Spending Compression

All of Retail is Moving Toward New Spending Baselines

September 25, 2023
By Don Unser, President, Thought Leadership, Circana and Marshal Cohen, Chief Industry Advisor, Retail, Circana

The purse strings are tightening up when it comes to retail spending. The shifts in consumer spending have been evident when monitoring year-over-year spending trends. When those same trends for discretionary general merchandise, food and beverage, and non-edible consumer packaged goods (CPG) are viewed together, a picture emerges, showing changing consumer priorities.

Nearly two years ago, at the start of 2022, the gap in spending changes across each of the three big industries was minimal. Then, looking back just one year, spending on food and beverage
became elevated, while non-edible CPG and general merchandise dollar sales remained steady. After another six months passed, non-edible CPG spending caught up to the food and beverage elevation, and general merchandise dollars fell, in early 2023.

Inflation is easing, but consumers feel the pinch of still-elevated food and beverage prices.
Many also face new and future headwinds with the loss of SNAP benefits and the end of the student loan repayment pause. Households continue to look for deals and switch to lower-cost options to save money. But pockets of indulgence remain in areas like perimeter bakeries, butcher shops, and other specialty stores. The opportunity is to balance consumers’ need to save money with their enduring desire to enjoy themselves.

Circana blog post chart: Weekly Dollar Percent Change vs. Prior Year

U.S. Retail Trends

Monitoring the Slow Spread of Change

Discretionary general merchandise spending remains on the new course established over the past few months. For the week ending September 2, 2023, our Retail Early Indicator reports U.S. dollar sales of discretionary general merchandise were 4% lower than in the same week in 2022, and unit sales were down 6%.

In August 2023, discretionary retail dollar sales were down 5%, and unit sales fell 7% below the same month last year. Contributing to declines is the tardy back-to- school season. But marketers should not be too quick to move on from back-to-school, because the full impact of the season’s needs has yet to be realized (despite traditional thinking).

Circana: General Merchandise Most Recent 13 Weeks: Percent Change Compared to Prior Year

The slowing growth within food and beverage is worth keeping an eye on as prices begin to decline. Dollar sales were up a more moderate 3% in August, and unit sales fell 1%. Non-edible CPG sales revenue grew 2%, and unit sales declined 3%.

August 2023 total retail sales revenue, including both discretionary general merchandise and CPG, was flat compared to the same month last year. Unit sales declined 2%. We may be seeing the beginning signs of higher prices, lower demand, and weather disruption having an impact on overall consumer spending.

Adjusting to the Consumer’s Priorities

The tardiness of seasonal shopping and the pockets of indulgent spending illustrate the importance of retailing at the right place and the right time. Manufacturers and retailers need to align with the
consumer’s current needs and schedule if they are to maximize purchase opportunities, rather than
jumping to the next thing on the calendar.

As spending compression reaches a new constant, discretionary general merchandise will be up against CPG purchases that take priority for consumers — and that means working harder to find growth. Tapping into consumers’ needs and desires that can cross the aisle will prove beneficial, blurring the lines of priority as compression trends continue in future shopping seasons and the coming year.

Watch for the next Now in Retail, where we’ll shine more light on what is happening below retail’s surface.

Source: Circana, Retail Early Indicator, Circana general merchandise universe
Discretionary retail includes the following industries: accessories, apparel, auto parts, beauty, consumer technology, DVD/Blu-ray, footwear, housewares, juvenile products, office supplies, small appliances, sports equipment, toys, video games.

About the Authors:

Don Unser headshot, Circana

Don Unser
President, Thought Leadership, Circana

Don Unser leads thought leadership for Circana. Don’s expertise in consumer and retail trends spans a wide range of general merchandise categories, making him a trusted advisor to some of today’s most successful brands. He is a frequent guest in the C-suites of companies such as Target, Apple, Best Buy, Newell, and many others, that rely on him for insight into industry and category performance, the state of retail, and winning strategies of best-in-class companies. Read more

Marshal Cohen headshot

Marshal Cohen
Chief Industry Advisor, Retail, Circana

Marshal Cohen, chief industry advisor of The NPD Group, Inc., is a nationally known expert on consumer behavior and the retail industry. He has followed retail trends for more than 30 years, at NPD and as the head of leading fashion and apparel manufacturers as well as major retailers. As part of his work at NPD, Marshal leads many top firms in long-range and strategic-planning sessions. He often utilizes motivational presentations to help launch corporate goals and kick-off meetings. Read more