Read “The State of Fraud and Abuse” report
Amid all the tumult, trauma, drama and stress of a presidential election year, you can count on one campaign promise to ring true: The election will be at least a temporary drag on holiday retail sales.
The conventional wisdom says so. Signifyd customers say so. And most importantly, the data says so. If we look at ecommerce sales during early November in recent years, we see that a U.S. presidential election is a major buzzkill for online holiday shopping.
In 2020, ecommerce sales during election week were up 1% compared to the average weekly sales in the eight weeks leading up to the election, according to Signifyd data. One percent is not nothing, you say? True. But consider that in the first week of November 2021, sales soared 21% higher than the previous eight-week average. In 2022, a mid-term year, sales increased 35% over the eight-week benchmark. And last year, ecommerce spending was 29% higher.
Do elections really have an impact on consumer spending?
“It’s pretty clear that something changes in presidential election years,” said Signifyd Senior Data Analyst Phelim Killough, who researched the election effect. “It’s a week when consumers are normally keen to start or accelerate their holiday shopping. But when an election year rolls around they are otherwise occupied, it seems.”
Going back further and more broadly, the picture is bleaker. Epsilon, a digital marketing company, looked at brick-and-mortar and online sales during the 2012 and 2016 presidential elections and found that consumer spending dropped 6% during election week and even lagged in the two weeks leading up to the election.
A slowdown in consumer spending at election time makes sense intuitively. Consumers are distracted as Election Day approaches. Uncertainty hangs in the air — about the outcome of the election and the meaning of the outcome of the election.
But you know what else happens right before an election — any election, but especially presidential elections? Digital advertising channels go berserk. Campaigns take whatever money they have left and buy up digital ads, spend on email and text sends, pump up paid social — not to mention broadcast ads. Remember broadcast ads?
The response from consumers (of both goods and media)? Please. Make. It. Stop. They don’t want to read, listen, view. Not just political messages, but messages from retailers, too.
Election ads are a major cause of consumer attention fatigue
Meanwhile, costs per view and per click on streaming services and paid social media will shoot up 15% to 50%, according to BrandMuscle.
And wouldn’t you know it? This barrage of advertising is congressionally mandated to happen just as the holiday shopping season should be seriously revving up. And this year, the advertising barrage is congressionally mandated to happen right between a flurry of marketing-created shopping holidays — Walmart Holiday Deals days, Prime Day, Target Circle Week, Way Day — and the start of the traditional holiday shopping season.
Merchants have been talking to Signifyd about their worries — that consumers will be thinking more about the election’s effect on the economy than the items on their holiday shopping lists. Yes, they’re worried that consumers won’t be in a buying mood.
But this is not all gloom and doom and we do get a president out of the deal. If history is a guide, online shopping will pick up again once election week passes. Signifyd is projecting a solid Q4 for online retailers, though individual merchants’ mileage may vary depending on their vertical.
Election or not, consumer spending will rise this holiday season
An analysis of Signifyd data indicates that ecommerce sales will be up 7% over last year’s holiday season and that the Cyber Five stretch will see an 8% sales increase over last year. Those figures, coincidentally, are the same sales increases that online brands enjoyed for holiday 2023, according to Signifyd data.
Before and after the election-week swoon, consumers will spend cautiously this year — trading down for cheaper goods and hunting for discounts throughout the holiday season, according to Killough.
What is doom spending or doomsday spending?
“We’ve seen the same trend for many months now,” said Killough, who provided Signifyd’s holiday projection. “It’s a sign that retailers should be ready to appeal to shoppers with discounts during the upcoming holiday season, or to otherwise find ways to distinguish their offerings from what competitors are offering, potentially at a lower price.”
That said, predicting consumer behavior can be a tricky thing. While data shows that recent presidential elections have put a temporary damper on consumer spending, contrarians point to the potential for doom spending — the buzzy urge among millennials and Gen Zs to engage in retail therapy when they are feeling stressed and discouraged by the world around them.
What other things are impacting consumer spending right now?
Whether those generations’ anxiety-fueled spending will be enough in the run-up to the election to offset the pullback by other, presumably older, generations is yet to be seen.
And while election distractions and advertising overload are likely to be factors in retailers’ Q4 results, there are plenty of influences on consumer spending.
Heading into holiday 2024, consumers are coming off of years of confounding macroeconomic signals. While inflation has cooled considerably, prices, particularly for necessities, have remained at levels higher than they were a year ago. Unemployment figures have been a mixed bag in recent months — the bad months planting the seeds of doubt while the good months calm nerves. And while wages have been on the rise, they have not kept up cumulatively with inflation over the last three years.
How merchants can beat the presidential election slump
As always, holiday sales will be influenced by a long list of factors that are outside of merchants’ control. So, let’s talk about what is within their control:
- First, remember, the election-cycle swoon has historically been short-lived. By the week after the election, the effects will have worn off, history shows. That means merchants should be prepared to be the center of consumers’ attention once the election is past, the digital advertising barrage has subsided and the winter holidays are fast approaching. Plan your marketing and promotions accordingly. Think of November 11, as your Little Black Friday. It’s Singles Day, the largest online shopping holiday globally and Veterans Day, a holiday for many — and for years a day that has exhibited outsized shopping enthusiasm.
- Second, while no retailer needs to be reminded of the importance of the Cyber Five — the stretch of days from Thanksgiving through Cyber Monday — this year the five-day shopapalooza is even more important than usual. Thanksgiving falls late this year, reducing to 22 the number of shopping days between Thanksgiving and Christmas and heightening the importance of the momentum built coming off the long Thanksgiving weekend.
- And lastly, remember that we’ve been holding presidential elections for 235 years and if that track record has proven anything, it’s that the force has yet to be conceived that will keep consumers from ultimately powering through their holiday shopping lists.
Photo by Getty Images
Looking for ways to optimize holiday sales? Let’s talk.
Latest posts
