The world may be getting economic jitters generally but US consumers are going to keep on spending. That’s the option of The National Retail Federation, which released its 2016 economic forecast late yesterday.
But the good news comes with a sting as the increase won’t necessarily be about individuals spending more. Instead, falling unemployment means more people will be spending but they’ll still be bargain-hunting and that has massive implications for discount strategies and even the chances of retailer survival.
The NRF projected retail industry sales (excluding cars, gas stations and restaurants) to grow 3.1% this year. That may not sound huge but it’s higher than the 10-year average of 2.7%. Oh, and non-store sales (that’s internet to you and I) should grow between 6% and 9%, not as big as some years but as e-stores are a more mature sector, growth is bound to slow.
“Wage stagnation is easing, jobs are being created and consumer confidence remains steady, so despite the headwinds our economy faces from international developments — particularly in China — we think 2016 will be favourable for growth in the retail industry,” said NRF president and CEO Matthew Shay. “All of the experts agree that the consumer is in the driver’s seat and steering our economic recovery.”
Who’s in control?
It’s that fact of the consumer being in control that’s key. While we as shoppers aren’t always as in control of the situation as we like to think (and as retailers tell us we are), last year, we really did step up and kind of take the reins.
Yes, we allowed ourselves to be manipulated into leaping on bargains every time stores dangled an easy discounted worm on the end of their fishing lines. But all many succeeded in doing was diverting us from snapping up the non-discounted worms we might have bought otherwise!
The rest of the time, we decided goods were too expensive or just not right for the weather.
Will we see more of the same this year? The NRF isn’t answering that question directly, but it believes the environment is right to encourage higher spending. “The economy had a bumpy ride in 2015 with fits and starts along the way,” its chief economist Jack Kleinhenz said. “Despite the volatility, the economy continued to reduce unemployment, raise wages and actually increase real GDP by 2.4%. Lower gas prices are creating more discretionary income to save, pay down debt and spend on travel, eating out and personal services. Retailers have benefited as well, and continue to find ways to compete and succeed in a very cost-conscious environment.”
That last line is significant: as I said at the start of this article, although the NRF expects us to spend more, it thinks we’ll stay intensely aware of price and will continue to search for bargains.
So, it looks like retailers who want to survive this environment need to be working out their discount strategy now – especially if the weather doesn’t play ball (again).