Consumer spending “should remain strong,” but its pace “is continuing to slow,” said National Retail Federation Chief Economist Jack Kleinhenz Thursday. The 2.6% rise in gross domestic product (GDP) for Q3 -- after declines of 1.6% in Q1 and 6% in Q2 -- “dispelled the notion that the U.S. economy is in a recession,” Kleinhenz said, but “the economy is cooling and interest-sensitive sectors, in particular, have seen a significant pullback.” For the rest of 2022, GDP is expected to grow “very gradually,” about half of what was recorded in Q3, as consumers are “stepping back” and changing how they allocate their resources, Kleinhenz said. Employment and consumer spending “should remain positive” heading into 2023, though “there will be economic hardships, and some may feel like they’re in a recession,” he said. Spending will continue for those who have jobs and feel secure about their employment. Rising interest rates have made new homes unaffordable for many would-be buyers, while spending on services is continuing to “bounce back” from the COVID-19 pandemic; that's causing a shift away from spending on retail goods, he said. The willingness to spend has been stable, and retail sales for the first 10 months of 2022 grew 7.5%, on track to meet NRF’s forecast of 6%-8% growth over 2021, he said.
Target expanded on its Starbucks pickup partnership in a Wednesday blog post, saying customers in select markets can have beverages and food delivered with their Drive Up order to their car via curbside service. The service is available at 240 Target stores in California, Delaware, Minnesota, New Jersey, Pennsylvania, Texas, Washington and West Virginia, Target said. After placing a Drive Up order at a participating store, customers will receive a prompt to place and pay for an order from the Starbucks Café menu. When they complete the Drive Up check-in process and check “I’m on my way,” a Starbucks barista located in the Target store prepares the order. Upon arrival, the customer indicates they’ve arrived in the Target app and a Target employee delivers the Starbucks order with the merchandise, it said. The retailer piloted the service in the summer and will continue to enhance the service, it said. Some 1,700 Starbucks Cafés are in Target stores in the U.S.
Some 166.3 million consumers are expected to shop from Thanksgiving Day through Cyber Monday, almost 8 million more than the 2021 period, said the National Retail Federation Thursday. Noting speculation about inflation’s impact on consumer spending, NRF CEO Matthew Shay said the Thanksgiving weekend will see “robust store traffic with a record number of shoppers taking advantage of value pricing.” NRF is optimistic that retail sales “will remain strong in the weeks ahead, and retailers are ready to meet consumers however they want to shop with great products at prices they want to pay.” An NRF-Prosper Insights survey showed 69% of holiday shoppers plan to shop over the five-day span because deals are too good to pass up (59%), tradition (27%) or because it’s something to do over the holiday (22%). Black Friday remains the most popular day to shop (69%), followed by 38% on Cyber Monday. Two-thirds of the Black Friday shoppers expect to go to stores, up from 64% last year, it said. Six in 10 respondents had started browsing and buying for the holidays by early November, it said. Some 18% of respondents in the survey of 7,719 adult consumers fielded Nov. 1-8 had completed at least half of their holiday shopping. The top five gift categories are clothing (55%); gift cards (45%); toys (37%); books, movies, music and video games (33%); and food/candy (31%), it said. Total spending on gift cards is expected to reach $28.6 billion, up $500 million from a year ago; consumers plan to spend an average $51.47 per card for three or four cards. NRF forecasts holiday sales will grow 6%-8% vs. 2021 to $942.6 billion-$960.4 billion.
Consumer spending has “gradually slowed but remains solid,” said National Retail Federation Chief Economist Jack Kleinhenz in a Wednesday retail update. Retail sales, excluding automobile dealers, gas stations and restaurants, inched up 0.7% in October, NRF said. Electronics and appliance store sales slipped 0.3% in the month. Consumers “continue to show resiliency despite elevated inflation, rising borrowing costs and widespread macroeconomic uncertainties,” Kleinhenz said. He cited early October holiday deals as drivers for retail sales gains in the month, saying more will be seen in November and December. On a Wednesday earnings call, Target executives cited a falloff in consumer demand toward the end of October that has continued into November (see report, this issue).
Target, which has evolved its store strategy to focus on fulfillment, announced Thursday new larger-format 150,000-square-foot stores that will have a more open layout and “localized elements.” The stores are more than 20,000 square feet larger than the chain average, it said, and have a backroom fulfillment space that’s five times larger than previous stores of similar size. Stores are fulfilling over 95% of Target’s digital orders and same-day services, which are over 10% of its overall sales, it said. The new-design stores will offer the “full assortment” of Target merchandise including expanded food and beverage, brand partnerships such as Apple stores, and owned and national brands. The stores will have larger windows to bring in natural light, plus plants and natural wood, said the retailer, which plans to tailor stores to the community with localized product offerings and native landscaping. As part of Target’s goal to achieve net-zero emissions by 2040, future stores and remodels will have natural CO2 refrigerants to help lower emissions, and electric vehicle charging ports for guests; some will have rooftop solar panels. Starting next year, more than half of Target’s 200 stores are slated for remodels, and nearly all of its 30 new stores will include elements of the new design. In 2024, all new stores and remodels will have most of the new design elements, it said.
The tight labor market could push retail closers to automated checkout, but “the question is no longer when the checkout tech will be ready, but when customers will be ready to use it,” said eMarketer Monday. Three-fourths of U.S. adults haven't used or heard of the technology, it said. Amazon is ahead of the curve with cashierless “just-walk-out” checkout technology, rolling it out in its own stores and those of other retailers, said eMarketer Tuesday, but just 14% of U.S. adults regularly use mobile scan-and-go or just-walk-out payment methods. Some 21% of 18- to-34-year-olds use it vs. 6% of those 55-65 and 16% of consumers 35-54, it said.
Increased investment in contactless acceptance infrastructure will drive a 60% increase in unique global contactless mobile payment users to 1 billion by 2024, said a Tuesday Juniper Research report. Also fueling growth is consumer demand for convenient and frictionless payment methods using a phone or near-field communication-enabled device, eliminating the need to carry multiple payment cards, it said.
Business conditions are “generally positive as consumer fundamentals continue to support economic activity,” said National Retail Federation Chief Economist Jack Kleinhenz Friday, after the trade group’s Thursday holiday season sales growth forecast of 6%-8% (see 2211030060). Kleinhenz noted gross domestic product rose 2.6% in Q3, calling it a “healthy increase that should override any remaining fears that the economy is in a recession.” Consumers’ willingness to spend has been “clearly impacted by inflation,” Kleinhenz said, but job growth, rising wages and available savings accumulated during the pandemic have bolstered their ability to spend. September consumer spending rose 0.6% from August, underscoring that “demand remains strong and can be expected to continue,” he said. The labor market “has cooled but job growth remains strong,” said the economist, saying employers “will likely continue to hire in the next few months.” Wages and salaries are up about 5% year over year, he said, citing Bureau of Labor Statistics data, and consumers have about $1.7 trillion in savings built up during the recession. Credit balances “are growing but remain near a historical low as a percentage of disposable income,” he said. NRF forecasts holiday retail sales Nov. 1-Dec. 31 will be $942.6 billion-$960.4 billion.
To counter high food inflation, Walmart is offering “this year’s Thanksgiving meal at last year’s price,” blogged John Laney, executive vice president-food, Thursday. Featured items including turkey, ham, potatoes and pumpkin pie have been priced to ensure that “the price for the same basket of items does not cost more than it did last year,” Laney said. The comparison is based on the average price charged for featured items Nov. 1-Dec. 26 last year vs. Walmart’s national or highest regional price to be charged when buying “the entire assortment of the same items” during the same span this year, he said. Laney highlighted Generation Z customers as “first-time turkey buyers this season,” saying Walmart broadened its assortment to meet their needs, including “easy, convenient meal options."
Target and Apple expanded their relationship, tripling the number of Apple at Target store-within-a-store locations to 150 nationwide, Target said Wednesday. The shops have Apple-trained Target consultants and twice the space dedicated to Apple products, it said. As part of the expanded agreement, members of the Target Circle loyalty program have access to a four-month free trial of Apple Fitness+, with no purchase required, Target said. The retailer will also have special holiday offers on Apple Music, Arcade News+ and iCloud+, with some including up to five months free, also through Target Circle, it said.