Consumers Are Leaving Major Cities, Slowing Retail’s Digital Transformation

The impact of the pandemic on consumers’ geographic distribution has continued, with shoppers increasingly residing outside of major urban areas, and this trend away from cities is decelerating retail’s digital shift.

PYMNTS’ Q1 eBook, “The Implications of Uncertainty,” collects insights from 18 payments industry executives to understand how data can help firms navigate unpredictable times. Alex Gonthier, founder and CEO of Trustly, spoke to how the pandemic has transformed how — and from where — consumers shop.

“The economy is still feeling the aftermath of the pandemic, which completely disrupted the way we live and work,” Gonthier wrote. “In the U.S., consumers changed their physical location, their shopping habits and their spending patterns, leaving businesses guessing who they’re working with and what their customers may need.”

As the United States Census Bureau reported Thursday (May 16), exurbs are seeing greater population growth than before the pandemic, which the Bureau’s Population Division attributes to the ongoing effects of how COVID-19 changed consumers’ lifestyles.

“We tend to think of [exurbs] as far outer suburbs of metro areas,” said Luke Rogers, a Population Division demographer, stated. “Exurbs have sometimes been among the most rapidly growing communities, but this appears to be even more true now than before the pandemic.”

The bureau cited high housing costs and the increased ability to work remotely as drivers of this shift.

These moves affect how consumers are likely to shop. For instance, they may keep consumers coming to stores. The PYMNTS Intelligence study last year, “ConnectedEconomy™ Monthly Report: The Urban-Rural Health Divide Edition,” which drew from a survey of nearly 2,500 U.S. consumers, found that those living outside of cities shop online significantly less. The study found that 70% of consumers in urban areas shop digitally, versus 37% of those in suburban areas, and 30% of those in rural areas.

This disparity began during the pandemic. PYMNTS Intelligence’s November 2020 study, “The How We Shop: Winning The Digital-First Shopper Report,” showed that 47% of consumers who lived in large cities had shifted from in-store retail shopping to online retail shopping, compared to 36% of those who lived in rural or farming areas.

Conversely, supplemental research from the study found that consumers in suburban areas participate in 77% more non-digital shopping activities than those in urban areas, and rural consumers participate in more than twice as many such activities as their urban counterparts.

Indeed, the vast majority of U.S. consumers engage with the physical store during their retail journey, per findings from the PYMNTS Intelligence study “2024 Global Digital Shopping Index: U.S. Edition,” created in collaboration with Visa Acceptance Solutions. The study revealed that a plurality of shoppers (44%) prefer to make retail purchases in stores without interacting with digital technologies, and another 19% prefer to shop in stores with the assistance of digital features. Only 26% of shoppers prefer not interact with the store at any point in their purchasing journey.

The shift in consumer geography, driven by the lingering impacts of the pandemic, has left a marked influence on retail’s digital transformation. As consumers migrate to exurbs and rural areas, their shopping habits remain more rooted in physical stores than in digital alternatives. Retailers, therefore, must balance their digital initiatives with strategies that cater to these preferences, ensuring they meet the needs of consumers in these environments.