With the end of the pandemic in sight, retail is gearing up for a broader economic rebound — and experts are now painting a clearer picture of what that “new normal” could look like.
On one hand, the idea of “revenge spending” could lead to a roaring ’20s of sorts — a reference to the self-indulgence and mass consumerism of the 1920s following the First World War and the 1918 flu pandemic. Shoppers could flock back to stores and splurge on big-ticket items following months of being cooped up, boosting hard-hit industries like retail — as well as dining and tourism.
On the flip side, the coronavirus has also challenged consumption: At the height of the pandemic, a fear of shortages drove many shoppers to stockpile daily necessities and hold back on discretionary purchases. It also renewed the focus on sustainability, which swayed some to consume less — particularly as the recession impacted food, housing and employment — and prioritize quality over quantity.
“There is an eagerness to face the future with hope rather than dread. Has behavior shifted yet? The answer is no,” said Sarah Engel, CMO at retail consultancy January Digital. “There’s still so much volatility and uncertainty, and we’re about a year away from really knowing how the consumer is going to shop — but we’re starting to make our way toward that and see a mix [of different types of consumers] moving forward.”
In the near-term, some shoppers continue to emphasize the basics ahead of a return to pre-pandemic activities. According to recent data from Deloitte, U.S. consumers plan to keep their spending on clothing and shoes flat over the next four weeks compared with the previous four weeks. It also reported that Americans plan to spend on day-to-day necessities such as groceries (25% more) and utilities (19% more), as well as household goods, medicines, internet or mobile and health care (all up 17%), plus housing (15% more).
But while millions of Americans were furloughed, lost their jobs or encountered financial hardships over the past year, others — particularly those with sizable travel, entertainment and other discretionary budgets pre-pandemic — were able to save up more money than usual and record a decline in their monthly expenses. These, according to experts, will make up the majority of the cohort of shoppers who will engage in “revenge spending” — but that doesn’t necessarily mean apparel and footwear retailers will be great beneficiaries.
“A lot of spending went to home goods and sporting goods stores, but we’ve been home for a year now and want to get out of the house,” explained Gabriella Santaniello, founder of retail consultancy A Line Partners. “You’ll see an uptick in apparel and footwear as people go out for dinner and to travel, but I don’t see a full wardrobe replenishment anytime soon. People want experiences.”
In a new survey, consulting firm McKinsey & Company found that half of consumers are already pandemic-fatigued and intend to spend soon, especially on apparel, beauty and electronics. The other half is waiting for a full resolution to the health crisis and plans to engage with more experiential categories like restaurants and travel.
“With growing consumer confidence, most categories are starting to see a shift back to normalcy as life starts to stabilize,” RetailMeNot shopping and trends expert Sara Skirboll told FN. “COVID has affected the way shoppers approach retail, but as restrictions begin to loosen, shoppers are optimistic about 2021.”
Still, experts have warned that not at retailers are well positioned to take advantage of the influx of shoppers to stores, particularly if they were already behind in the digital curve. Even after the health crisis subsides, offerings like buy online, pick-up in store, curbside pickup and same-day delivery — which emerged as go-to shopping options for consumers concerned with safety and convenience — will remain critical in an omnichannel retailer’s arsenal. As such, experts suggest that retailers will need to invest in tools and technologies that give them the foundation to be flexible and agile to support this modern-day shopping experience, accelerated by the COVID-19 pandemic.
“The vanguards in the past — those that were pushing the envelope as far as what customers were able to experience in their stores — will probably be in the best position,” said Chris Shaw, senior director of product marketing and analyst relations at Manhattan Associates. “The older generation, for instance, which might have been the last to jump on the digital-physical bandwagon when the pandemic hit, might actually be the last ones to go back to stores … You can’t separate those experiences anymore; even if a customer goes to a store physically, they were already going to be engaged with the retailer digitally. It’s just the way that we shop today.”
But there’s no question that retailers will be looking to make up for lost ground in the past year, particularly with shopping holidays like Memorial Day on the horizon. Experts suggest that consumers could expect deeper discounts across the board — and purchases in the back half of the year could even “rise to an all-time high,” Skirboll said, as Americans look to supplement a year’s worth of shopping, events, travel and other expenses that were put on hold in 2020.
“While confidence is growing due to stimulus check deposits and continued vaccine rollouts, deal seeking is still extremely important to many shoppers,” she added. “After a year’s worth of economic strains, many are optimistic but still erring on the side of caution and looking for savings where they can.”