The New Consumer (May-June 2022)

U.S. consumers are spending on in-person experiences again, but the pullback on general merchandise spending that is expected to coincide with it has not played out — at least not yet.

Experiential spending reached 91% of 2019 levels at the end of 2021, but general merchandise retail spending remained elevated at 19% above pre-pandemic levels, according to a report from The NPD Group. However, some diminished demand has been evident, with retail unit sales declining in nine of the first 10 weeks of 2022, compared to last year. However, revenue rose more than 5% in four of the same 10 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 for NPD, in a news release on the report findings. “If the pandemic’s trajectory continues moving toward an endemic status, people are likely to begin spending very differently.”

While consumers appear to be emerging from the pandemic lifestyle, they’re not yet emerging from pandemic-era spending. Accessories, beauty, apparel and other categories are getting a boost from experiences, as consumers return to more in-person activities. However, even as consumers become less focused on at-home needs than they were over the past two years, sales of the products most popular through the pandemic continue to exceed pre-pandemic performance, including toys, small appliances, housewares and technology.

Reinvented In-Store Experience

Eighty-five percent of consumers will do more in-store shopping in 2022 than 2021 — up from the 79% who reported increased visits last year — according to consumer survey results from ChaseDesign.

The design firm fielded an online survey through its proprietary research platform, mPulse, among 1,000 consumers between the ages of 25-54, during March 2022. Respondents were screened to be the primary or secondary shopper in their households.

Factors driving this return to physical locations included having the ability to choose products in person, seeing what’s new and taking advantage of the store staff’s expertise. At the same time, online ordering volumes and services like buy online, pick up in-store (BOPIS) are slipping from their 2021 highs, which doubles down on the importance of a vibrant retail offering, according to survey findings. 

ChaseDesign’s analysis of its new research concluded that this means retailers need to make digital investments in their stores to attract and retain that returning foot traffic.

“For retailers, this means maintaining and even boosting their expertise in e-commerce and omnichannel in the context of their physical stores,” Joe Lampertius, president of ChaseDesign, said in an April media release. “It’s about having the right information presented to shoppers through the use of apps, QR codes, AR and VR, and other digital tech, so the in-store shopping experience can be as dynamic and convenient as online experiences.”

Other key findings from the “2022 Shopper Sentiment” survey include:

• Shoppers see 2022 as the tipping point for self-checkout, as they cited it as the most used technology tool at physical retail. This means merchandising practices for retailers must change and adapt to sustain lucrative impulse purchases.

• Self-checkout joins QR codes and retailer mobile apps as the technologies that best help improve the shopping experience. More than two-thirds of shoppers use self-checkout at least occasionally, while 44% use the retailer’s shopping app and 29% use QR codes — all of which represent increases from previous years.

• Target has set the tone for investing in store design and experience over the past five years, resulting in its delivery of the best in-store shopper experience. While Target’s strategic investment in a more relevant and appealing store began five years ago, Costco, Kroger and Dollar General have been investing here, too. Both Target and Walmart saw increases in this area. Walmart outpaced Target in having the best app.

The Digital Shelf

Edge by Ascential’s annual “Future of the Digital Shelf” report, which illustrates the impact e-commerce is having on traditional retail, predicts that shoppers will spend over $2.4 trillion dollars online by 2026. It also predicts that from 2021 to 2026, e-commerce will make up 63% of all total gross merchandise volume (GMV) growth, more than double the amount generated by all the store-based channels measured in the report.

“As retail enters a new generation where the shopper path to purchase is most likely to start on a mobile phone or a laptop, the digital shelf is the primary place where shoppers discover, select, purchase and engage with products online, and therefore is fundamental to a brand’s future growth,” Deren Baker, CEO of Edge by Ascential, said in a news release.

The report highlights e-commerce trends and challenges impacting brands and retailers today. Some additional key findings include:

• E-commerce is reshaping the purpose of the store. Most shoppers now begin their product searches on digital channels and studies show that one in three store purchases begin online. Even when in stores, shoppers are increasingly engaging with digital experiences through mobile apps, QR codes, digital payment tech and social media platforms like TikTok and Meta. The report suggests that brick-and-mortar retail, while still important, must find fresh purpose in a digital-first world.

• The digital shelf is the primary place where brands achieve future growth, but online is not just one channel. Amid the pandemic in 2020, e-commerce activity increased by 37% worldwide, causing the entire online shopping ecosystem to evolve.

• Keeping items in stock is the ultimate precursor to sales and conversion on the digital shelf and to maintain a top search ranking. Edge has observed clients lose as much as one-fifth (22%) of their weekly sales for every day their product is out of stock.

• Search is now the preferred way to shop and an entry point for product and brand discovery.

• For products sold online, a product detail page and online packaging are as critical as the packaging and promotional material for products displayed on a physical shelf.

Insights from Edge by Ascential’s latest report were gathered between November 2021-2022. The report was created with data from the company’s proprietary analytics tool dubbed Retail Market Monitor. Retail sales data included online and offline operations, and only includes chain retailers, of which Edge Retail Insight covers almost
2,500 worldwide.