By: Michael McNamara, Katheryn Stanwick and Meena Raman
Published: June 18, 2024 | Updated: June 18, 2024
Read time: 6 minutes
Introduction
Business leaders need to make informed decisions. However, fast-evolving market conditions, from demographic shifts to changing competitive dynamics and consumer financial health, have made forecasting particularly difficult.
While making accurate predictions is no easy feat, there is a wealth of information that can help. Keeping a close eye on consumer spending preferences — from where consumers are shopping, to what they are buying, to how much they are spending — can help you stay on top of the trends and make more educated decisions.
What are consumer spending patterns?
Consumer spending patterns are defined as trends in what consumers are spending on goods and services for personal use. This encompasses all household spending, from groceries and household necessities to apparel and electronics, to dining, travel and entertainment. Consumer spending patterns can be segmented and measured in a number of ways — by industry, geography, or sales channel, to name a few.
Consumer spending follows a predictable pattern, particularly for traditional brick-and-mortar sales. These patterns are closely tracked in SpendingPulse™, which measures in-store and online retail sales across all forms of payment.
According to SpendingPulse™, Saturday is the peak day for in-store shopping in the U.S., so spending typically spikes then. When analyzing consumer spending over the course of a year, a similar predictable pattern begins to form. Spending tends to be lower at the beginning of the year, starts to pick up by summer and peaks during Black Friday and the holiday season.
What factors contribute to spending patterns?
There are many drivers that contribute to consumer and household spending patterns, and some are more predictable than others.
Day of the week, time of year and holidays all drive predictable spending patterns that can be seen from year to year. The majority of candy sales occur around holidays like Valentine’s Day, Easter and Halloween, for example.
Macroeconomic factors also dictate how confident consumers are in their purchasing power and how they approach spending decisions. When the labor market is strong and wage growth outpaces inflation, consumers are more likely to spend confidently.
Examples of spending patterns
Spending patterns unfold in front of our eyes every day, from changes in consumer behavior around major cultural milestones to naturally occurring events.
One recent spending pattern example can be seen in Taylor Swift’s Eras Tour, which visited 20 U.S. cities in its first year. As fans flocked to those cities, they drove incremental sales at hotels and restaurants. According to the Mastercard Economics Institute, the concert series was such an economic force that in some smaller cities, like Kansas City, Mo., spending at restaurants over the two days of the tour accounted for nearly two weeks of “normal” spending at restaurants near the stadium.
Similar boosts in spending can be seen with other concerts, sporting events, and festivals across the world, from the ICC Cricket World Cup in India to Carnival in Rio de Janeiro.
8 reasons why consumer spending patterns change
There are many drivers behind the changes in consumer spending habits. While some are predictable, like time of year, other real-world factors can cause these patterns to break. Here are 8 of the top reasons consumer spending patterns change:
1. Seasonality
Spending patterns change throughout the year, varying from industry to industry. For example, spending in retail peaks during the holiday season. Travel spending typically ramps up closer to the summer, as people spend more on vacations and experiences, and then again during the holiday season, according to SpendingPulse™. Within travel, different sectors exhibit different patterns. Spending on airfare increases before travelers go on vacation because customers pay when booking their flights. In the hotel sector, customers typically pay once their stay is over, so spending lags slightly.
2. New products
New product launches and fads can also contribute to fluctuations in consumer spending. Over the years, releases of new technologies like phones and headphones have generated significant buzz and heightened consumer spending. The release of blockbuster video games can also drive a surge in entertainment sales and influence the broader economy. As one example, Call of Duty: Modern Warfare II surpassed $1 billion in worldwide sell-through in the first ten days of its release.
3. Commuting
Changes in when and where people work can have a sizeable impact on consumer spending patterns. As return to office mandates continue to be implemented, brick-and-mortar sales in major commuting cities may bounce back in response. Spending will tend to be concentrated on certain weekdays. For example, Tuesdays through Thursdays have seen increased lunchtime activity in parts of New York City, according to the Mastercard Economics Institute. At the same time, other workers have remained hybrid or fully remote, which has driven an uptick in online shopping.
4. Macroeconomic conditions
The broader economic landscape will always play a hand in how consumer spending ebbs and flows. A strong labor market and high employment confidence can drive increased consumer spending. On the other hand, high price inflation does not empower consumers to spend.
5. Fiscal policy
Fiscal activity at the national, state or local levels can also influence consumer spending behavior. Consider the stimulus checks that were provided during the COVID-19 pandemic. These large spikes in available cash and spending power drove boosts in consumer spending over time.
6. Stock market performance
When the financial markets are in flux, consumer spending patterns react. During the Great Recession of 2007-2009, for example, consumers were worried about job stability and savings, and spending slowed in the U.S. Stock market performance is a strong indicator of consumer confidence, so shocks like these can affect spending behavior.
7. Fuel prices
While prices in general can dissuade or encourage consumer spending, fuel prices in particular can impact spending. This is because fuel prices influence consumer mobility, which refers to how people get from place to place. When people are more likely to jump in their cars to head to the mall, brick-and-mortar sales at retailers and restaurants go up.
8. Demographic changes
Finally, the changing composition of populations over time can stimulate different consumer spending trends. For instance, global birth rates have been falling and are expected to continue falling through 2100. This decrease in the child population can have ripple effects in the broader economy, especially in the addressable market for children’s products.
How to analyze your customer spending patterns
To stay ahead of the curve, organizations can look to macroeconomic indicators of retail sales. Examining these indicators at a global or national level can help you get a sense of broader trends, but it is important to use localized or industry-specific segmentations to understand how spending patterns affect your business and storefronts specifically.
Macroeconomic insights can help organizations reduce bias as they benchmark sales and set targets. However, with the added help of testing, organizations can understand the impact of different initiatives, like price changes, and make data-driven, go-forward decisions.
Consumer spending analysis can help you answer key questions, like:
- How does my organization’s performance compare to the broader industry?
- What are important upcoming sales days?
- Where should I open a new storefront?
Current spending patterns by group
In conducting spending pattern analysis, it’s important to consider that patterns can vary considerably across different groups. Demographic insights can help you understand spending patterns by age, gender, or a variety of other factors.
Consider income level, for example. Changing fuel prices tend to have a smaller impact on spending patterns in high-income groups, but they can have a significant impact on mobility for low-income groups. When money is tight, low-income consumers may fuel up less, and thus are less likely to indulge in going out to eat. Sales at quick service and fast casual restaurants could also see a decline.
Factors like age, marital status and overall life stage also dictate how consumers spend and how much they are spending. For example, Gen Z consumers prioritize buying locally sourced and ethically produced products.
Conclusion
Consumer spending insights can provide learnings around what consumers are prioritizing. By closely monitoring how consumer spending patterns are evolving, organizations can make more data-driven pricing decisions, sales forecasts, product launches, marketing strategies and more.
However, like most things in life, consumer spending patterns aren’t always predictable. Cultural phenomena, global events and changing economic tides all have the potential to disrupt patterns. Having the right tools to predict outcomes and pressure test decisions can make all the difference.
Related resources
