Primed for Consumerism
How the Federal Reserve’s drop in lending rates is pivotal to your ecommerce biz
Surely a relationship between the US Federal Reserve Fund and everyday shopping would otherwise be unthinkable, but a recent major change has fueled optimism for those who sell online.
Following a seemingly endless and excessively high rate of interest for borrowers, finally the Fed has cut the prime lending rate by a half-percent. Sounds miniscule; is actually monumental.
The fallout for consumers will be significant. Obviously mortgage interest rates will drop exponentially, which is good for the entire economy. But also on the radar screen are credit card interest rates, which will increase the expendable income of anyone who uses plastic. It means consumers will feel more free to spend, and ecommerce merchants stand to gain.
The upshot for ecommerce sellers? Feel positive about the future. Particular holiday shopping. Though full effects of this decrease won’t materialize immediately, there is a solid optimism in all aspects of consumerism, from suppliers, to shippers, to end-point consumers. In other words, the psychological impact of lower overall interest rates is built into the fiscal models of lenders, borrowers, and anyone whose business is centered around purchasing.
When lower interest rates result in lower mortgages, one can guess that home purchases are more likely to be followed by a greater willingness to supplement those homes. Hardware, gardening/landscaping, appliances, and interior décor become more of a reality than a pipe dream. If you’re involved in any of those sectors, prep for a blitz on marketing and advertising with some degree of confidence that sales will improve over the next six months or more.
A consumer study released in 2023 shows that the level of personal finance concerns among respondents has decreased from 39 percent to 26 percent over the past year. Current figures will appear soon, but it’s a sure bet those numbers will be greatly improved now that borrowing is cheaper. And because indicators show a continued gain in economic growth, it’s hard to imagine there will not be future rate reductions. All of this is good news for those who’ve been caught up in the collateral damage of a troubled economy.
To be clear, some consumer categories should see a boost sooner than others. Shoppers whose confidence in their financial outlook improves might be keen on essentials they’d been putting off. But even luxury goods will enter the picture as viable purchases.
The old rule of thumb on merchandising applies: Temper optimism enough to accommodate a slight bend. Don’t exceed your capacity to deliver goods, even if you anticipate acquiring wholesale product at a lower price.
But in general, the economic pox hitting many around the globe looks to be weaning. This latest lending rate is a blessing, and could be followed by further reductions. Be vigilant and celebrate.