Report: Consumers Take a Break From Discretionary Spending
In July, U.S. retail sales across discretionary general merchandise and consumer packaged goods continued on a “path toward a state of equilibrium,” according to market research firm Circana.
During the four weeks ending Aug. 3, overall sales revenue remained level with the same four weeks last year, and unit demand declined 1%.
While both food and beverage and non-edible CPG sales revenue increased 1% — with generally flat year-over-year unit performance — discretionary sales remained challenged, with a 3% decline in dollars and a 2% decline in units. Despite major retail promotional events, consumers maintained their steady spending of the past several months, per Circana.
“This month’s sales results demonstrate just how adept consumers have gotten at adapting their spending behavior to stick to a budget, including taking a break in some areas,” Marshal Cohen, chief retail industry advisor for Circana, said in a media release. “This apparent vacation from spending is having an impact across discretionary categories. The longstanding strong performance in beauty and the auto aftermarket is starting to level off; back-to-school shopping has yet to show up in a significant way, and challenging results for apparel, footwear and accessories demonstrate that consumers are holding off on updating their wardrobes.”
In addition, there is a growing focus on value, as club and dollar stores saw food and beverage revenue gains in the first half of this year. Club store gains in non-edible CPGs indicate similar behavior. In discretionary general merchandise, Circana said the shifts are more about what consumers are buying than where — products are prioritized based on need, and brand loyalty is tested by financial concerns and competitive product offerings across all channels.
[Also Read: Circana Sees 'Stories of Growth' as Retail Spend Stabilizes in June]
“Consumers are shifting their dollars, not spending more, so marketers need to find ways to be the beneficiaries of these changes or risk being the victims,” added Cohen. “As fall weather approaches and looming distractions around summer activities and the election evolve, it will be important to watch how consumer spending behavior changes — because it will change.”