Paycheck-to-Paycheck Shoppers May Demand More Deals Events This Fall

In the wake of the savings events rush of the summer, with seemingly every large merchant announcing some major discounting push, consumers are growing accustomed to shifting their spending toward predictable sales moments.

Key retailers including Best Buy and Target have been noting this trend throughout this year.

“Given the significant headwinds they faced with inflation over the last few years, consumers continue to focus on value as they work hard to manage their household budgets,” Target Chair and CEO Brian Cornell told analysts on the company’s latest earnings call Aug. 21. “And while they continue to turn out and shop around holidays and other seasonal moments, many are delaying purchases until the moment of need.”

Plus, industry giants Amazon and Walmart saw strong demand for their summer sales events. The former’s Prime Day brought in record-breaking spending this year, and compared to 2022. PYMNTS Intelligence research indicated that Walmart+ Week participation increased by 71%. The study “Shoppers Love Amazon Prime Day — but Spend More on Walmart+ Week” found that 40% of consumers participated in Prime Day and 21% made purchases during Walmart+ Week.

Budget-constrained consumers may be being trained to steep discounts on a regular cadence. August’s installment of PYMNTS Intelligence’s “New Reality Check: The Paycheck-to-Paycheck Report,” the “How Consumer Perception of Inflation Forces Many to Trade Down” edition, examined this deal-seeking behavior, drawing from a survey of more than 2,500 U.S. consumers. The study revealed that 63% of consumers live paycheck to paycheck, and their spending power is dwindling.

Specifically, 60% of those who live paycheck to paycheck without issues paying bills and 72% of those who do so with issues paying bills said their income has not increased to offset inflation at all. As such, these shoppers are making more conservative budgeting decisions. Ninety-two percent of paycheck-to-paycheck consumers in the former category and 97% of those in the latter said they have taken actions to cope with price increases when buying retail products. Plus, 94% and 96%, respectively, have done so for grocery products.

The study found that in response to inflation, 42% of consumers have adopted the “budget shopper” persona when purchasing retail products. These consumers “trade down by turning to cheaper merchants and plan their purchases around sales and discounts.” Nearly half of those who live paycheck to paycheck without issues paying bills and 4 in 10 of those who live paycheck to paycheck with issues paying bills fall into this retail shopping persona.

With the next round of predictable sales events arriving for the Labor Day holiday, consumers’ engagement with retailers’ discounts on offer will provide key insight into whether they continue to rush to spend during seasonal sales or whether they are all shopped out after a summer of deals events.

Each sales season serves as something of a predictor for the next, with retailers monitoring consumer trends from savings event to savings event.

“It is nice that the early days of back to school went well,” Walmart CEO Doug McMillon told analysts on the company’s earnings call in August. “Sometimes — most times, I guess — that does give some indication as to how Halloween and Christmas will go.”

This period will provide insights into how persistent inflation and paycheck-to-paycheck consumers’ dwindling spending power are shaping shopping habits. Retailers will be watching closely to see if the trend toward deal-seeking remains strong or if shoppers are adjusting their approach to budgeting and purchasing in response to ongoing economic pressures.