U.S. consumers have started to spend on in-person experiences again, but the pull-back on general merchandise retail spending that is expected to coincide with it has not yet materialized.
Experiential spending reached 91 percent of 2019 levels as of the end of 2021, but general merchandise retail spending remained elevated at 19 percent above pre-pandemic levels, according to The NPD Group. Some diminished demand has been evident, with retail unit sales declining in nine of the first ten weeks of 2022 compared to last year; however, revenue rose more than 5 percent in four of the same ten weeks.
“There is a cautious optimism in the air, as consumers embrace some newfound freedom from restrictions while not yet letting go of their pandemic ways,” said Marshal Cohen, chief retail industry advisor, The NPD Group. “If the pandemic’s trajectory continues moving toward an endemic status, people are likely to begin spending very differently.”
Consumers seem to be emerging from the pandemic lifestyle but not yet from pandemic-era spending. As consumers return to more in-person activities, accessories, beauty, apparel, and other categories have been boosted from experiences. But even as consumers become less focused on at-home needs than they were over the past two years, sales of products most popular through the pandemic continue to exceed pre-pandemic performance, including toys, small appliances, housewares, and technology.
“Retailers and manufacturers need to prepare for the multiple directional shifts that are poised to occur,” Cohen said. “Beyond the growing pressure on retail sales, as consumers redirect more spending toward experiences and the looming sales comparisons of the past two years, political unrest, economic challenges and consumers’ financial well-being can all create a substantial distraction and retail disturbances.”
