Retail is moving from “the great acceleration” to “the great rebalancing”.

At the start of the pandemic, it became popular to say that we had seen 10 years of e-commerce growth in just 10 weeks. While that’s obviously not close to being true, the idea of ​​a “great acceleration” in just about everything retail has made its way into the popular vernacular. Additionally, many media outlets and retail pundits have called certain trends, including home grocery delivery, permanent drastic changes. In fact, not so much.

While it’s clear that some significant shifts have taken place during the Covid crisis, it’s also quite evident that right now we’re experiencing much more of a “big rebalancing” and a rather clear return to habits of more familiar purchases.

As the US Census Bureau’s Monthly Sales Report released today reveals, spending in the areas that saw the biggest spikes in activity over the past two years is nearly all slowing significantly, and spending changes the most pronounced of the recent past see a return closer to the average.

For example, big ticket purchases and spending on fitness equipment that had increased significantly are now seeing year-over-year declines. Clothing and restaurant spending, which had been hit hard in the depths of Covid, are now both seeing strong gains. The rate of increase in eating out now far exceeds food purchases for the home, bringing us closer to the relative share of pre-Covid spending.

As more and more data comes in, the supposed massive acceleration in online shopping is now looking closer to a year or two across most categories – and you could say it’s still weaker when considering the important distinction between something ordered online but actually executed from a brick-and-mortar store. There is also growing evidence that the rise of online grocery shopping, whether delivered to home or picked up curbside, is clearly waning.

This rebalancing, along with a growing (but eminently predictable) shift in consumer spending from products to services, seemed to inexplicably surprise a number of retailers. As many companies work to aggressively reduce their inventory levels, we may see unusual buying patterns for products most likely to experience heavy markdowns in the months ahead. But that too will pass.

The exorbitant rate of inflation will also cloud the picture of buying activity for the foreseeable future. For a time, it was generally assumed that if sales dollars increased, that meant the number of units purchased increased as well. This relationship is no longer true in many categories. Since the elasticity of demand can vary considerably depending on the type of customer and the nature of the goods purchased, it will be more difficult to analyze changes in consumer behavior with great precision until runaway inflation is mastered.

While hyperbole is perhaps the greatest thing there is, there are often times when clickbait headlines should be ignored, or at least scrutinized with a high level of discernment. And always remember that your mileage may vary.

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Post expires at 3:46am on Sunday June 26th, 2022