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Rising prices are shaping the American economy in early 2022.
Following the 40-year high in consumer prices reported on Tuesday, that continued to be the theme as the federal government released new monthly data in key areas over the latter part of the week.
The new data showed that total retail sales ticked up in March, while prices for imports and wholesalers also continued to rise.
Here’s a closer look:
Monthly retail sales were up .5% month-over-month in March, according to the US Census Bureau. The total sales were up 6.9% year-over-year.
The Bureau also posted a revision to its data for February, now stating the month saw an increase of .8% in retail sales over January, as opposed to the previous number of .3%. The revised number means February had growth of 18.2% over the same month in 2021.
As with the Consumer Price Index released earlier this week, rising gas and food prices drove the increase in this area. Gas station sales had a particularly notable spike, up 37% year-over-year. This came as the cost of fuel continues to rise amid record inflation and the Russian invasion of Ukraine. Data released by the government is not adjusted for inflation.
Putting the focus on consumer goods, the National Retail Federation completed a calculation of retail sales totals that excludes gasoline and food services. Its measure showed that these "core" retail sales were unchanged from February, and up 4% year-over-year.
Per the Census Bureau, the biggest month-over-month increases were in general merchandise stores (5.4%), electronics and appliances (3.3%), sporting goods and hobby (3.3%) and clothing stores (2.6%).
Nonstore retailers, which includes purchases made online, were down 6.4% from the prior month in March, according to the Census Bureau, but the total was up 1.1% year-over-year.
“March retail sales show that consumers have maintained their ability to spend in the face of record-level inflation, supply chain issues and geopolitical unrest,” National Retail Federation CEO Matthew Shay said in a statement. “Consumers are adapting and shopping smarter for themselves and their families.
US import price index data (Courtesy of US Bureau of Labor Statistics)
Prices for imports were up 2.6% in March, which was the largest monthly increase since April 2011, according to the US Bureau of Labor Statistics.
This followed a 1.6% increase in February and a 2% rise in January.
Consumer goods followed the overall trend pattern. Data showed the import prices in the category had an uptick of 3% year-over-year. This was the largest rise since a 3.4% year-over-year increase reported in December 2011.
Prices for exports were up 4.5% month-over-month in March. Put together with increases in the first two months of the year, the BLS is reporting the largest rises in export prices since January 1989.
Prices for exports of consumer goods, meanwhile, were not in line with the overall trend, as it did not rise as dramatically. There was an increase of .8% in this category, according to the BLS.
Producer Price Index one-month changes (Chart via BLS)
The Producer Price Index, which measures the prices paid by suppliers and wholesalers before goods reach retail, also posted new highs in March.
The month-over-month increase of 1.4% was higher than the previous two months, the BLS reported Wednesday.
On a year-over-year basis, the BLS said there was an increase in the PPI of 11.2%. This is the highest increase since the government started releasing the measure in 2010.
The PPI's metric of prices for goods that leaves aside food, energy and trade services rose 0.9% in March. This was largest month-over-month increase of this measure since a 1% increase in January 2021.
Taken together, the measures show that everyone is paying more right now, whether they’re consuming, supplying or transporting goods. It’s why we’re not only seeing the price of goods on digital shelves go up, but also rare moves like a 5% surcharge from Amazon for fulfillment services.
Businesses must control costs as they bring in goods, while staying in line with consumer expectations as they look to sell them. It’s a fine line. Everyone is walking it.
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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.