No matter how you feel about student loans and the political frenzy it has created we are now past the decision and now look onward to the future. If you aren't aware of the money at stake you read a bit more about the issue here. No matter the decision Q4 should have expected a slow in growth as student loan payments would've restarted anyway but borrowers would've had $100's more in disposable income. With the entire plan being struck down in court the full weight of payments will have a major ripple going forward.
We'll cover a bit more in depth the potential impacts on consumers and ecommerce retailers. Not every business will be impacted equally so we will also cover those most vulnerable and those that may be much safer. Lastly, we will cover ways in which to weather this new outlook or even turn it into an advantage.
Predicting Q4 Consumer Behavior
No doubt Covid-19 rocked a lot about the way we lived for a couple years and halted certain aspects of our lives. One of the long-lasting side effects of this was student loans payments being put on hold to help millions of Americans get through the pandemic. Now that we have shifted out of that and the supreme court decision, we have to look at the reality that is coming.
Economic forecasts are all over the place as many seem to ignore the return of student loan payments to about 60% of Americans. The most common number I've seen that considers these payments forecasts a -2.1% dip in Q4 and a continued drop in Q1 2024.
Who's Effected the Most?
While student loan debt isn't entirely on a single generation there are 2 affected the most, Gen Xers & Millennials. Gen X holds almost 39% of the national student debt (~$631 Billion) & Millennials hold 30.39% (~$495 Billion). You can see even deeper breakdowns here to see a how your client or business may be affected.
This is a large amount of money that will be removed from the more "active" markets going into debt repayments. All this cash being removed will have a sudden impact on most ecommerce sites' bottom lines.
Which Businesses Will See an Impact?
The broad answer is ecommerce sites, especially those that offer more of a "want" than a "need". Lead generation non-emergency services may also be vulnerable to drops in potential clicks & leads, (i.e., home services, consultations).
Even major corporations will still take some serious hits. Amazon being a good example as many of us have probably bought stuff we didn't really need. It's ok were all guilty of it. High level industries most likely to see drops will be Furniture, Electronics, Entertainment (Gaming, Music, Etc.), Beauty/Healthcare to name a few.
While I listed quite a few industries it won't guarantee that your business will be affected. A lot of considerations have to be looked at like your area, consumer base, etc. This is more a generalized guideline, but you understand your business best.
Which Businesses May be Immune?
While guaranteeing anything isn't a possibility there are plenty of businesses that may possibly not feel these impacts. Construction seems like a safer bet as bigger businesses and major corporations are most likely to be somewhat unaffected. Other businesses that may be safe seem to be anything related to AI Development (this include developers and tools) as it's still one of the industries expected to grow in 2023 and on.
Necessity businesses, while not entirely immune, are best to weather the storm. Obvious industries like Grocery Stores & Pharmacies will be fine but other industries like Plumbers, Roofers, & Electricians should also be fine as well. A somewhat surprise growth industry may be DIY-based businesses. Experts are expensive and in the world of tighter consumer budgets DIYs seem like a route more people are willing to take.
A strange exemption to those may have been listed as impacted business are those that exclusively cater to either generations less likely to have student loans or those that target high earners to where student loans may not impact them at all.
How Can you Limit Losses or Turn it to an Advantage?
The "easiest" answer is to change your audience(s) to those least likely to be affected by student loans returning. Obviously, that's not something every business can do but those that may target Baby Boomers and Gen Xers could shift more of a priority to the Boomer Generation.
"What if switching audiences isn't an option for my business?" Like I said earlier, that isn't an option for everyone so what can you do if you're in that group? A lot of is dependent on your industry and product/service. What you have to do is really push what sets you apart. With so many consumers having tighter budgets many will be more protective of what they get.
Consumers will have a much longer conversion process as they will research even more than before and take their time more to make sure it was "money well spent". To achieve this, it comes down to really driving your value propositions and maybe making what problem you solve seem a bit more important.
Wrap Up & Final Thoughts
With everything being said I don't think we are looking at a full-blown recession or anything, but I would prepare for consumer "Belt-tightening" starting late Q3 but really showing up in Q4 numbers. What I think may be an indicator for businesses will be looking at August/October 2023 compared to 2022. If this is your "slow season" the first month out of that time will be your best way to forecast.
From a digital marketing perspective, I believe the first indicator we will see are rises in costs overall but mostly a rise in CPC (Cost per Clicks) and a significant rise CPA (Cost per Acquisition) as conversions will start to come at a premium for many industries. Really pushing what makes your business unique and separating yourself from your competition will be the main way to not just survive but possibly thrive.
At Trailblaze we are always planning ahead and preparing for any outcomes that may arise. If you are worried about this new era and need help not just to survive but thrive through this time. Contact us down below and let us get you prepared for this new time.
