Our Latest Retail Data Shows Shoppers Are Holding Out for Discounts

Is the economy improving or not? Should retailers be optimistic or worried? Economic indicators are still pointing every which way and the messages seem to contradict each other daily. But if you delve into the numbers of our Q2 Shopping Index, the results get clearer. 

First, the good news: Global online sales growth is trending upward. The bad news is U.S. online sales are in the red for the first time since we started the Shopping Index in 2014. Strong macroeconomic headwinds are still putting downward pressure on consumers worldwide to spend carefully and save more, which could impact retail strategy for the balance of 2023. (But there are signs of hope: parts of Europe are finally getting their groove back, with online shopping rates returning to normal after the pandemic.) 

So what’s driving shoppers to open their wallets? Discounting. Based on our latest research, the most effective tactic for getting shoppers to visit your website in the first half of 2023 was sending them a discount code. Facing economic uncertainty, consumers are searching for a good deal. Retailers are listening, with second-quarter discount rates increasing by 12% over last year and 19% over 2021.

What does this mean for your retail strategy? Check out are our key findings from the second-quarter Shopping Index:

Europe shows signs of recovery

Europe began feeling economic strain in early 2022, at the start of the war in Ukraine. The region saw online sales decline throughout the rest of the year as inflation, political conflict, and extremely high prior-year comparisons put strain on online sales. 

But the first half of this year has hinted that European online performance may be headed towards recovery. The results of the first quarter showed the region starting to stabilize. This continued in the second quarter, as online sales grew 1% for the entire region, with Germany, France, and Spain showing strong positive growth.

The UK, however, still faces economic challenges, with sales down 3% year over year. The nation’s consumers are still experiencing rapid inflation growth, even as other regions are seeing a slowdown in price increases. Despite softer sales, UK retailers pulled back on discounting to preserve margins as costs continued to rise. Average discount rates fell 12% over last year, likely contributing to the UK’s softer sales growth compared to European Union countries. 

While the UK may still have a rough road ahead, the rest of Europe appears to be settling into more predictable online sales growth, following the pandemic-era surge of 2020 and 2021. 

Action plan: In Europe, focus your retail strategy on building customer loyalty by delivering timely and personalized promotions for their customers. 

U.S. shoppers pull back on online orders

One thing holds true about U.S. consumers – despite economic challenges, they are resilient. While inflation rose over the last two years, shoppers continued to deliver positive online growth to the retail industry. 

But we started to see cracks in the foundation in the second quarter, as online sales fell 1%. While small, this drop is the first time online sales volumes have fallen behind the previous year since we began tracking the Shopping Index in 2014. Not only was spending down, but the number of orders shoppers placed dropped 4% — the largest decrease over the last five quarters. 

The drop in sales is likely related to U.S. shoppers facing higher prices for consumer products. While sales were down, the average order values were up 3% year over year to $124.45, and prices remained stubbornly high despite an 11% increase in discount rates. Even with the pullback on spending, online traffic remained strong, growing 2% year over year as consumers hunted for deals. 

Still, U.S. shoppers are remaining loyal to their favorite online brands and retailers. Although order volumes dropped, retailers are seeing an increase in the share of online orders coming from repeat shoppers, which rose 5% year over year to 39% of all orders. 

Action plan: U.S. retailers should double down on efforts to retain their loyal customer base, focusing on a deliberate and personalized discounting strategy.

Marketers slow their email outreach

As consumers face shrinking wallets, marketers are grappling with shrinking budgets. Inflationary pressure on retailers means marketers have to do more with less. Many of them are reducing the number of marketing messages to email inboxes. 

The send rate of marketing messages increased just 6% in the second quarter of this year, down from 28% in the second quarter of 2022. The rate of deceleration was greatest for email marketing, which saw growth of only 3% compared to 21% in the same quarter of 2022. In fact, mobile messages carried much of the growth for the quarter, rising 28% year over year, indicating that marketers were prioritizing more intimate forms of marketing engagement as part of their retail strategy.

Still, retailers’ marketing efforts are making an impact. Despite the deceleration in message sends, consumer engagement remained strong. The rate of message opens was steady, quarter over quarter, at 21%. Click rates also stayed the same, holding at 0.7%. What does this mean for the back half of 2023? Volume does not necessarily equal engagement. 

Action plan: Focus on relevant and timely messaging that delivers value to your customers. And engage them on the channels and devices that they prefer.

What’s my retail strategy for the second half of 2023?

The retail industry is at the starting line of a six-month marathon. From Prime Day and back to school and throughout the peak holiday shopping season, there are many opportunities to engage with your most loyal shoppers. If the 2023 Prime Day results are any indication of what’s to come, shoppers are going to be bargain-hunting and waiting until they know they are getting a good deal. 

Action plan: For the rest of the year, focus your retail strategy on promotions, customer engagement, and building relationships with your most loyal shoppers. Read our 2023 holiday predictions to learn more about setting up for success during the most important time of the year. 

Methodology

Powered by Salesforce platform data, the Shopping Index uncovers the true shopping story. We look at the previous nine quarters to uncover a deep understanding of how consumer behavior is evolving and how the market is moving. The Shopping Index analyzes the activity and online shopping statistics of more than 1.5 billion unique global shoppers from more than 67 countries. This battery of benchmarks covers both the recent history and current state of digital commerce. Several factors are applied to extrapolate macroeconomic figures for the broader retail industry, and these results are not indicative of Salesforce performance.