We could take some encouragement from the recent jump in retail sales, but let’s keep it measured. WSL’s research shows as many as half of Americans remain pessimistic about their financial security, depending on socioeconomic conditions. That figure is likely to rise as unemployment and stimulus checks dry up. Our latest How America Shops® research provides four ways to prepare.
Retail sales may be rising, but a bubble is likely lifting them.
While shopper spending surged month-over-month in May, we expect people to tighten their belts as the end of July nears. This is when unemployment compensation benefits, collected by more than 15% of the U.S. population in May, are expected to halt. And those $1,200 stimulus checks, received so far by 73% of the shoppers in our June How America Shops® research, will likely be spent. (The unpredictable next step is if the government steps in with more stimulus to shore up the unemployed.)
“ Today, 45% of shoppers are cutting back or avoiding retailers
where they are tempted to overspend.”
A lot of households are already anxious about it.
According to our report, “The Bridge to an Open Society,” the extent to which the pandemic affects consumer confidence mirrors the divide in American wealth:
- As of June, 40% of all shoppers told us they felt pessimistic because they were barely hanging on and expected their finances to get worse. The breakdown: Half of those with household incomes of less than $50,000, as well as Hispanics, were pessimistic.
- 1/3 of those living in households of $50,000 or more also were worried;
The result is across-the-board frugality. Today, 45% of shoppers are cutting back or avoiding retailers where they are tempted to overspend.
When the stimulus support is gone, we expect two-thirds of shoppers to self-describe as frugal. This means they will avoid stores, cut back on non-essentials and reconsider if a purchase is a smart use of their money.
Spending Will Dry Up with Those Recovery Checks
Incomes supplemented by unemployment benefits that exceeded the pay many people received at work will not last.
Those benefits and the stimulus checks contributed to the spending “surge,” but let’s put it into context: while retail sales rose 17.7% in May from April, they were down 6.1% year-over-year. And while stores that sold apparel posted a surprising 188% increase month over month, they recorded a 63.3% decline year-over-year.
Meanwhile, grocery store sales rose 2% just month-over-month, but 14.3% year-over-year, a figure we think hints at broader behavioral shifts, including the shopper’s intensified focus on wellness and sticking to the basics.
Now is the Time to Focus On Basic Needs: Here are 4
Shoppers will likely choose retailers and brands that give them confidence in their purchase choices and help them feel good about how they are getting through this crisis. They can achieve this by recognizing these needs:
- Celebrate confidence, support insecurity: Half of the population – 49% – told us they feel proud about how they are managing during the crisis. While retailers and brands should recognize this confidence, they should also acknowledge the 51% who could use added support to feel better – the rewards will pay out in the long haul. All messaging should reinforce a commitment to the well-being of shoppers and workers.
- Sanitize, distance and reinforce: Signs that explain a store’s policy on distancing and face masks are meaningless if the policies are arbitrarily reinforced – this includes staff as well as shoppers. Stores taking a hard stand include Costco, which requires all of its shoppers (over the age of two) to wear masks, and Whole Foods, which is providing free face masks to shoppers.
- Make the trip quick: Contactless purchasing (through digital apps) is fast becoming an expected option in the store experience. But the quick trip begins in the parking lot, app or website – nearly 50% of shoppers bought basic CPG categories online in the last three months; about 40% for the first time. Curbside delivery should be simple to follow and fluid. In the store, necessities such as diapers and soap may attract more in-store trips if closer to the door.
- Don’t sell, provide: This isn’t the time to promote products that are frivolous and ultra-discretionary. Shoppers told us they will most likely cut back on clothing, electronics, cosmetics, and home décor, and are less likely to cut back on oral care, vitamins/prescriptions, produce, and household cleaners. Specialty and department stores, in particular, should pay close attention to what matters to their customers now and be stocked with the goods people want.
The pandemic has forced retailers and brands to brave some of the worst economic conditions in generations, in large part due to the unpredictable nature of the disease’s course. But many leaders have impressed us by taking control where they can, sometimes in new places, to the benefit of shoppers, workers, and company.
Let’s not get distracted by what we don’t know. The economic recovery starts with making the most out of what we do know.