It’s hard to say which is the most important topic in the daily news: inflation or scorching weather. One thing is certain, they both seem unavoidable, with inflation now having an effect on consumer spending. As the back-to-school and holiday season approaches, retailers and brands would do well to be aware and plan for this new shopper mindset.
Conference Board senior economist Erik Lundh recently said the latest retail sales data shows that despite increased spending, the economy could lose momentum due to inflation and rising interest rates. interest.
“Retail spending rose $6.7 billion to $680.6 billion in June, up 1.0% from the previous month and 8.4% from the year previous one,” says Lundh. “While this data may look positive at first glance, when adjusted for CPI (consumer price index) inflation (which hit a 41-year high in June), sales were down 0 .3% month-over-month Indeed, for the full quarter, real retail sales growth fell to -0.9% quarter-over-quarter (SAAR) from + 4.3% in Q1, suggesting spending on goods will weigh on GDP in Q2 2022.”
Coresight Research points to $1.66 trillion in US government stimulus funds, a 5.1% increase in hourly wages, supply chain bottlenecks driving stock-outs and the increase commodity prices as contributors to inflation.
“We asked consumers who have taken action to deal with rising inflation what action they have taken, and the top responses show that while consumers are willing to spend, they are cost-conscious and want to maximize the value they receive in exchange for any expenses,” reads Coresight Research’s report, “The Inflation Pressure Cooker: How North American Consumers are Respond.”
Currently, 70% of US consumers are very concerned about the economy, according to Cotton Incorporated’s 2022 Inflation and Supply Chain Survey. Respondents say the economy has greatly affected (62%) their spending.
US consumers are most concerned about the cost of gasoline (55%), according to the 2022 Inflation and Supply Chain Survey. This was followed by concerns about prices of daily consumer goods such as groceries and household items (53%), availability of items (34%), salaries/cost-of-living wages (38 %), the cost of health care (28%). ), recession potential (24%), stock market health/investments (19%), loan interest rates (15%) and job availability/unemployment (11%).
According to the Inflation and Supply Chain Survey, around 40% of consumers say the cost of gasoline is causing “serious hardship”. Prices for everyday goods like groceries and household items are causing serious hardship for 30% of shoppers.
In response to economic concerns, the National Retail Federation advocates the removal of Chinese 301 tariffs as an effective method of reducing inflation. The NRF argues that removing tariffs would reduce the consumer price index by 1.3 percentage points, “bringing immediate relief to families and businesses”.
For its part, Walmart recently announced it would cut prices to help move clothes and other items that had been sitting on shelves due to consumer spending restrictions.
“Rising levels of food and fuel inflation are affecting how customers spend, and while we’ve made good progress eliminating hardline categories, apparel at Walmart US requires more markdown dollars,” said Doug McMillon, president and CEO of Walmart Inc.. “We now expect more pressure on general commodities in the second half; however, we are encouraged by the start we are seeing on school supplies.
About 36% of consumers think the economy will improve by the end of the year, according to the 2022 Inflation and Supply Chain Survey. Meanwhile, nearly 4 in 10 (39%) have spent less on clothes in the past month. And 92% say they plan to reduce their spending on clothing in the coming months.
When consumers shop, they take better advantage of sales, discounts and promotions (51%), according to the 2022 Inflation and Supply Chain Survey. They also buy fewer things they want (52%), buy generic/store brand items (40%), shop at discount retailers (39%), and buy fewer things they need ( 35%) . Additionally, shoppers say they are buying less or postponing clothes for themselves (53%) or for their children (19%).
If prices stay the same, 26% of consumers say they will wait and buy clothes for themselves in the next three months, according to the 2022 Inflation and Supply Chain Survey. 31% say they will buy by the end of the year, while 22% say they will buy clothes for themselves within 6-12 months.
Inflation can also have an impact on back-to-school purchases (BTS). Nearly three-quarters (72%) of parents say there are people in their household who need BTS items such as school supplies or clothing, and 86% of those shoppers say the economic/inflationary situation will affect their BTS purchases, according to the 2022 Inflation and Supply Chain Survey. Electronics (50%) is one of the main items affected, followed by school supplies (50%), clothing (49%) and shoes (39%).
According to the 2022 Inflation and Supply Chain Survey, only 18% of parents say that due to current economic conditions, they will buy fewer back-to-school clothing items this year. Other strategies to save money on BTS purchases include taking better advantage of sales, discounts, and promotions (23%) and buying more used/second-hand clothes (18%). Parents say they will also buy low-cost stores, warehouses and outlets (17%), buy lower-quality items that cost less (16%), wait to buy BTS clothes until until their finances improve (14 percent) and will accept hand-me-downs from family or friends (13 percent).
“Marketers need to be well-versed in all of the conditions that influence their retail channel and target consumer or they risk missing out on growth opportunities,” says Marshal Cohen, chief retail sector adviser at the NPDGroup. “An attractive shopping environment, displays that make the product stand out, and persuasive promotions are necessary to get more items in the cart when consumers shop.”
The Cotton Incorporated Lifestyle Monitor™ is an ongoing research program that measures consumer attitudes and behaviors around clothing, shopping, fashion, sustainability, and more.
For more information on the Lifestyle Monitor™ survey, please visit https://lifestylemonitor.cottoninc.com/.