U.S. retail sales revenue in May 2023, including discretionary general merchandise and consumer packaged goods (CPG), increased 2 percent compared to the same month last year, even as unit sales declined 3 percent, according to data from Circana, formerly IRI and The NPD Group.
Circana said the growth came primarily from food and beverage CPG spending, with a 5 percent increase in sales revenue over last year and a 2 percent unit-sales decline. Non-edible CPG sales revenue grew 2 percent, while unit sales fell 4 percent. Decreased spending on discretionary general merchandise continued through May, with a 5 percent decline in sales revenue and an 8 percent decline in units.
“Consumers are engaged and spending, just not at full throttle,” explained Marshal Cohen, chief retail industry advisor, Circana. “Directional spending shifts, coupled with unemployment elevation and recent air quality concerns in the U.S., could jolt a significant shift in consumer behavior. But, for the time being, consumers continue to seek little luxuries and are willing to pay a premium for most of their purchases.”
Year-to-date through May, sales of apparel, technology and other traditionally high-volume categories declined from a year ago, but consumers did boost their spending on several industries. Prestige beauty was the only industry to exceed the sales growth noted in the food and beverage industry. Sales revenue increased by 16 percent, while mass-market beauty sales grew by 9 percent. Retail sales revenue from video games, homecare CPG, office supplies, automotive aftermarket products, health CPG, and floral CPG also grew. Aside from prestige beauty, the average selling price for each industry increased by 5 percent or more as unit sales declined.
Rising prices and declining consumer sentiment drove down discretionary general merchandise spending, but the anticipated shifts in where people shop during economic uncertainty have not materialized. E-commerce gained the largest share of sales revenue this year, rising more than 2 share points, and department stores maintained a steady market share. Value-oriented options, like mass merchants, warehouse clubs and off-price retailers, have yet to gain additional consumer attention.
However, how consumers adjust CPG purchases indicates that changes are brewing. While overall spending remains elevated because of inflation, consumers approach shopping differently. For example, the average number of items purchased on a shopping trip this year is smaller than last year. Consumers have also begun their migration to more value-focused retail options. These changes in CPG shopping behavior are likely a precursor of the changes on the horizon for the rest of the retail industry.
“Price is certainly part of today’s consumer spending story, but it is not the leading force,” said Cohen, “Consumers are willing to spend if they are presented with something that’s new or delivers greater value, extending the window of opportunity for manufacturers and retailers to make a move and elevate consumer engagement before the tide turns.”
