(BPT) - Ramen noodles have become a reliable barometer of the economy. Think about it: When the going gets tough, noodle sales rise as consumers turn to goods that help them stretch the power of their dollar. And how is the economy performing right now? Noodle sales have been strong for months, with consumers trading down on purchases to offset the rising costs of food and other essential goods.
These kinds of insights on consumer spending are critical for business success, as they highlight key trends that can help small business owners, and the companies that serve them, chart the best path for growth.
For those looking for information that is a bit more clear cut than ramen noodle sales, the Fiserv Small Business Index is a simple tool providing data at the national, state and industry levels by analyzing consumer transaction data (card, cash and check) at approximately two million U.S. small businesses.
What's the data showing?
Here are some insights from the index:
- The pace of consumer spending at small businesses accelerated in the first quarter of 2024, growing 3.4% compared to 2023
- Foot traffic is also up considerably, growing 5.3%
However, at the same time, average transaction sizes are decreasing. In other words, while total spending and transactions are up, consumers are spending 2.4% less each time they're at the checkout counter (meaning they are buying less or trading down for less expensive items, like those ramen noodles).
Where's the money flowing?
Roughly 40% of all incremental spending in the first quarter went toward experiences rather than goods. For example, people are spending on dining out and lodging away from home, plus fun activities like sporting events, traveling for spring break or holidays - or to watch the solar eclipse.
In fact, compared to 2023, 28% of every incremental dollar that consumers are pouring into the small business ecosystem is going to restaurants.
How data can spur growth
Small businesses that have access to actionable insights are in a position to make better business decisions. As inflation impacts the economy, the Fiserv Small Business Index reveals how consumer spending across small businesses is changing in response.
Armed with that information, savvy business owners can make strategic decisions regarding how and what they're selling, allowing them to better serve customers and capture a bigger share of wallet. Here are some examples of those kinds of decisions:
Offer multiple payment methods
Different age groups prefer to pay in different ways. Make it easy for all your customers to buy by allowing them to pay the way they prefer, whether that's via credit card, debit card, mobile wallet, cash, check, bank or even gift card.
Popular point-of-sale platforms like Clover from Fiserv make it easy for small businesses to provide customers with a range of payment options and a seamless shopping experience.
Promote more budget-friendly options
Although consumer spending is resilient, what consumers are buying is changing. As inflation pushes the cost of goods higher, consumers seek to get more bang for their buck.
Businesses looking to combat inflationary impacts on consumers should consider how to drive their own sales through budget-friendly offers: discounts, bonuses and other promotions - or by selling less expensive alternatives to high-priced goods.
Create appealing experiences
Businesses that sell experiences, notably in the restaurant, travel and leisure spaces, are reaping the rewards of shoppers who are increasingly buying things to do instead of physical goods.
Small businesses can capitalize on this trend by creating engaging experiences that make sense for their particular business. For example, an art gallery can host pottery classes, an Italian deli can offer pasta-making lessons, or your business could provide a membership program letting customers tap into special events.
Consider local expansion
As a business grows, opening a new store presents the opportunity to reach more customers, but deciding when and where to open that new shop can be complex.
By analyzing how comparable businesses are performing in potential locations, a small business owner can pinpoint their most advantageous expansion opportunity based on consumer spending patterns in those markets.
"Understanding trends and making the most of them can make a huge difference for any small business," said Prasanna Dhore, chief data officer at Fiserv. "Right now, businesses that can offer consumers a memorable experience are especially well positioned to succeed."
Small businesses, and the businesses that serve them, should be optimistic as consumer spending remains resilient despite inflation, and using current data can help them keep their fingers on the pulse of consumer needs and wants.
For more information on the health of small business, visit the Fiserv Small Business Index at fiserv.com/smallbusinessindex.