#2 Mid-year consumer insights—based on 146 million purchases

Hi, and welcome back to Retail Radar, your monthly newsletter and go-to for the latest in retail.

In the last issue, we talked about how to use AI to create shopping experiences that connect with your customers—humans. In this letter, we will focus on the shopper and their behavior.

As we reach the midpoint of 2024, we've analyzed data from 146 million purchases in the Nordics year-to-date and compared the statistics to the same period in 2023, bringing you fresh insights into current shopping trends.

We have a few key insights you need to know! Let’s dive in!?

The total number of transactions has increased—and shoppers are returning to physical stores.

When comparing the total number of transactions from January to July 2024 with the same period in 2023, we observe an interesting trend: in-store shopping is on the rise while e-commerce transactions are slightly declining.

?Total number of transactions:

• Online: -2.4%
• In-store: +11.3%

?It's worth noting, however, that when shopping online, consumers tend to spend more money per purchase. The average receipt value is 63% higher online than in-store. So, while retailers are successfully drawing shoppers back into physical stores, there's still a challenge in encouraging them to spend more per visit.

"Over the past few years, we've seen a significant shift in strategies for physical stores. Pure e-commerce players are increasingly opening flagship stores to provide their customers with memorable experiences. It's becoming more important to build the brand and create unique in-store experiences rather than merely competing with e-commerce on spending. Retailers are focusing on making their physical locations destinations that complement and enhance their online presence."

—Felix Kruth, Chief Product Officer at Voyado.

Younger shoppers are increasing their purchases—and spending more money.

We’re seeing a significant uptick in the number of transactions among younger shoppers, with Generation Z leading the way with a 25.8% increase. Generally, the younger the shopper, the higher the increase in the number of transactions made. In contrast, seniors aged 65+ have only seen a 1% increase in their number of transactions.

Not only are younger shoppers buying more frequently, but they are also spending more per purchase. The average receipt value has risen by 6.7%, and they are opting for more expensive products. Interestingly, while they spend more, they are purchasing fewer items per transaction, with an average decrease of 5.2% in the number of products per receipt. This trend highlights the growing purchasing power of the younger generations and their willingness to invest in higher-quality items.

?Generation Z are opting for more expensive products:

• Average receipt value: +6.7%
• Items per receipt: -5.2%

E-commerce returns are on the rise again

It’s no surprise that e-commerce is facing higher return rates compared to physical stores. The return rate is 170% higher online than in-store.The return rate in-store is the same as last year, however, the return rate online has gone up by 6,8%.

In 2023, we observed a significant decrease in e-commerce return rates due to more deliberate shopping behavior driven by economic pressures. However, in 2024, this trend has reversed, with return rates rising again as consumers become more accustomed to online shopping and less cautious about their purchases.

In addition to return rates, monitoring the return-to-purchase rate is crucial. While returns don't necessarily have to be detrimental if managed well, ensuring profitability requires e-commerce retailers to retain enough of the purchase value.

This year, the return-to-purchase rate has increased by 25.7% compared to the same period last year, indicating that shoppers are sending back a larger portion of their total purchases.

Effectively managing e-commerce returns is crucial for retailers:

• Optimize processes: The key to handling high return rates lies in optimizing processes. Today's technology allows for optimized delivery flows, reducing the environmental impact of returns. Retailers can work on multiple fronts to achieve positive economic and environmental outcomes.
• Detailed product information: Clothing and footwear are particularly challenging due to their high return rates. Ensuring the right product information upfront can significantly reduce return rates. It's crucial for fashion retailers to provide detailed product descriptions, images, and size guides to help reduce the number of returns—as well as user-generated content and reviews.
• Consider charging for returns: Charging for returns can set a standard in the industry and influence consumer behavior. This approach can help cover the costs associated with returns, discourage frequent returns, and create a shift in the consumer mindset that shipping, and returns do come with a cost.
• Understanding the impact of returns: Understanding the root cause of returns—whether financial or sustainability-related—is essential for finding the most effective solutions. From an economic standpoint, not all returns are bad if the consumer keeps part of the purchase. On the sustainability front, there is significant potential to minimize the impact of new technology.

E-commerce is also discounting more

The statistics reveal that 2024 has been a tougher year for e-commerce, not only with increased returns but also with more frequent discounting. The number of discounted items per receipt has risen by 4.9% compared to 2023, and the average discount value on receipts has surged by 23.2%. This indicates that e-commerce retailers are selling more discounted items and offering greater discounts to consumers.

?In contrast, in-store shopping shows a different trend, with the number of discounted items decreasing by 5.5%.

The biggest bargain hunters are Generation Z shoppers—seizing larger discounts when they shop. While they purchase 3.8% fewer discounted items, they manage to increase their savings on these items by 43.3%.

Felix comments: "Looking at the statistics, the e-commerce landscape is highly competitive this year, and retailers leverage discounts to attract and retain customers. However, balancing these discounts with profitability is a delicate act that requires strategic planning.”

The evolution of consumer trends?

In our full-year Retail Radar report released in November 2023, we highlighted several key consumer trends that have continued to evolve. Last year, we observed a significant decrease in e-commerce return rates due to more deliberate shopping behavior driven by economic pressures. However, in 2024, this trend has reversed, with return rates rising again as consumers become more accustomed to online shopping and less cautious about their purchases.

Furthermore, the influence of Generation Z, noted for their selective and high-quality purchases in 2023, continues to shape the retail landscape. Their propensity for online shopping and bargain hunting has intensified, reinforcing their role as a driving force in the market.

Lastly, the strategic shift among e-commerce players to enhance in-store experiences, which began gaining momentum last year, remains a pivotal strategy for balancing online and offline sales channels.

Want to deep-dive into all the statistics? Find them here!