Conflicted consumers drive supply chain changes

It’s a high-cost world, and getting pricier all the time.

Businesses have been feeling the pinch of inflation for two years, and recent interest-rate increases are compounding the problem. Borrowing is becoming more expensive, which may lead companies to think twice about new investments in capital equipment, infrastructure, or business development projects. 

Consumers are likewise feeling the effects of a challenging economy. Inflation hit a 40-year high one year ago (June 2022) and remained near record-high levels through the first four months of this year. Early reports showed that consumer sentiment slipped to a six-month low in May, reflecting widespread concerns about inflation, rising interest rates, and political squabbling over government spending that had garnered headlines during much of the month.

These sentiments were reflected in an industry report released this spring that pointed to new trends in consumer buying habits—trends that reveal an increasingly cost-conscious consumer who nevertheless continues to place high demands on retailers, brands, logistics companies, and others across the supply chain. International e-commerce and mail delivery company Asendia surveyed 8,000 consumers worldwide in February, asking about their buying decisions and outlook for the year ahead. More than 1,000 of those surveyed were U.S. consumers. The results showed that more than half of consumers (52%) cited price as a top consideration in their buying decisions in 2023, a factor the researchers attribute to cost-of-living pressures. At the same time, three-quarters of consumers said they remain “sustainability-minded” in those decisions—and that they’re willing to pay the price. More than 20% of respondents said they would pay more for 100% carbon-neutral deliveries, for example, and 23% said they would pay more for greener fulfillment options—even if it meant the item took longer to arrive.

A separate survey of retailers underscored the trends.

“[Fifty-eight percent] of retailers surveyed by Asendia said that in the last year, shoppers were buying less frequently, and that basket sizes are down,” according to the report. “This trend will continue. Looking ahead, 70% of U.S. shoppers said they planned to cut back on spending in 2023 due to economic uncertainty, yet they are also re-evaluating how and what they buy to minimize their environmental impact.”

So maybe consumers will purchase less but pay a little more for it to stick to their principles. Time will tell, but one thing seems clear: Consumers have long been driving the sustainability trend, and it looks like that will continue, even in a tough economy. According to the survey, shoppers expect retailers to ship with reusable-only packaging (more than a third said so), provide carbon-neutral delivery on international orders (23%), and use electric vehicles for domestic fulfillment (24%). Such demands are raising the stakes for retailers, according to Renaud Marlière, Asendia’s global chief of business development.

“This is creating what we’ve [termed] the ‘conflicted shopper’: consumers who seek value for money—acting with price-sensitivity and spending caution—on one hand, but want to consume in line with their values on the other, opting for eco-conscious decisions across their buying journey, from product choice to fulfillment methods,” he said in a statement announcing the report’s findings. “Retailers now need to cater to both ends of the conflicted shoppers’ value spectrum if they are going to win customers, loyalty, and lifetime value.”

That may be tough at a time when retailers are facing many of the same cost pressures in their own businesses. Many large retailers have announced layoffs and other cost-cutting measures recently, including Walmart’s move in April to slash 2,000 jobs at five of its e-commerce warehouses in the United States. Online retail giant Amazon has cut about 27,000 positions this year alone, including jobs in its e-commerce business and its brick-and-mortar stores.