By most accounts, 2014 ended on a positive note for Americans. The employment rate approached pre-recession levels and consumer confidence continued to inch upward. But despite these positives, consumers remain cautious when it comes to spending, even though plummeting gas prices are padding their wallets.
Gas prices declined 31% between June and December last year, which has left many Americans with a little more discretionary money than at the start of 2014. In fact, 39% of U.S. consumers in a recent survey stated that they have more money to spend due to declining gas prices. This leaves the retail industry clamoring to figure out how to capture some of those extra dollars. So what are consumers doing with that extra money, and how can the retail industry capture a piece of it in 2015?
With more than half of consumers saying they believe we are still in a recession, many remain focused on mindful spending. Handling the essential expenses is a top priority, with 50% of respondents saying they’re using the extra money to pay off bills, while 36% are paying for everyday essentials like food. When it comes to non-essentials, consumers are choosing out-of-home entertainment and clothing as their top two ways to splurge.
Due to economic perceptions, many consumers are likely to gravitate toward the middle ground when it comes to essential and discretionary spending through 2015. When asked about their optimism about the economy for 2015, 40% of consumers fall somewhere in between “not optimistic” and “very optimistic.”
|Health and Beauty Aids||-0.3%||1.6%|
With government forecasts indicating that gas prices should stay below $3 per gallon in 2015, consumers’ discretionary dollars will continue to rise—as will manufacturers’ and retailers’ efforts to capture those dollars. So what are the best ways to capitalize?
Promotions will be a key element to succeed, as consumers’ memories of recessionary struggles remain fresh. But training consumers to buy only when products are on sale isn’t the answer. Instead, retailers should carefully choose which discretionary categories would benefit most from promotions in order to entice consumers when they otherwise might not indulge.
There are also important marketing and partnership opportunities in the out-of-home entertainment realm–one discretionary area where consumers say they’re already spending. Within the entertainment arena, live music events and festivals are gaining momentum, particularly among younger consumers. In fact, Nielsen’s 2014 Music Report notes that live events now account for more than half of Americans’ annual spending on music. And when it comes to movies, young adult fiction adaptations like the Hunger Games, the Twilight Saga and the Harry Potter series are steadily growing their slice of the box office pie. They’re also broadening moviegoing to a wider audience—fiction fans that are interested in seeing how their favorite books translate on the silver screen.
The consumer insights in this article were derived from an English language online survey of 553 U.S. respondents ages 18+ between Dec. 15 and Dec. 18, 2014.
Nielsen 2015 forecast provided by Nielsen Advanced Solutions.