Impact of the Financial Crisis on Consumer Spending

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The financial crisis of 2008 was one of the greatest economic disasters since the Great Depression and ultimately led to the Great Recession. This impacted house values losing trillions of dollars in real estate value as well as causing foreclosures due to impacting the average household income.  The unemployment rate was devastatingly impacted and American jobs were lost during the financial crisis. “The hemorrhaging of American jobs accelerated at a record pace at the end of 2008, bringing the year's total job losses to 2.6 million or the highest level in more than six decades” (Barello, 2016). When people have less money to spend due to unemployment and the average household income is less, other companies suffer from less consumer demand. When business is lost, this may result in forced layoffs of their own, which in turn results in a higher unemployment rate and overall consumer spending drops even more.

 “As the housing market collapsed and the financial crisis ensued, spending and employment relating to private fixed investment—which includes spending on structures, equipment, and software related to production—continued to decline from its 2006 peak, sparking economic contraction” (Barello, 2018) (see figure 9).

Since the financial crisis happened almost ten years ago, many things have changed to impact consumer spending. Although online shopping was first launched with Amazon and e-bay in the mid-1990’s it did not become popular until this past decade (Timmermann, 2018). Today the question of online shopping versus in-store shopping is irrelevant and physical stores cannot compete with online stores and what they have to offer. Smartphones are one of the products that have continued to rise and sell over the past decade (Business.Com Editorial Staff, 2017). The first iPhone was introduced on June 29, 2007. Smartphones allow us to do things that were unimaginable from before; such as, mobile electronic banking, video chat on a mobile device, and online shopping, etc. Americans have become so dependent on smartphones it’s hard to imagine having to do things the old way before there was a smartphone application that allowed us to do a task anytime, anywhere (Rani and Jason, 2017). As online shopping continues to increase, so does the use of smartphones to make purchases. According to a survey from one year ago, 44 percent of smartphone users made their purchases through their smartphone versus 41% for the previous year (Farber, 2016)

However, not all markets benefitted from the arrival of the smartphone. Using smartphones have made some things unnecessary. Carrying around CDs with a CD player to listen to music, or carrying a camera other than the one built into your smartphone is no longer needed (Christman, 2016). According to, 2016 was the worst year for music sales since the debut of SoundScan in 1991; which tracks the sales of music and music products (Christman, 2016). The compact disc has continued to deteriorate and album sales fell 13.6 percent; totaling 100.3 million sales. Unsurprisingly, the most common place for consumers to buy albums and songs were from digital retailers. Listeners are also now able to listen to music through streaming and not necessarily have to purchase any CD’s or tracks. Listeners streamed 208.9 billion songs (which translates to 139.2 million album units) between January and now (July 6), an increase of 58.7 percent (Christman, 2016).

Smartphones threaten dedicated camera companies and many major manufacturers, including Nikon, Kodak, and Canon have been reporting decreased camera sales during the past few years. In the 1990s, the camera company Kodak reached a market capitalization of $30 billion. Kodak fell into Chapter 11 bankruptcy on January 19, 2012 (Stirr, 2017).

In today’s society, Americans rely on smartphones which allow us to go online and shop with the click of a button. As online stores continue to dominate, in-store retailers need to learn to adapt or will fail with the times. Numerous stores continue to have to file for bankruptcy and shut down stores due to being unable to compete with online competition like Amazon. Some of the biggest names in traditional retail have closed more than 5,000 stores in the year of 2017 due to plummeting sales and increased competition from online sellers. Some of the name brand stores to have to shut its doors include Macy’s, J.C. Penney, Sears, Kmart, and the list goes on (Timmermann, 2018).

The arrival of smartphones has changed the landscape of markets in a dramatic way. Allowing markets, like online banking to soar. has grown from 68.41 on June 29, 2007, to 949.28 as of May 12, 2017 (Rani & Jason, 2017). That is an increase of 1302.25%. Prior to the arrival of the smartphone, Amazon’s share prices never reached over 100$. Since September 30, 2009, they have not dipped below 100$; not even close.

Figure 2: Amazon stock price (Rani and Jason, 2017)

            The frequency of which people shop online is equally important. As it shows, 20% of people shop online every day, 40% several times a month, 15% once a month, 23% several times a year, and 2% shop once a year.

            Figure 3: Graph of Online shoppers a day that shop every day (, 2016).

Research Questions: Do smartphones have an impact on the retail sales since the financial crisis of 2008?


            There are various assumptions made during the collection of the data. Firstly, the data assumes the arrival of smartphones is what shaped the landscape of online market; assuming the biggest percentage of people use who shop online use only mobile phones. Secondly, the study assumes that arrival of the phone in the market and not technological advancement led to the shift of online sales in the current decade. Lastly, the research assumes that Amazon’s success in the market is solely as a result of its business model of online retail. Moreover, the results did not consider other social or economic factors. However, ignoring these factors, online retail business has enjoyed significant success post the 2008 financial crisis.

            The information collected and presented in the paper shows smartphones affected the online retail shop significantly the first online shops – Amazon and eBay. While they were established in the mid-1990s, Figure 2 shows that there was a relatively steady growth of the Amazon since 1997 and 2007. However, post the financial crisis of 2008 and the first launch of Apple's smartphone in 2007, the Amazon’s stock price shot up. In the 10 years of existence, Amazon had not gone past the $100 share price, but post-2008, the price has since sky-rocketed. The percentage increase (over 1302.25%) can be attributed to the onset of mobile phones in the market since it is only after its introduction did its market change.

            Any business is in danger of losing if they do not change. As evident, the film camera sales were doing well since their inception in the market. However, as soon as the digital cameras came into the market, the unit sales declined immensely throughout the years (Hubert, et al. 2017). This attribute and failure to change may be the reason why over 5000 stores including Macy’s, J.C. Penney, Sears, and Kmart shut down. Statistics from projects that their number of digital shoppers will increase as years go by (Timmermann, 2018). This shows that not only is online shopping convenient, but also one of the most convenient way for people with a mobile phone (Groß, 2015). As evident, Amazon’s sales have grown significantly over the years and the revenues keep increasing every day. The projections as shown in figure 6 show that the number of online shoppers is set to improve to over 230 million.

Looking at the trends in the market, the online retailers are improving their market shares while those sticking to the traditional shops are failing and closing (Bilgihan, 2016). This improvement is attributed to the arrival of the smartphones. As Groß (2015) noted since the online retail market is still improving and mobile phones still play a major role in the excellence of the business, the best market practice for online shops is moving to or maintaining the online retail shops.

Figure 3: Projections of online shoppers by 2021 (, 2017)

Conclusions and Recommendations

            Retail sales have improved with the arrival of mobile phones which have facilitated online sales over the years. Since 2008, online retailers like the Amazon have experienced volume shopping, a key indicator of increased sales. The present numerical graphs have shown that due to the increasing number of people shopping online, stores like Amazon and eBay are improving their market share and seemingly improve their fortunes while other retailers like Macy’s, J.C. Penney, Sears, and Kmart, have been forced to close their doors. The key to their competitive advantage has been their business model focusing on the trend of shoppers shifting to online shopping. Moreover, the online retailers are projected to continue improving their volumes with Amazon 2021 projection indicating shoppers improving to 230 million shoppers up from 215 million in 2017.

The community needs to understand that the online shopping is the current trend that has been facilitated by the smartphones market. Going by the trends, the online retail design will surpass the traditional retail shops, and without changing their business models, these traditional retailers are going to fail. Therefore, I recommend two things. First, the retail shops need to change their model to accommodate online shopping. The number of consumers that shop daily, weekly, and monthly are only improving and getting accommodating an online shop within the business model will help in the sustainment of the business. Secondly, new business needs to be dynamic to have a share growing number of online shoppers.  Advertising the business model must show incentive or existence of business shopping opportunities to the customers to attract the new set of shoppers.


            Most of the data have concentrated on Amazon’s amazing business prosperity. However, if the data applies to other online retailers as well has not been discussed. This could have presented a different picture from the ones presented. Moreover, the lack of consideration for factors such as age and other social or economic factors affects the real projections or reasons for people moving to online shopping.


Barello, S. (2018). Consumer spending and U.S. employment from the 2007–2009 recession through 2022: Monthly Labor Review: U.S. Bureau of Labor Statistics. Retrieved 1 March 2018, from

Bilgihan, A. (2016). Gen Y customer loyalty in online shopping: An integrated model of trust, user experience, and branding. Computers in Human Behavior, 61, 103-113.

Business.Com Editorial Staff, (2017, February). “Beacons are Beckoning: How Mobile Technology is Changing Retail.” Retrieved February 05, 2018, from

Christman, E. (2016). U.S. Record Industry Sees Album Sales Sink to Historic Lows (Again) -- But People Are Listening to More Than Ever. Billboard. Retrieved 1 March 2018, from

Farber, M. (2016, June 08) Consumers Are Now Doing Most of Their Shopping Online. Retrieved February 05, 2018, from

Groß, M. (2015). Exploring the acceptance of technology for mobile shopping: an empirical investigation among Smartphone users. The International Review of Retail, Distribution and Consumer Research, 25(3), 215-235.

Hubert, M., Blut, M., Brock, C., Backhaus, C., & Eberhardt, T. (2017). Acceptance of Smartphone‐Based Mobile Shopping: Mobile Benefits, Customer Characteristics, Perceived Risks, and the Impact of Application Context. Psychology & Marketing, 34(2), 175-194.

Rani M and Jason D. L, (2017, May 15). Amazon's epic 20-year run as a public company explained in five charts. Retrieved February 05, 2018, from (2016). How Often Do You Shop Online | Statistic? Statista. Retrieved 1 March 2018, from (2017). A number of digital shoppers in the U.S. 2021 | Statistic. Statista. Retrieved 1 March 2018, from

Stirr, T. (2017, April 06). A Few Thoughts on the Camera Market. Retrieved February 05, 2018, from

Timmermann, M. (2018, January 05). These major retailers have closed more than 5,000 stores in 2017. Retrieved February 05, 2018, from


Figure 1: Kodak sales before and after the introduction of digital cameras.

Figure 2: Number of Online shoppers a day that shop every day.

Figure 3: Amazon’s online shoppers

September 25, 2023


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