U.S. retail sales showed continued slowing growth in March.
Data from the U.S. Commerce Department for March 2023 shows the following:
Total retail sales were $691.7 billion.
Month-over-month, that represents a decline of 1% from February.
Year-over-year, sales increased 2.9%.
Nonstore retailers, which is the category that includes ecommerce, grew 12.3% for the year, and 1.9% for the month.
Notable declines by category included electronics and appliance stores, which fell 10.3% year-over-year. Furniture stores declined 2.4% year-over-year, while home improvement fell 3.5%.
Notable gains were observed in health and personal care stores, which increased 7.1% for the year.
Core retail sales, as measured by the National Retail Federation, which leave out restaurants, gas and auto parts, showed a decline of 0.5% month-over-month, and an increase of 4.6% year-over-year.
While the first two months of the year started off strong, growth of retail sales is slowing.
“These results reflect both slower economic activity and lower prices because of easing inflation – which means fewer dollars spent even if consumers buy the same number of goods – but there is still a lot of spending in the economy,” said NRF Chief Economist Jack Kleinhenz, in a statement.
While slower post-holiday shopping and smaller tax refund checks play a role, the results point to signs that the convergence of inflation and interest rates may be taking more of a toll on consumers. To be sure, inflation is moderating, as observed in a whopping 14.2% decline in sales at gas stations. But people are still paying more for food, and that affects decisions on other purchases. In particular, the categories that include bigger ticket items such as furniture and electronics are in the “doldrums,” amid a downswing in the housing market and waning consumer confidence, said GlobalData Managing Director Neil Saunders.
“The message is that while shoppers are not retrenching completely, they are doing so selectively and are much more cautious about spending,” Saunders said.
Separate data from Circana (formerly IRI and NPD Group) showed that discretionary retail sales fell by 7% in March from the prior year, while volumes fell by 8%. That doubled average monthly declines in January and February. Circana Chief Retail Industry Advisor Marshal Cohen said a lack of new product is also a key contributor, alongside economic headwinds. He called for "new ways of thinking to reflect the changed consumer behavior and retail landscape."
“One of the biggest retail casualties of the pandemic has been the availability of new and refreshed products for consumers, and now economic uncertainty is putting even more pressure on the consumer’s interest in spending,” said Cohen, in a statement. “Manufacturers and retailers need to broadcast their value and prove their worth to the consumer now, in order to avoid a downward spiral later.”
This behavior is colored by increasing worries that higher prices will be sticking around in the near term. The University of Michigan’s initial reading of consumer sentiment for April edged up, but one-year inflation expectations rose from a rate of 3.6% in March to 4.6% in April.
“While consumers have noted the easing of inflation among durable goods and cars, they still expect high inflation to persist, at least in the short run,” wrote UMich Survey of Consumers Director Joanne Hsu.
Ask Instacart answers prompts with personalized recommendations.
A pair of recent launches from Instacart highlight how the grocery ecommerce company is integrating two of the key emerging areas of technology into its offerings: Generative AI and marketplaces.
Let’s take a look:
Instacart is seeking to harness generative AI to create a more personalized shopping experience.
A new tool called Ask Instacart that is launching this week is designed to allow customers to type in questions about specific recipes or general recommendations for an occasion. Embedded in the search bar, Ask Instacart also provides personalized questions to be asked by customers. In addition to specific items, it provides information about food preparation, product attributes and dietary considerations.
For those eying how generative AI will play a role in the shopping experience, Ask Instacart shows how search can be transformed into a place for discovery. Instacart is aiming to provide answers to the more open-ended questions that people would naturally ask, not just simply provide info in response to a question that has one answer. It shared the following sample prompts:
The tool is also showing the way for generative AI to integrate with retail media. Ask Instacart is designed to integrate with a brand's sponsored products campaign, so that the answers to questions that match consumer needs can also provide a way for brands to stand out.
To create the tool, Instacart combined the language understanding of ChatGPT with its own AI models. It added in catalog data from 80,000 retail partner locations around the country, which together have more than one billion shoppable items.
Beyond mission: Ecommerce marketplaces have honed a shopping experience where it’s easy to find what you’re looking for. But if shoppers want to happen upon something they didn’t know they needed, social media or the store is still the best place to visit. Instacart is showing how generative AI can make discovery a marketplace function. It also signals that advertising will come to generative AI by way of retail media. Going forward, the growth of discovery could make retail media more valuable as a tool for advertising that raises brand awareness, not just lower-funnel conversions.
Instacart will power a new virtual convenience store for the grocery chain Aldi.
Aldi Express will feature 2,000 of the most-shopped Aldi items, ranging from prepared food and snacks to grocery staples.
Drawing on 2,100 Aldi locations around the country, items will be delivered as fast as 30 minutes, the companies said.
“Through ALDI Express, we’re making shopping more convenient so you can satisfy a craving or get a missing ingredient in minutes,” said Scott Patton, VP of National Buying at ALDI, in a statement. “Together with Instacart, we’ll continue to find ways to innovate and make the online grocery experience even more effortless and accessible.”
Aldi began offering delivery via Instacart in 2017, and has since expanded services to include pickup as well as alcohol delivery.
Aldi’s marketplace moment? While Aldi previously offered delivery, making the assortment available through a virtual store offers the opportunity to create a marketplace for its goods. With the virtual store, it will more closely resemble DoorDash and Uber Eats, which have been expanding their grocery assortment. With a marketplace, additional revenue opportunities could open up for the grocer, such as advertising through retail media.