even stronger. We’re here to help.
-The Geek Team