If it was anybody other than the CEO of the nation’s largest bank, it would be easier to ignore. But when J.P. Morgan’s Jamie Dimon puts the country on a six-to-ninth-month recession alert, it’s hard not to take note.
Dimon’s warning comes in the wake of PYMNTS’ data released a month ago that found 62% of United States consumers said they still expected a recession even though inflation has eased from peak levels set in June.
For retailers and consumers who have been waiting nearly three years for the economic “all clear,” Dimon’s gloomy forecast not only keeps those hopes on hold for a while longer but cranks the heat on what’s already shaping up to be the earliest holiday shopping season ever, and likely one of the most promotional too.
A full-blown recession slamming into a retail sector already weakened by nine months of intense inflationary pressures could be disastrous. It’s a reality that is already triggering a strategic shift in the industry to optimize any and all commerce flows in hope of capturing every available consumer dollar before it gets spent elsewhere. This, as PYMNTS data shows 7 in 10 consumers already have a spending bias for essentials like food and utilities rather than discretionary items.
The Hard Sell
To be sure, Dimon’s recession alarm sounded Tuesday (Oct. 11) was likely not a shock to the global retail titans in Seattle, Bentonville or Minneapolis It comes amid a swirl of seasonal sales activity on display this week — including Amazon’s Prime Early Access sale — which kicked off Tuesday and comes in the wake of competing sales events from Walmart and Target, among others.
Using 2022 as a guide, we’ve seen pandemic overstocks create a wave of deep discounting that’s causing issues for retailers and brands as consumers trade down goods and flock to deals wherever they find them, casting hard-won retail loyalty to the wind in many cases.
“For the average online shopper, the temptation to seek the best deal outweighs loyalty to favorite merchants,” according to “At the Checkout: Deal-Chasers Versus Loyal Customers,” a PYMNTS and Checkout.com collaboration based on surveys of over 2,000 U.S. consumers. “More than two-thirds of online shoppers frequently opt for deals over loyalty, with 38% of shoppers identified as deal-chasers and 36% as persuadable consumers. Among consumers who own seven or more internet-connected devices, 40% are categorized as deal-chasers, while 22% are loyal customers.”
Checkout experience plays an important role here as well.
“On average, 35% of online customers indicated dissatisfaction with their most recent shopping experience, suggesting a significant opportunity for online merchants to ensure a smoother checkout journey,” the study found.
Amped-up recession fears are also bad news for Americans living paycheck to paycheck, as pandemic savings cushions are vanishing, and credit card balances are revolving more — signs that millions of households are ill-prepared for inflation to morph into recession.
“The average savings balance of paycheck-to-paycheck consumers with issues paying their bills was $2,415 in July 2022, down from $4,325 in July 2021,” according to “New Reality Check: The Paycheck-to-Paycheck Report: The Emergency Spending Edition,” a PYMNTS and LendingClub collaboration. “This suggests that this group is less able to handle continued negative economic developments down the line, and the fallout may be severe.”
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