March 21, 2022
As Spending on Experiences Returns, Retail Holds Its Own
Experiential spending is rising but the expected pullback on retail spending has not played out — yet
Consumers are slowly shifting out of their pandemic lifestyles, but they are not yet emerging from pandemic-era spending. There is a cautious optimism in the air as they embrace some newfound freedom from restrictions while still not entirely letting go of their pandemic ways.
Spending might take many paths, as consumers navigate the realities surrounding the pandemic’s second anniversary. If the trajectory continues toward an endemic status, consumers are likely to begin spending very differently in the months to come.
In February, most experiential categories remained below 2019 levels. Airlines/travel agencies, mass transit, and ride-sharing trends improved, suggesting a gradual return to traveling/commuting
Despite the gradual return of experiential spending, total retail spending remains elevated compared to pre-pandemic 2019 levels
“The spending that occurred over the past two years, combined with the current pricing dynamics, is causing shifts in what and how consumers buy,” said Marshal Cohen, chief retail industry advisor for NPD. “The inevitable fatigue puts added pressure on the ability to sustain growth, as stimulus cashflow slows, experiential spending returns, and general demand recedes.”
While experiential spending is returning, the pull-back on retail spending that is expected to coincide with it has not played out. At least, not yet. Certain categories, like accessories, beauty, and apparel, are getting a boost from experiences and consumers’ general return to more in-person activities. But even as consumers become less focused on at-home needs, overall general merchandise sales continue to hold their own.
“In the coming months, as pandemic lifestyles pull back, discretionary retail spending is also expected to recede,” said Don Unser, chief retail strategist for NPD. “Today, we still have too many dollars chasing too few goods. However, that situation is starting to change, with unit sales softening since the beginning of the year.”
Retailers and manufacturers need to be prepared for the multiple directional shifts poised to occur. There is also growing pressure on retail sales, beyond consumers redirecting more spending toward experiences and the looming sales comparisons of the past two years. Political unrest, war raging overseas, economic challenges, and consumers’ financial well-being lead to additional and substantial distraction and retail disturbance.
With limited spending for two years on travel, going out, and other experiences — and bolstered by federal stimulus payments — U.S. consumers saved more money, which continues to bolster ongoing retail spending.
Domestic business travel spending is expected to exceed three-quarters of 2019 levels in 2022 – with full recovery expected in 2024.
Source: Tourism Economics and U.S. Travel Association, 2022.
Bolstered by stimulus payments and unspent experiential dollars, consumers spent nearly $1T more in retail and amassed more than $2.5 trillion in excess savings.
Source: The NPD Group, Checkout Omnichannel Tracking (retail including food/grocery); NPD Innovation Lab (experiential); New York Federal Reserve (excess personal savings), 2022.
As of February 2022, about 45 million work from home in the U.S., declining by almost one-third compared to January.
Source: The NPD Group, NPD Innovation Lab, Financial Transaction Data, and U.S. Bureau of Labor Statistics, 2022.
Take a look below at the effects of experiential spending on various industry segments. Find out how brands and retailers can best position themselves to capitalize on specific consumer opportunities.
Director, Industry Analyst
The U.S. apparel industry brought in $246.2 billion in revenue for 2021 — an increase of more than $61 billion versus 2020, and the highest dollar volume generated in more than 10 years! With both revenue and unit sales up, compared to 2020 and 2019, the apparel industry must figure out how to keep up the momentum this year.
Now that consumers are feeling comfortable venturing back into offices and other social settings, pent-up demand for categories, including jeans and tees — the gateway for consumers to get dressed up again — has begun to reveal itself in the sales trends. Dressing up for occasions, work, and travel has new meaning: Jeans are the first step away from sweatpants, and dresses have pivoted to less structured and more free-flowing styles.
Executive Director, Industry Analyst
Consumers are emerging from a two-year period in which they had a void to fill. Time and energy used to focus on commuting or going to a restaurant, was spent on activities to improve health and wellness. We saw real surges in home fitness, outdoor living, and cycling. Now that they are returning to more aspects of normal life, consumers are re-shifting their focus and, in some cases, those “pandemic born” activities are taking a backseat.
As we move through 2022, walking, bringing a cooler to a picnic, and other easier and lower-cost activities will stick, while activities that take a lot of time, or are physically challenging will experience lowered participation. Golf, home based cardio fitness, and longer bike rides could all be challenged in 2022.
Executive Director, Industry Analyst
According to a survey conducted by NPD partner Civic Science, in the week ending February 6, 2022, half of Americans said they were comfortable traveling. That was 8 points higher than in the previous four weeks (ending January 9, 2022). And that’s good news for book sales in the travel books category.
As more consumers are vaccinated and making travel plans, it’s no wonder that demand for travel books is rising. In fact, sales of print books in the travel category were 40% higher for the year to date through February 19, 2022, compared to the same time in 2021, shown by NPD BookScan data. The strongest areas of interest indicate another good year for U.S. parks, theme parks, and campgrounds, broader travel within the U.S., and travel to well-vaccinated locations, like Spain, Portugal, and the Caribbean.
Vice President, Industry Advisor
Increased consumer experiential spending is likely to be both a headwind and a tailwind for the home industry. Some categories will be challenged as consumers spend their money elsewhere, but others will benefit.
For example, consumers will want to look polished and put together when traveling, dining out, or going to a concert or movie. This desire to look good in public again provides an opportunity for garment steamers, hot air stylers, hairdryers, and curling/flat irons, and other personal care products. Entertaining guests at home provides other opportunities for the home industry. We can expect to see growth in grilling appliances and accessories, tabletop and serveware, kitchen appliances, floor care, and bath textiles.
Senior Vice President, Industry Advisor
Dining in at full-service restaurants is roaring back, which demonstrates consumers value the experience of dining at a restaurant. As of February, customer traffic had increased 34% over the same month last year.
On the flip side, dining out still has a long way to go to reach pre-pandemic levels. In February, on-premises dining visits at full-service restaurants were still down 38% compared to February 2020.
Checkout data from NPD offers a clear view of what consumers are buying and where — across all traditional retail channels, marketplace platforms, and direct-to-consumer outlets. The unique position of NPD, as a supplier of point-of-sale purchase data, results in unparalleled knowledge of precise, category-level sales volumes, both in-store and online.
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