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Don’t waste another dime on bloated channel reporting and vanity metrics.
Don’t waste another dime on bloated channel reporting and vanity metrics.
Ecommerce sales dipped in the month after Prime Day, US Commerce Department data indicates.
US retail sales rose in August after falling in July, demonstrating continued evidence that consumers are still spending in the face of stubborn inflation.
Retail sales totaled $683.3 billion in August, which was an increase of 0.3% over July, according to the US Commerce Department. When compared with August 2021, sales grew 9.1%.
At the same time, the Commerce Department revised down its estimate for July from unchanged to a month-over-month decline of 0.4%. That means the rebound in August was even bigger.
US retail sales August 2021-August 2022 (Courtesy of FRED/US Census)
The retail sales released each month by the federal government are not adjusted for inflation, so the year-over-year rise in spending is likely linked in part to the same goods costing more than they did a year ago. Earlier this week, the August reading of the Consumer Price Index showed the inflation rate at 8.3%. So the growth in retail sales still outpaced the rise in prices.
While there has been some month-to-month variation, retail sales have continued to remain resilient during this year’s bout with 40-year-high inflation. However, this trend is also a sign that demand is not falling despite the Fed instituting back-to-back rate hikes of 0.75% that are designed to cool off the economy and bring inflation down.
Ecommerce sales show up in this macro measure in the category of nonstore sales. These sales fell 0.7% month-over-month after the Prime Day month of July, while growing 11.2% year-over-year.
US retail sales: Nonstore retailers. (1994-2022)
A major driver of the uptick in overall retail sales was the motor vehicle and auto parts category, which was the biggest mover in August with an increase of 2.8% month-over-month and a 6.7% year-over-year increase.
Food services and drinking places also posted notable growth, increasing 1.1% month-over-month and 10.9% year-over-year.
Gas station sales fell 4.2% month-over-month, reflecting the continued dip in gas prices.
Miscellaneous store retailers, which include office, secondhand and furniture stores, grew 1.6% month-over-month and 15.3% year-over-year.
A National Retail Federation measure of retail sales that excludes auto dealers, gas stations and restaurants to focus on core categories showed that retail sales were up 0.1%.
“Household spending remains steady even as costs continue to rise,” NRF Chief Economist Jack Kleinhenz said, in a statement. “Consumers continuing to spend more each month points to the benefits of strong job and wage growth and their use of pandemic savings to help handle persistent elevated prices. Consumers are showing their toughness, but they have limited options and cannot continue if prices do not begin to soften. This retail sales report comes amid mixed signals from the broader economy that show the headwinds against the consumer are strengthening.”
Those mixed signals continued to bear out in other data released this week.
The job market continues to show signs of resilience, despite rate hikes from the Federal Reserve that were expected to result in softening. Weekly jobless claims fell for the fifth straight week to 213,000, according to the US Labor Department. That’s down 5,000 from the 218,000 claims the week prior, which itself was revised downward. It was the lowest level for this metric since May 28.
Weekly jobless claims: Oct. 2021-August 2022. (Source: FRED: US DOL)
Meanwhile, there are upstream signs that inflation was easing. The Producer Price Index, which measures wholesale prices of goods before they reach retail, fell 0.1% for the month in August, despite rising 8.7% year-over-year, the Labor Department reported on Wednesday. It was the second straight month of decline after a 0.4% decline in July and a 1% increase in June.
In this measure, decreasing energy prices are having a bigger impact than they are in the Consumer Price Index, where falling gas prices were offset by rising food, housing and medical costs. Three-quarters of the decline in this month’s increase was the result of a 12.7% decrease in gas prices. Backing out food and energy costs, the index showed wholesale prices rose 0.2%.
This week's data is among the latest that the Federal Reserve will consider when it meets next week to determine whether and by how much to raise interest rates as it seeks to bring down inflation.
On average, customers spend $59 more than the value of their gift card, Fiserv found.
In retail, sales are often measured in goods, whether they are purchased for ourselves or someone else. There are plenty of strategies that brands and retailers use to increase those sales, whether it is marketing, loyalty programs or how that item is presented.
In most cases, these are two different parts of the equation for retailers: The product that is bought and the strategies that lead to the purchase.
That’s what makes the gift card unique.
It is an item you can buy, with a section in the store all its own. Eventually, it leads to the purchase of other goods, so the gift card is leads to a direct sale. Yet it’s also a means to build a retail brand and create incentives that both introduce customers to a store and keep them coming back.
That’s a key takeaway from the 20th Annual U.S. Prepaid Consumer Insights Study from fintech and payments company Fiserv.
At this point, the gift card feels like a staple of the shopping experience. But it is only about 30 years old. In 1994, Blockbuster Video pioneered the sale of cards for gifted purchases directly as a means to combat fraud in paper gift certificates. Since then, they’ve proven to have a multitude of uses that stretch beyond the holidays.
Starbucks and Amazon gift cards are commonly distributed as prizes at team-building events and as pick-me-ups by friends showing they care. In 2022, 60% of consumers said they received a gift card from an employer, according to the Fiserv report. That was a big increase from 32% in 2019. People appreciate the gesture. The survey found that 85% of employees think that gift cards from an employer make for appropriate incentives.
For people looking to show generosity, gift cards can also be a means to stretch dollars. At a time of high inflation, people are looking for deals with their discretionary purchases. Gift card promotions that offer discounts and bonuses are proving particularly popular, the study found. Two-thirds of consumers said promotions can influence them to purchase more, while more than half of consumers took advantage of such an offer in 2022.
Yet the more difficult consumer environment is also having an impact on overall gift card sales. In 2022, the growth of gift card purchases slowed.
“Overall, 56% of U.S. consumers purchased more gift cards in 2022 compared to 2021,” said Tom Niedbalski, VP of gift solutions at Fiserv. “This was a decline from the 73% of consumers who said they bought more gift cards in 2021 than they did in 2020.”
Inflation and less discretionary income were the driving factors for consumers who said they bought fewer gift cards during 2022, as 35% of consumers said inflation was the reason they were purchasing fewer cards.
It's important for brands and retailers to understand why consumers buy gift cards. But it's just as crucial to understand where they can fit in retail strategy. Beyond sales, gift cards can help drive repeat customers, and extend a brand. These tools are particularly valuable at a time when retailers are focused on profitability in a tougher consumer environment.
Fiserv explained four areas in which gift cards are of particular value for brands.The following is directly quoted from Niedbalski:
Improving cash flow and revenue. Gift cards not only drive in-store and online traffic, there is an associated “lift,” or overspend, when a gift card is converted into a sale. On average, customers spend $59 more than the value of their gift card.
Repeat customers. Retailers use gift cards to foster loyalty and customer engagement, ultimately leading to repeat customers. One way we see this play out is through promotions associated with gift card sales. For example: a consumer who buys a $100 gift card for the holidays will receive a $20 bonus card that can be used after January 1 – creating a pre-holiday sale and post-holiday transaction in the New Year.
Branded currency. A gift card places a merchant’s brand directly into the consumer’s wallet, increasing brand awareness and ensuring the merchant’s brand is with the consumer when they are looking to buy.
Year-round marketing. The gift card has grown beyond the traditional holiday season. From birthdays and graduations to anniversaries and babies, gift cards are becoming the most popular way to recognize milestones – giving retailers opportunities to run additional promotions throughout the year.