PERSPECTIVES

From The Co-Founders

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Tips, Tactics & Strategic Insights and Commentary
from The ROI Co-Founders, Pat Johnson and Dick Outcalt
Outcalt & Johnson: Retail Strategists LLC; Retail Turnaround Experts

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Increased Consumer Spending...on What?

Spring is in the air.  More places are lifting Covid restrictions. Daylight savings time starts this coming Sunday, extending the evening hours. 

And, for the first time in years, we can expect to celebrate Easter, Mother's Day, Father's Day, graduations, weddings with few restrictions. All promise a renewed air of celebration! 

There is widespread anticipation that consumer spending will be very strong. But...spending on what? Before you place all those merchandise orders, consider this.

  • We expect that the second quarter burst of consumer spending will be weighted towards services more than consumer goods. A big surprise for many.
     
  • That is, many folks will be preferring to go places and do things, rather than buy things as they've been doing recently.

What will have appeal right now? 

  • Restaurant dining, inside
  • Movie theaters
  • Concerts
  • Air travel, domestically and internationally
  • Road trips could be huge, even with high gas prices
  • Marathons and fun runs
  • Even events such as trade shows and business conferences will have new found appeal

All of which may have an effect on your business. Exuberant consumer spending will likely be diverted from buying things. And this trend should be reflected in your merchandise buying plans. Some caution is warranted.

Unless you are an entertainment venue, or sell merchandise that people will need before they head off for one or more of those activities, or unless you a located in a tourist destination, a college town, or a hub for business travelers, this initial surge of consumer spending may pass you by. 

All retailers have good reason to be optimistic. But as always, your innate optimism must be tempered when it comes time to place merchandise orders. 

Retailers have lots of reasons to celebrate. But like always, paying close attention to the attitudes, preferences, and behaviors of your target customers will prove invaluable. 
 

Related Articles

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    Consumer Confidence Dropped. Now What?

    As we follow economic indicators that particularly affect retailers, our primary focus always is consumer confidence. And the reports coming out this week give us pause. 

    • "The Consumer Sentiment Index fell by 13.5% from July, to a level that was just below the April 2020 low of 71.8," notes Richard Curtin, chief economist for the University of Michigan's Surveys of Consumers.*
       
    • "The extraordinary surge in negative economic assessments reflects an emotional response, mainly from dashed hopes that the pandemic would soon end."

    The highly transmissible Delta variant and the vaccine hesitancy of many have changed the momentum. Covid fatigue is back. This affects consumers. 

    And with it, more challenges for retailers. Decisions and policies may be needed regarding vaccinations, both for your staff and your shoppers. Meanwhile, consumers are likely taking another pause. Will schools reopen? Will offices reopen? 

    So, what's a retailer to do? What you always do: deal with it! 

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    What to Expect This Holiday Season...and From Whom?

    "Consumer confidence rises to five month high."

    That headline from Chain Store Age* brings smiles to retailers.

    Consumer confidence is a key indicator of retail sales, and this increasing confidence as we head into the holiday season is very welcome indeed. 

    • “Concerns about inflation dissipated further in September—prompted largely by declining prices at the gas pump—and are now at their lowest level since the start of the year,” according to Lynn Franco, senior director of economic indicators at The Conference Board.
       
    • "Looking ahead, the improvement in confidence may bode well for consumer spending in the final months of 2022," added Franco.

    But of course, there is no one-size-fits-all upside here. 

    More Spending on Necessities

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    Consumer Confidence Up Smartly, But...

    • "Consumer confidence rose sharply for a second straight month, hitting the highest level since the pandemic began," according to the Conference Board Consumer Confidence Index. 
       
    • "Economists believe that the rising consumer confidence will bolster overall economic growth as consumers, who account for 70% of economic activity, step up their spending as lockdown restrictions are eased." *

    This is welcome news for many retailers, as consumer confidence has been a key leading indicator of retail sales.

    However, a note of caution: retail sales are not the sole component of consumer spending.

    • "As more businesses and cities reopen, consumers will have even more places to spend the savings they've accumulated during the pandemic." **
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    What is "Value" for Your Customers?

    What is the definition of "value" for customers? Pretty straightforward, actually.

    • Value = benefits received for the burdens endured.

    Wait. What? "Benefits received?" "Burdens endured?"

    Turns out, the only single answer to "What is value?" is, "It depends." 

    Don't just roll your eyes. What constitutes value for your customers increasingly is a make-or-break part of retailing. 

  • Who's Buying What's Selling, And Where?!

    It's a given that your sales volume is a very big deal. Granted, you are analyzing it every day. But here's a slightly different approach which you may find very revealing.

    Let's start with a couple truisms. The definition of retailing is “selling to the ultimate consumer.” 

    Retailing also is having "the right product at the right price at the right place at the right time for the right customer."

    But, as retailers ponder how best to manage sales in the current consumer environment, does it really matter whether their "right customers" buy from them in-store or online? 

    Actually, it might! And here’s a simple, free "pilot project" to find out a little more.

    Customer Analysis Tally Sheet

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    Not Just WHETHER to Re-Open. WHAT to Re-Open?

    Some thoughts from Nordstrom leadership that are spot on!

    • “We started this company from scratch, so what would we want to be, knowing what we know now? It’s clear we can expect a new normal. And it's up to us to decide what that will look like. We're each being presented with the unique opportunity to create a future worth envisioning.”

    That's what Nordstrom President and Chief Brand Officer Pete Nordstrom told Puget Sound Business Journal columnist Patti Payne on April 23, 2020.

    And what he succinctly stated is exactly the challenge – and opportunity – that is confronting all retail owners. 

    In order to answer whether you should re-open once you can, you first must be very confident in WHAT kind of retail operation you will be re-opening.

    The only certainty of the aftermath of the pandemic is that everything will be different. Given that, what better time to re-imagine your business?



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