Consumer spending has been on a steady upward trend since the 2008 crash. Then the pandemic hit, throwing a spanner in the works for many businesses as consumers were pushed into their homes and away from the high street. As a result, consumer finances are naturally more precarious now, with jobs at risk and hard-hit industries in the process of recovery.
While nobody’s about to say we’re at an economic peak, that’s not to say it’s all bad news. COVID-19 has provided a great opportunity for technological growth, with the increased uptake of systems such as mobile payments and in-app purchasing, new online businesses popping up, and established businesses diversifying.
With this in mind, now is the time to look positively at what we can do to support consumer confidence and improve money movement in the economy.
Evaluating the landscape
Household saving hit a low in the first quarter of 2017 at just 3.9% of disposable income, according to Mintel’s report, COVID-19’s Economic Impact Will Reshape UK Consumer Behaviour and Shift Market Demand. Then, moving forward, consumers saved a slightly larger 5.4% of disposable income during the third quarter of 2019.
Further to this, Mintel’s Consumers and Savings – UK (January 2020) report found that 29% of consumers have less than £500 in savings, including 11% with nothing set aside at all, and 49% have less than £5,000. Consequently, the majority of UK consumers have startlingly few savings to tide them over should a dip in income occur, as it has done with COVID-19.
What does this mean for the future of spending?
As expected, consumer confidence has fluctuated. GfK’s UK Consumer Confidence Index documented a drop to -36 in confidence levels during March 2020, its lowest since January 2009. This rose slightly to -27 in July 2020.
While consumers who are not confident in the future of their finances are unlikely to spend freely, they still have plans to fulfil and purchases they want to make. In fact, along with the drop in confidence found in March, GfK also tracked a six-point rise in how willing consumers are to buy expensive items.
Helping consumers get the things they want
It can be difficult for consumers to commit to sizeable purchases while they struggle to predict COVID-19’s impact on their finances. However, if they can pay for expensive items gradually, making payments more manageable, they are more likely to commit to buying the items they want or need – knowing they don’t need to worry about suddenly having less in the bank when they do.
Point-of-sale (POS) finance can enable this. That’s why our retail partners have seen an increase in sales of big ticket items like sofas, dining furniture, office furniture, outdoor pizza ovens and artificial grass, through our interest free credit solution.
By providing services that support consumers’ financial situations, online retailers can help their customers to feel more comfortable when purchasing – even if their overall financial confidence has wavered.
How can DivideBuy help you?
What makes DivideBuy a pioneer in the LendTech space is that we’re both a technology company and a lender. We use automated decision-making algorithms to ensure the entire approval process takes less than 60 seconds and this significantly increases conversion rates and the average basket value.
DivideBuy offers end users full visibility of any effects to their credit score before making a purchase, and ensures they never borrow an amount they won’t be able to pay back. This helps customers make informed purchases without the stress involved in traditional credit lending models. Essentially, LendTech allows customers to spend more without feeling the strain on their wallets.
For more on how DivideBuy can help your online retail business provide better payment options for customers unsure of their finances, visit our retailer page.