How Will the 2020 U.S. Election Impact Consumer Spending?
Abby Long is the Senior Managing Editor at PMG.
With less than 50 days until the U.S. election, all eyes are on… well, just about everything. From consumer sentiment to the stock market, the endless news cycle of candidate coverage to the polls cataloging and profiling undecided voters, countless people are searching for any indication of who will win and how the results of the 2020 U.S. election will impact Americans and the larger global consumer economy.
While these inquiries and more are undeniably critical to the future of American democracy, for advertisers specifically, understanding if and how the unique circumstances of this election could impact holiday performance and consumer shopping behavior remains imperative.
The election is timed perfectly to fall right in the midst of the 2020 holiday shopping season, a period already made more challenging (and unusual) than holidays of the past as a result of the ongoing pandemic and its toll on the economy, small businesses, and people’s personal and financial wellbeing.
Due to a projected rise in mail-in (absentee) voting amid the pandemic, analysts anticipate that the winner of the 2020 presidential election is likely to be determined over the course of several weeks, rather than a matter of hours or days as Americans have come to expect on election night. In an April survey, Pew Research found that two-thirds of U.S. adults predicted the pandemic would affect their ability to vote.
Facebook’s Mark Zuckerberg acknowledged the importance of recognizing this new reality in a recent interview with AXIOS on HBO. Zuckerberg said, “Facebook and the media need to start preparing the American people that there’s nothing illegitimate about this election even if it takes additional days or even weeks to make sure that all of the votes are counted.”
Given the influential role social media and technology platforms play in informing and shaping public opinion, Facebook and other platforms have been under immense scrutiny heading into the 2020 election. In fact, Google, Facebook, Twitter, and Reddit are all meeting together regularly with national security experts as well as members of the intelligence community to discuss potential threats to election integrity. In the last 90 days, most — if not all — U.S. technology platforms have unveiled new policies to combat misinformation, protect election integrity and organize news updates from authenticated sources via “information hubs” within their respective platforms.
According to The Wall Street Journal, representatives from Facebook, Google, and Twitter said they are “working closely with election officials to safeguard the process, including strengthening policies and procedures that were put in place after the 2016 election.”
Many tech companies are also running voter registration drives and big promotions in addition to these policy changes. In fact, Axios reported this week that over 400,000 people have registered to vote on Snapchat, and Silicon Valley companies ranging from Apple to Twitter are giving their workers paid time off to go vote.
For advertisers, the question still remains if a potentially prolonged period of time between Election Day and the official results of the election will depress sales and consumers’ willingness to shop. Retail sales are not immune to external events, and no other time has that been more evident than throughout the last six months of the coronavirus pandemic.
From a July summer briefing:
According to June data from YPO, 50 percent of CEOs worldwide say that diminished demand for their company’s products and services is the biggest obstacle their business faces right now. Additionally, 44 percent believe changes in consumer behavior are among the greatest obstacles to their business’ viability. From The Drum, “when determining what to buy, value, quality, and reliability still matter more to consumers than brand purpose and social virtue, despite today’s contentious and ever-changing cultural conversation.”
The findings of reports and research vary greatly on whether or not uncertainty around elections impacts consumer demand or smaller wallet share, likely because there are simply too many factors to consider. This year will be no exception, due to the current economic climate, financial markets and the financial health of the private sector, public opinion of the candidates, prevailing issues and policies, global economic affairs, and countless other determinants.
According to research conducted by The University of Chicago Booth School of Business in partnership with Princeton University, consumer sentiment toward the results of an election does not make people spend any less. The study spanned four presidential elections and identified a correlation between “a voters’ ideological opposition towards a winning candidate and a lower score on the Michigan Consumer Sentiment Survey,” finding that the correlation did not prove causality.
In the study, when President George W. Bush was elected in 2000, “negative sentiment had no effect on consumers’ self-reported spending plans or … on their subsequent credit card use.” In other words, consumers who weren’t pleased with the election outcome reported no effect on what they spent or planned to spend. Across domestic and international markets, “there appears to be very little evidence to support the claim that an election will negatively impact consumer spending.”
Another study by Bank of America and Merrill Lynch looking at Italy and France observed that consumer confidence is “very well” explained by a few “hard economic variables,” including income and unemployment numbers. It was found political shifts alone do not have a measurable impact on consumer confidence.
In 2016, consumers were distracted by the contentious election, leading to reduced spending. Adobe Digital Insights found that retailers “lost an estimated $800 million in revenue from online sales” between November 1 and November 14 in 2016. The most significant decline took place immediately after the election on November 8, as total sales growth lowered to 1.3 percent, versus the forecasted 7.8 percent growth. In total, the dip marked the “slowest growth rate for retail sales” that Adobe had seen in the U.S. since 2012. Consumer spending around the 2016 election mirrored similar trends seen in the aftermath of Brexit in the U.K., where retail experienced a 0.9 percent decline during the month following the vote to split from the European Union.
Political ad saturation can certainly influence consumer spending as well, simply by over-indexing compared to other advertisements and relevant events. In July, Kantar Media revised its political ad spend projection to $7 billion, most of which is anticipated to be spent on TV and digital via campaigns and PACs this election year.
When considering this data, it’s important to recognize that this year’s campaign trail will look much different since campaign events, bus tours, and big speeches have been canceled, reorganized and replaced with virtual appearances and socially-distanced campaign spots. These changes have resulted in more money being earmarked for digital advertising than during previous elections.
Diving further into this research, it is apparent that most sectors — from apparel to B2B, fitness, and home & garden — have seen sales dip during election week, but rebound shortly thereafter. Interestingly, food sales, donations, and publishing and entertainment sales have increased during election week.
Of course, no other election in modern history has been conducted during our current circumstances: An ongoing pandemic, economic uncertainty and record-high unemployment, and massive changes in consumer lifestyles and behavior, with a backdrop of social unrest over racial inequality and other injustices, the prevalence of partisan divides and conspiracy theories, increased corporate accountability, and a series of extreme weather events occurring throughout the country — from hurricanes in Louisiana to wildfires in Washington.
Answering the question: “How will the 2020 U.S. election impact consumer spending?” requires a certain amount of conjecture and pure guesswork, because no one really knows the answer yet. Based on past elections, it is reasonable to expect some softness in consumer spending leading up to Election Day and potentially in the days and weeks following November 3rd.
Axios and others are already anticipating delays in reporting election results, as a projected 80 million mail-in ballots are counted. Therefore, it is also reasonable to presume spending could return to “normal levels” once we get past election night and accept the outcome or prospect of delayed results. By then, the run up to the holiday season and shipping deadlines will be upon us, which could rebound spending.
With more platforms and publications already preparing voters that it could take several weeks before the election is ultimately decided, it is less likely to dominate online conversation or the consumer psyche for the duration of November.
That said, one thing to call attention to is Mark Zuckerberg’s comments on potential post-election violence. In an interview with AXIOS on HBO, Zuckerberg shared, “There is, unfortunately, I think, a heightened risk of civil unrest in the period between voting and a result being called. I think we need to be doing everything we can to reduce the chances of violence or civil unrest in the wake of this election.”
Another wrinkle: The U.S. presidential candidates have each been preparing legal teams with election protection experts to ensure election integrity. Expect a legal battle, whatever the results may be.
The upside for national retailers is their ability to turn potentially unfavorable conditions (and changing cultural dynamics) into a sizable opportunity that reconstructs the holiday season. By turning consumers’ attention back to the holidays, there will still be time to bring some much needed holiday cheer to the close of a tumultuous year.
To start, national retailers, including Target, Walmart, Best Buy, and many others, are closing their doors on Thanksgiving Day. Just this week, Simon Property Group, America’s largest mall operator, announced similar measures. The malls owned by Simon Property Group will be closed on Thanksgiving Day, a first for Simon and its hundreds of retail brands.
While unsurprising in the larger context of how businesses are adapting amidst the coronavirus pandemic, these business decisions keep employees and customers socially distanced and safe, and also mark a monumental shift in retail strategy and give the holiday itself renewed relevance. They also reflect how consumer behavior is shifting to increasingly rely on ecommerce, transforming storefronts into fulfillment centers. Salesforce predicts a 90 percent YOY increase in digital sales that use curbside or in-store fulfillment capabilities, and roughly 54 percent of shoppers already report they plan to conduct all or most of their holiday shopping exclusively online (more than double last year’s 22 percent).
Related: The rise of ‘dark stores’
These changes translate into greater dependence on ecommerce solutions to provide customers the goods they need during such a critical sales period for retailers. The Financial Times highlighted that retailers are attempting to spread demand over several weeks to help alleviate an expected surge in online shopping that pushes the limits of distribution networks, straining merchandise availability, and causing potential shipping delays.
The rescheduled Amazon Prime Day was long-rumored to be the “kick-off” event for holiday shoppers, but as more national retailers announce their own sales (Target, Macy’s, Guess, Lowe’s, and more), October looks to be a season of savings and deals across brands and categories, not just via Amazon.
Bloomberg reports that more than a dozen major retailers are participating in 10.10, a new retail sales holiday — emulating China’s Singles’ Day on 11.11 — to officially usher in the holiday season. By pulling holiday sales (and spend) further up in the calendar year, retailers are hoping to earmark substantial earnings before the election has the potential to impact consumer sentiment and to avoid the potential impact the election outcome could have on Black Friday/Cyber Monday sales.
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The 2020 U.S. election is sure to have a profound impact on consumers, businesses, and the economy, regardless of the results. As we draw closer to Election Day, we’ll continue to share more data and news information for how current events are shaping consumer sentiment and impacting performance for your brand.
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