Franchise Owners Can Expect a Post-Vote Spending Surge After Jitters Subside
Fear not, franchise owners. If you are experiencing a sales slowdown, it’s almost certainly temporary. You may nervously observe customers hesitate to pull the trigger on nonessential spending for real estate, travel, gym memberships, salon services and products, home upgrades, cars, furniture, pet luxuries, cleaning services, and more. So what’s their problem? It’s a commitment phobia fueled by anxiety about the presidential elections and a potentially precarious economy, according to The New York Times.
Ipsos, a global market research leader, backs up The Times article. The Oct. 4 Ipsos Consumer Tracker confirms that consumer confidence “tends to pause in periods around elections.” This year, because of heightened interest in the election as compared to, say, the less-polarized 2004 and 2012 races, Ipsos reports that the pause may be more pronounced. The Ipsos Tracker found that 47% of Americans (55% of Republicans, 39% of Democrats and 53% of independents) say they’re spending less. Another finding: 47% (52% of Republicans, 46% of Democrats, 45% of independents) say they’re opting to save more.
How Consumers React
The takeaway is that when consumers feel instability, they hoard resources (think toilet paper during the Covid pandemic). Right now they’re keeping their cash. Kelly Goldsmith, a Vanderbilt University marketing professor and behavioral scientist, explained to The Times that “if the world starts to fall apart, you benefit from having a bunch of money in your mattress, right?”
She also pointed out that consumers may make minor discretionary splurges to gain a feeling of control or at least the illusion of it. “When I see myself holding this $8 Starbucks cup, I feel like I’m a person able to do things in the universe,” Goldsmith told The Times.
Positive Economic Data
Retailers, perhaps, have a right to worry about the trend as the calendar closes in on Christmas, when much of annual sales occur. But retail sales have held steady, the U.S. Census Bureau reports. On Oct. 17, it estimated that retail and food services sales for September 2024 increased about .4% from August; those sales rose by 2.3% when compared to September 2023. Other recent positive economic developments are declining inflation, positive employment numbers, and a reduction in the Federal Reserve’s prime interest rate.
Consumers haven’t been reassured so far, but history tells us their waffling likely will end after Election Day, Nov. 5. By midnight or possibly a few days after polls close, Vice President Kamala Harris or former President Donald Trump will be declared the winner.
Real Estate, Taxes, Interest Rates, Cars
In the meantime, The Times article speculates that some consumers postpone home purchases in the hope that Harris will achieve her campaign pledge of down-payment assistance for first-time buyers. If they buy now, they might miss out. Others may wait to see whether they have more spending power if a Trump administration trims their taxes. Everybody hopes for falling interest rates on all types of borrowing, from new and refinanced mortgages to credit cards and car loans.
Speaking of cars, back in June, Cox Automotive Inc., which provides services and technology expertise to the automotive industry, saw the beginnings of the tightening trend. Cox Automotive Chief Economist Jonathan Smoke reported “a lot of uncertainty in this market, leaving consumers and dealers alike unsure of the road ahead. On top of uncertainty about interest rates, we are heading into an election season, and this one is especially breeding more concern. In the auto business, uncertainty is the enemy – it negatively impacts sales, hurts consumer sentiment, and leaves auto dealers feeling troubled.”
Former car dealer Jerry Reynolds has personally witnessed the pullback. “It’s the uncertainty,” Reynolds says in The Times report. “We’ll likely see a surge of sales right after the election.” The real estate market faces similar pressures. Antonio del Rosario, a New York City real estate broker, told The Times that home buyers and sellers have “a deer-in-the-headlights attitude” and are “frozen.”
Expect a Rebound
History promises a thaw. The Times article cited an analysis of 20 years of housing sales data in Los Angeles, Manhattan and Miami showing that sales fell late during even years and bounced back during odd years in the 12 months ending in November of each year. “Election Day is the pivot point,” said Jonathan J. Miller, a real estate appraiser who analyzed the data. “After the election, there is an uptick in sales. … It’s like the foot is taken off the brake the day after the election.”
While big-ticket spending on cars and houses probably feel the most severe pinch, middling purchases at franchises – items such as a yearlong packet of doggie day care or facials; a two-week stay at a short-term rental; new carpet, kitchen cabinets or fencing – also may prompt consumers to hold up spending… temporarily. Franchise owners should take heart in the cyclical spending linked to elections. This too shall pass.
