Spring 2024 Retail/CPG Trends: Impulse Purchasing is Down & High Rents Persist, But At Least Those Y2K Fits in Your Closet Are Back In-Style

May 15, 2024
By Mike Wilkening, Communications Manager, ARC (CMA | SIMA)

Our industry must be aware of so much data, so many trends. It seems impossible to get a handle on it sometimes. We feel the same way, and like you, we’re always reading to stay on the wave, lest we be swept ashore.

To this end, we highlight 10 news items below with applicability to you, the retail/CPG expert. We will start with retail sales trends and move through nine other items quickly, but with a little takeaway for each.

Here we go.

NRF Head: “Elevated” Inflation in Services, Not Goods 

Core retail sales inched up 0.4% percent seasonally adjusted in April, according to the National Retail Federation. In a statement, NRF President and CEO Matthew Shay noted that goods inflation “has dropped to nearly zero,” with inflation persisting “because of elevated prices for services.” Of note: grocery/beverage store sales declined 1.1% month over month on a seasonally adjusted basis.

Hmmm. Food for thought. So what about food outside of the home? What’s the story there? One particular chain seems like a very good one to highlight.

Potbelly CEO: Consumers “Pulling Back a Bit”   

Nation’s Restaurant News detailed the challenges and opportunities for Potbelly, a Chicago-based quick-service restaurant with 427 stores, with sandwiches generally ranging $6-12. While first quarter sales were down 0.1% in first quarter, use of the company’s mobile app is up, and 41% of sales are digital.  Potbelly CEO Bob Wright told the magazine: “I think what we’ve seen, at least in our business — and I do think it’s a symptom of the broader economy — is our less frequent consumer is pulling back a bit, and not just with us … their food budget as a whole is under pressure.” Indeed, Pizza Hut and KFC saw year-over-year sales decreases in Q1, with McDonald’s year-over-year growth slowing.

Why might consumers be pulling back? One constant factor likely looms large, as we see next.

Rent Outpacing Wage Gains

The pressure consumers face starts at home, and it starts with the monthly check, or ACH withdrawal, to pay the mortgage, or rent.

With mortgage rates exceeding 7% and housing inventory still well down from pre-pandemic levels, it’s a challenging housing market. Well, the rental market has had its share of challenges, too. A recent Zillow/StreetEasy study found that rent prices have grown 10.2% faster, on average, than wages in the top 50 U.S. metro markets. Tampa, Miami, Indianapolis, Hartford, Ct., and Jacksonville, Fla. have seen the highest rent growth vs. wages over the last five years.

It stands to reason, then, that if consumers need shelter and food, and the cost of shelter is constant, food might be a place where cutbacks occur.

Which brings us to the next item.

Private Label Rolls On

How big is private label these days? So big that Walmart has made its biggest new brand launch in more than 20 years with ‘bettergoods,’ products aiming to be both affordable and with the better-for-you attributes that resonate with the retailer’s increasingly higher-income shoppers. Private label sales reached $236.3B in 2023, according to the Private Label Manufacturers Association, with general food sales up 10% and beverages up 8.9%.

Want more consumer data? We’ve got it.

Study: Impulse Purchasing on the Decline

Here are some eye-opening statistics from NIQ: in research conducted from Sept. 2022 to June 2023, just 9% of consumers made impulse shopping trips. That’s quite a drop from the standard 16% NIQ reports seeing in surveys in the not-so-distant past. Online impulse trips fells 8%, with in-store/offline falling 5% from Sept. 2022-June 2023, per the survey.

Earlier this year, the CMA explored the state of impulse purchasing in this increasingly online world. The NIQ study brings up a great point: so many online sites today are excellent at reminding consumers of what they’ve purchased previously, and what they may need to buy today, lest they run out. This “reminded” shopping may well be taking the place of some impulse trips.

However, you can’t completely eliminate impulse, right? If we want cookies, we want cookies. And if we’re watching something we really like on our phone, perhaps we need it, right then. Here, the brands can maybe gain some share back.

To our next item.

NBC Universal, Instacart Team Up in Retail Media 

The retail media space continues to boom, and the topic was one of the most popular at our 2024 CMA Conference. Last week, NBC Universal and Instacart announced a retail media partnership set to launch this quarter, where viewers will be able to interact with Peacock streaming CPG advertisements and buy those items via Instacart.

“Soon, NBCUniversal advertisers will be able to leverage Instacart’s first-party audience data to enhance their streaming campaigns and prove their campaigns’ efficacy with our closed-loop measurement,” said Tim Castelli, Vice President of Global Advertising Sales at Instacart. “Consumers can see a CPG’s ad on streaming and get that product delivered to them via Instacart in as fast as an hour – it’s a win-win for both consumers and brands.”

On the subject of win-win, we go next to the technology front.

AI Age Verification Technology for Self-Checkout Piloted in Germany

Let’s face it: one of self-checkout’s weaknesses is the time it takes for age verification when a store team member isn’t right near the register. When the light flashes for customer assistance, and no employee is nearby, you get that sinking feeling. You gambled self-checkout would be quicker, and you lost. We’ve all been there, either grabbing that bottle of wine to take to someone’s home for dinner, or we’re stuck behind the person who needs an ID verified.

Well, the future of self-checkout could well be at the Stuggart Airport in Germany, which has begun testing Vynamic Smart Vision Age Verification at one of the stores. The tool uses AI facial recognition to determine if a person’s age needs to be verified for a restricted purchase item (alcohol, cigarettes, etc.). According to Vynamic’s parent company, the system had a better than 80% success rate in the first week in correctly and automatically approving age-appropriate purchases.

A more seamless self-checkout experience is imperative to getting people into stores. So, too, of course, is having a place for people to go.

So what does the retail real estate market look like these days? Glad you asked.

Retail Real Estate Market: Landlords Still in Driver’s Seat

After 11 consecutive quarters of growth, the U.S. market saw a negative net absorption of 1.2 million square feet in Q1 2024, according to Cushman & Wakefield. While a small setback, Cushman notes that with retail construction continuing to lag, landlords are in a position of strength.  Dallas (1.5M SF), New York City Metro (871K), Houston (797K SF), Austin (739K) and Phoenix (607K SF) are the leading U.S. markets in terms of shopping centers currently under construction.

OK, that’s a lot of numbers. Let’s get something light in before we finish. Two more items. This next one is fun.

Here Come The … 2000s?

We saw this article and had to share it with you. “Who What Wear” spotlighted some early-2000s(!) make-up trends that appear to be making a comeback. Well, old always ends up being new again, and it has been 20 years, so here we go. Let’s bring back the early-2000s, frightening as that feels to write. (Alas, the author’s once-boy-band spiked hair is long gone, both the hair gel and the hair itself.)

For retailers and suppliers, it’s probably worth looking back at those turn-of-the-century trends. For the author, it’s another evening of looking at old photos and sighing. Where did all that hair go? We were so good together!

Finally, let’s finish with a note of caution on something we’re seeing more and more of these days – a particular tactic some consumers don’t particularly like.

Fee Fatigue

We close by sharing this fascinating read from the Wall Street Journal on the seemingly voluminous fees consumers are seeing attached to services as well as goods. There’s been some federal and state pushback on the clarity around these fees. As always, it will come down to the consumer – when the fees can’t be passed on, it will become very obvious to the companies seeking to tack them on. This is a must-read for anyone with an interest in consumer psychology, even if it’s a little scary.

See you soon for more trends, and the story behind them.