by You’ve probably heard the one about the obviously very tipsy gent who walks into the pub and then announces he is going to buy everyone in the bar a drink. But just not today.
Based on a just-released survey from the ConsumeWise team at market research firm McKinsey, more consumers than not are acting like that guy.
And for retailers, that’s not funny.
The report concludes that although a growing number of consumers are beginning to feel more optimistic about the economy, they are still departing with their disposable income pretty cautiously.
The report also determined that consumer spending, across all age and income groups, is lower than it was 12 months ago and has dipped again for the second consecutive month.
Specifically, the report concludes that, when measuring by credit-card spending, April’s volume of consumer spending dipped in excess of 3% versus that same period a year ago.
Retailers hurt the most by the spending slowdown were jewelry retailers, which had to grapple with a dip of 12% in real spending, year over year. On a positive note, spending with fitness retailers was strong, showing a gain of 4%.
Worth nothing is that McKinsey said that spending dipped across the board for the first time in more than 24 months. Considering the current economic challenges, it is not surprising that the report confirmed that the dip in spending was deepest — at just under 5% — among low-income shoppers.
And much like our tipsy gent introduced to you at the beginning of this story, consumers, while maintaining their intent to splurge and spend, don’t always follow through.
As the chart below shows, although some 50% of Gen Zers and millennials in all income groups said they planned to splurge and spend in April, real spending, including year-over-year spending, dipped across all income groups that month.
When McKinsey surveyed consumers during the second quarter, many indicated they planned to splurge on several categories. But in later follow-up polls, the company determined that this was not always the case.
As one example, even though 38% of respondents expressed intent to splurge on restaurants, the year-over-year change in real spending in the restaurant segment was –3% in April.
However, the travel and out-of-home entertainment segments saw 2% real year-over-year spending growth in April.
Across the board, consumers said they intend to splurge on eating out, groceries, travel and apparel. In our case, home goods were only mentioned by 21% of those responding to the study.
Based on this information, you are not just competing with other local home furnishings retailers.
And truth be told, this was always the case. But today, with the consumer’s growing concern about the economy, we need to figure out a way to change “I’ll splurge someday” to “I want to buy home furnishings today.”
