July Retail Sales Flat But Beauty And Wellness Remain A Top Category

The U.S. Census Bureau released July retail sales, which remained unchanged compared to June (seasonally adjusted). Non-store sales, including online, increased 2.7% from the previous month. Jonathan Silver, founder and CEO of Affinity Solutions, said, “With retail sales being flat or slightly up if you exclude gas and auto purchases, we’re still seeing a consumer appetite to spend despite economic hurdles like bottle-necked supply chains and higher than normal inflation.” While retail sales were flat compared to June, store visits increased, demonstrating that shoppers are making more trips to physical stores.

Beauty and wellness remain strong

Monthly visits to beauty stores and spas have increased every month of 2022 compared to last year. In July, visits were up 4.5% compared to 2021 and 27% higher than pre-pandemic levels. Shira Petrack, marketing content manager of Placer.ai, stated, “While some of the visit growth is driven by brick-and-mortar expansions, the increase in foot traffic also reflects a strong demand for beauty products that have remained relatively unaffected by the wider downturn in consumer spending.”

Foot traffic to movie theaters increased in July 2022, with visits up 72% compared to a March 2022 baseline. Petrack stated, “The success of movie theaters and the beauty and spa category indicates that, despite the challenges, consumers are still willing to spend money on non-essential goods and services.”

Discount and dollar stores show increased store visits

According to the Placer.ai quarter index of store visits, discount and dollar store visits have increased weekly since April. As consumers continue to feel the squeeze of inflation, price-conscious shoppers are looking to the discount segment to offset higher prices. The consumer price index, while flat in July compared with the previous month, showed an 8.5% increase (average of all items) for the 12-month measure, year over year. Silver said, “This back-to-school shopping season, parents, particularly in the low to middle-income bracket, are focusing on the basics while also trading down to cheaper stores amid surging inflation.”

Ethan Chernofsky, vice president of marketing for Placer.ai, discussed how discount and dollar stores generally see the most significant spike in visits around December as shoppers visit the sector in search of value-priced holiday gifts and party supplies. The shift in visits explains a drop between the first quarter of 2022 and the fourth quarter of 2021. Store visits to the discount sector are expected to increase during the holiday season.

Chernofsky stated, “As consumers look to stretch their budgets, dollar and discount stores are likely to continue seeing elevated traffic numbers in the second half of 2022.”

Customers continue to spend online

Non-store sales (not seasonally adjusted) for the year were up 16.5% compared to 2021, with July up 29.6%. Compared to pre-pandemic levels (2019), nonstore sales were up almost 60%. Consumers are purchasing online and taking advantage of many retailers’ buy-on-line-pick-up-in-store features. Click-and-collect sales are projected to reach $96 billion in 2022, up 19.4% from last year.

Lower gas prices will fuel back-to-school (BTS) sales, including online. Cotton Incorporated’s BTS report revealed that 38% of parents surveyed plan on buying their BTS items online. The report stated that the current economic situation and inflation impact 85% of respondents’ BTS shopping. While prices across every category have remained flat to June, online prices have decreased for the first time this year.

The Adobe Digital Price Index (DPI) showed July as the first-month e-commerce entered deflation after 25 consecutive months of persistent inflation online. According to the report, most of the categories tracked by the DPI (14 out of 18) saw month-over-month (MoM) price decreases in July, and there was an overall online price decrease of 1% year-over-year (YoY).

Most retail segments remain strong

Year-to-date (YTD) retail sales running from February through July (not seasonally adjusted) were up 9.9% compared to the previous year, with the top categories of gasoline up 40.8%, non-store including online up 16.5%, and groceries up 7.4%. Department stores lagged, with sales being down 0.5%. For July, department stores took a hit with a sales decrease of almost 9%.

Inflationary pressures remain steady

The second half of 2022, which starts in August for most retailers, will continue to foster great uncertainty in consumer spending. BTS sales may increase based on many students returning to full-time classroom study (versus remote), and pricing may continue to be reduced based on excess stock. Inventory levels across all categories are up 15% in May compared to last year, with discount stores up 30% and department stores up 17%, driving many retailers to cut prices to move inventory.

Silver stated, “The year-to-year increase tells us that the economy is recovering, although it is difficult to ascertain which areas are truly rebounding faster than others as there has never been a more fragmented consumer landscape, and broad economic indicators are often no longer enough to truly understand changing consumer behaviors across segments.”