Economy
25 September 2022
The Week Ahead: Natural Products East, Consumer data, Nike earnings
Check out what's in store for retail and ecommerce from Sept. 26-30.
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Welcome to a new week. As fall temperatures arrive in the Northeast US, a pair of industry events will be gathering leaders in some of the region’s largest cities. Plus, the economic calendar is bursting with reports, and Nike headlines the week in earnings.
Events
Here’s a look at the industry events where brands and retailers will be gathering this week:
GS1 US Innovation Summit: Industry leaders discuss strategies to advance circularity in supply chains at this free, virtual event. The one-day summit features three panel discussions, a keynote presentation and more. Sept. 29
White Label Expo New York: The entrepreneurship-focused expo covers aspects of building an online business across retail, ecommerce, and sourcing. Partake in masterclasses, networking and showcases. Sept. 29-30
Natural Products Expo East: This Philadelphia trade show features more than 1,000 booths showcasing natural products, and a chance to learn about topics in the industry. Sept. 28 - Oct. 1
Economic Indicators
A week after the Federal Reserve delivered its third straight 0.75% rate increase, a number of economic reports for August are due from the federal government and others:
Durable goods orders: The US Census Bureau releases August totals of orders placed for delivery of hard goods that are meant to last at least three years. Sept. 27, 8:30 a.m.
New home sales: The US Census Bureau releases its monthly survey of residential sales. This measure is always a focus for home brands and retailers. Housing in general is a key market for the whole economy, especially after the Federal Reserve raised interest rates this year. Sept. 27, 10 a.m.
Consumer Confidence: The College Board will release its monthly survey that looks at consumers’ intentions in purchasing for the coming months. Sept. 27, 10 a.m.
Retail Inventories: The US Census Bureau will release estimates of retail inventories. Stock has been elevated at major retailers following a combination of easing supply chain bottlenecks and an influx of items that were in high-demand during the pandemic that were no longer as widely sought. Sept. 28, 8:30 a.m.
Personal Consumption Expenditures: The US Bureau of Economic Analysts will provide its report on spending, income and prices for August. The price report is widely known to be the inflation index that is preferred by the Federal Reserve, making it especially important as the central bank seeks to bring prices down. Sept. 30, 8:30 a.m.
Consumer Sentiment: The University of Michigan Survey of Consumers will provide its final reading of consumers’ outlook for the economy and inflation for September. Sept. 30, 10 a.m.
Earnings
Some big names in retail and consumer goods are reporting earnings this week:
Tuesday, Sept. 27: United Natural Fooods
Thursday, Sept. 29: Nike, Bed, Bath and Beyond, Rite Aid, CarMax
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02 June
Macy's sees 'reset year' for ecommerce
The retailer's marketplace is expanding quickly.
When it comes to ecommerce growth, was the pandemic a blip or a new trendsetter?
As we move further from the height of COVID-related closures, it’s a question that will start to be answered through the lens of history.
So far, the narrative of ecommerce growth in the U.S. from 2019-2022 has gone like this: Ecommerce’s share of overall retail saw a huge spike at the height of the pandemic in 2020-21, when goods in general were in demand and online shopping was necessary to preserve health and safety. Experts looked out and saw a permanent exponential change in the penetration of ecommerce as a share of retail that would last beyond the pandemic. Then, in 2022, everyone went back to stores and the trendline came back to 2019 levels. Growth was no longer exponential. There was still growth, but it was not happening as fast as during the pandemic period.
With this in mind, it’s worth pointing out that 2023 is the first year that there likely won’t be a pandemic-influenced swing to influence ecommerce growth. It is also a year where demand has suffered challenges amid inflation and interest rate hikes.
So as we seek to determine the importance of ecommerce to overall retail, it’s worth it to continue taking a close look at what growth trends retailers are seeing now, whether ecommerce is remaining resilient amid consumer pullback and how retailers are preparing for the future.
The latest example arrived this week from Macy’s. It’s a fitting one for the times. Overall, Macy’s is seeing a slowdown as consumers pull back on discretionary purchases, with sales declining 7% in the first quarter versus the same quarter of 2022. Digital sales were down 8%.
Macy’s is particularly susceptible to the macroeconomic headwinds that many brands and retailers are facing, as spending among the middle-income consumers it counts as a primary customer base is particularly softening, said GlobalData Managing Director Neil Saunders.
But while ecommerce is slowing overall, the importance it gained to Macy’s business during the pandemic is remaining in place.
In 2019, ecommerce made up 25% of Macy’s revenue, CEO Jeff Gennette told analysts on the company’s earnings call. That jumped to a high of 44% in 2020. By 2022, digital reached 33% of sales after the pandemic boom. In the first quarter of 2023, it remained at 33%. So, while the trend line dipped after shoppers returned to stores, ecommerce share still settled in at a higher post-lockdown point than it was before the pandemic.
This came in a quarter in which traffic was “relatively good” across both online and in-store, Gennette said. It was “flattish” online, and slightly up in stores.
“We do expect that this is the reset year with the penetration between them,” Gennette said. “But we do expect more aggressive growth in digital in the future versus stores as we think about '24 and beyond. And that's going to be foisted by a lot of ideas and strategies.
Over the last year, the retailer has made investments in boosting ecommerce, even as shoppers returned to stores. In a bid to boost the assortment of goods available online, Macy’s launched a marketplace in September 2022 that welcomes goods from third-party sellers.
The marketplace had an “outstanding” first quarter, said Macy’s President Tony Spring, who is poised to succeed Gennette as CEO next year. Gross merchandise value increased over 50% when compared to the fourth quarter of 2022, while the average order value and units per order for marketplace customers was 50% above those not shopping at the marketplace.
Macy’s is continuing to build the marketplace even as it racks up sales. The retailer added 450 brands, ending the quarter with 950 brands.
This is helping to draw in new customers, as well as younger existing customers who are buying more items, resulting in increased basket size.
“We're very excited as to how marketplace is really attracting the Gen Z customer, particularly in categories where it was not economically feasible for us to carry in the past,” Gennette said.
In the end, Gennette said a strong digital and social presence is key to attracting younger consumers. That's a different type of shopper than other age groups.
“We know the younger customer starts first online,” Gennette said. That behavior will still be in place as the generation gets older, and gains more buying power in the process.
Going forward, Macy’s is seeking to expand the model to other retail banners in its portfolio. Bloomingdale’s will open a marketplace in the early fall.
The Macy’s ecommerce trajectory isn’t that different from the wider U.S. ecommerce narrative detailed above. With one quarter of 2023 data, there is evidence that ecommerce share settled out at a higher point after the pandemic than where it started before COVID arrived. There is flattening now, but the retailer is taking it not as a sign of a slowdown, or a signal to change course. Rather, it sees changing consumer behavior as a reason to build for the future.
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