Consumers are spending on in-person experiences again, but the expected pull-back on general retail spending has not played out. At least, not yet.
Experiential spending by U.S. consumers reached 91% of 2019 levels, as of the end of 2021, according to The NPD Group. At the same time, general merchandise retail spending remained elevated 19% above pre-pandemic levels.
Some diminished demand has been evident, however, with retail unit sales declining in nine of the first ten weeks of 2022, when compared to last year. Still, revenue rose in excess of 5% 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 for NPD. "If the pandemic's trajectory continues moving toward an endemic status, people are likely to begin spending very differently."
Consumers appear to be emerging from the pandemic lifestyle, but 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.
But 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.
Retailers and manufacturers need to prepare for the multiple directional shifts that are poised to occur, advised Cohen.
"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 substantial distraction and retail disturbances,” he said.