Health of the American Consumer: Highlights from the 2021 Economic Outlook Conference

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Health of the American Consumer: Highlights from the 2021 Economic Outlook Conference

Matthew Shay is president and CEO of the National Retail Federation, the world’s largest retail trade association. He serves as chief advocate and spokesman for the nation’s largest private-sector industry employers. In our 30^th Annual Economic Outlook Conference, he joined Chamber President and CEO Bryan Derreberry for a discussion on the health of the American consumer as we enter year two of the COVID pandemic. Before COVID-19, retail directly employed 32 million people and supported 52 million American jobs; it contributed $3.9 trillion to annual GDP.

In 2019, retail sales grew 3.8%. You may be surprised to learn that in 2020, retail sales were actually significantly higher than usual. According to the National Retail Federation, retail sales grew 6.7%. While there was an overall increase in sales, industry performance was uneven, with sectors deemed essential outperforming those deemed nonessential. Spending shifted to different categories, with trends reflecting the nation’s activity in response to the pandemic: at the beginning, people were stocking up on toilet paper, hand sanitizer and cleaning supplies; then there was more spending on food; home appliances for cooking; work from home necessities; at-home exercise equipment; and home projects – sound familiar to anyone else??

Bryan and Matthew discussed some of the other trends that we have seen as a result of the pandemic, and whether or not those trends represent more permanent changes in retail:

Changed behavior: There has been an increased emphasis on hygiene and safety in stores. Matthew said that this bar has been, and will stay, raised. After the pandemic is over, consumers still want to know that the businesses they are frequenting are being cleaned and maintained to the highest standard.
E-commerce: In January of 2020, e-commerce accounted for 13.2% of all retail sales. In April, as brick and mortar stores had to close their doors, that jumped to 19.2%. In December of 2020, it was down to 14.7%. Matthew said that e-commerce will continue to grow, but it will be a slow increase following the trend that has been observed over the past. It is also interesting to note that companies do not have to be exclusively brick and mortar or digital. In fact, of the top 25 e-commerce companies, the vast majority also have physical locations.
Omni-channel options: Consumers like having options when it comes to shopping and will continue to want omni-channel options. In-store shopping, shopping online and picking up later, personal shopping, etc. will be here to stay.

Across all age groups, everyone did more digital shopping. When businesses were closed, it was out of necessity. Now, people like the convenience of having options. They also have the option to phase back into in-person shopping according to their own comfort levels.

Matthew shared that the spirit of innovation, trial and error and failing fast that we most commonly associate with Silicon Valley were imported to other industries out of necessity during the pandemic. He shared that the philosophy and pace of decision making that were adopted as a strategy to survive the pandemic will continue to be beneficial to those companies and to consumers.

As we look to the future, here are some factors for retail that will continue to be increasingly important to success: