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What Consumer Spend is Signaling to SMBs about the Future

3 Mins read

A bellwether for the year ahead, how consumers choose to spend their money today often foreshadows what businesses – and even the economy – can expect in the weeks, months and years to come. With that in mind, the SpendTrend team at Fiserv took a deep dive into consumer spending patterns from Q4 of 2022 and found that increases in credit, contactless payments, and omnichannel interactions are shaping a future more intricately connected to experiences.

Our analysis measures proprietary payment data from Fiserv operating systems, including the Clover point-of-sale and business management system for small- to mid-size businesses and the Carat global commerce platform for large enterprises. Analyzing all card-based forms of payment to measure actual same-store sales activity between October 1 and December 31, 2022, we tapped into brick-and-mortar and online sales at nearly two million merchant locations to form a representative sample of commerce in the United States.

Here are four trends we found to be most relevant and some insight regarding what they may mean for small business owners:

1. Consumers are Spending on Experiences: Businesses that sell experiences, notably in the travel, leisure and entertainment space, saw more than 20% spending growth in the fourth quarter as shoppers increasingly began to purchase experiences in lieu of physical goods. To capitalize on this trend, traditional small businesses can consider selling experiences that fit well within their existing business models. Some examples might include an art studio offering pottery classes, an Italian restaurant marketing pasta making lessons, or even membership programs that allow loyal customers to tap into special events.

2. Credit Usage is Climbing: Driven by a decrease in disposable income, inflationary pressures, and historical lows in personal savings rates, U.S. consumers are reaching for their credit cards more often, sending credit usage climbing (+6.5%) faster than debit (+2%) to end 2022.

With purse strings tightening, many consumers are looking for creative ways to stretch their buying power. While credit provides the customer one avenue, some are also turning to special offers, such as gift card promotions, to get more bang for their buck. Others are adopting flexible payment options, such as Buy Now, Pay Later (BNPL). Businesses that offer their customers more payment choices at checkout are able to create better experiences for their clientele.

3. Contactless Momentum: It took time, and maybe even a pandemic, but contactless payments in the US are sustaining momentum – albeit a decade behind many international markets. What sectors are seeing the fastest contactless growth rates? Restaurants and retailers, which saw usage of contactless payments grow 114% and 56% respectively.

The adoption of contactless payments is an important security evolution that both benefits a business and signals a shift in how consumers plan to engage at checkout. Modern consumers expect to be able to tap a card at the point-of-sale or use their mobile device to pay with a digital wallet. Some small business owners are even using QR codes to capitalize on the trend, such as those enabled by Clover that allow businesses to accept contactless payments from PayPal and Venmo accounts.

4. Omnichannel is Driving Big Box Growth: Omnichannel interactions that give customers a unified digital/physical purchasing experience, such as in-app, order ahead, and pickup-in-store, are more than fads. Today’s businesses are tasked with selling seamlessly across all channels, engaging customers at multiple points in their customer journey, and packaging each touchpoint into a refined brand experience. Who is doing it best? Unfortunately, for small business owners, big brands are beating them to the punch. Large national merchants grew sales (+6.3%) through Q4 of 2022, nearly doubling the growth of SMBs (+3.2%). Big brand growth was driven by a huge boost in omnichannel spend (+11.3%), an increase not mirrored in small businesses.

Small businesses that want to succeed against larger competitors should consider expanding their customer engagement channels beyond the four walls of their physical store, whether that means selling in-app or online, through marketplaces, or even social media platforms.

As businesses prepare for the future, taking an in-depth look at current payment trends provides a critical viewpoint into what is to come. Modern consumers are increasingly shopping across channels, looking for contactless options, and want flexibility in how they pay. By better anticipating how, when and where customers want to shop, each business positions itself to create the best possible experience for their customers.

Dan Parzych is the SVP, Analytics Products and Innovation at Fiserv.

Consumer spending stock image by ESB Professional/Shutterstock

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