We have entered a new stage of the pandemic lifestyle. U.S. consumers have returned to more in-person activities — and the next phase of consumer spending has begun. It’s clear that where consumers are focusing their spending has shifted significantly. And higher average selling prices across the board are still masking continued unit sales declines.
As fully reengaging remains a priority, we see consumers spending on beauty, accessories, and other out-and-about categories. Some segments, like sports equipment, which struggled to find new growth following the pandemic’s sales peaks, have also improved. “The industries with recent acceleration are those offering the necessities for a more externally focused life, including the return to the office, school, and social activities,” said Marshal Cohen, NPD’s chief retail industry advisor.
More workers head back to offices
When the pandemic began and many workers shifted to working from home, companies expected their employees to return to their offices full-time eventually — in many cases enticing or mandating them to do so. “Although the majority of workers have been working in person throughout the pandemic, those who could work from home grew accustomed to it,” said Don Unser, president of thought leadership, general merchandise, and retail. “Even though the expected mass return to offices has not materialized, there has been a recent and measurable uptick in the number of workers headed back to offices, at least part-time. And that’s good news for some retail categories.”
Working From Home
As of July 2022, about 49 million workers are working from home, increasing 11 million compared to June 2022.
Foodservice business and industry segment reaps benefits
One area that’s already experiencing growth from people returning to office life is the foodservice industry’s business and industry segment (B&I). Our analysts estimate 38 million U.S. workers continued to work from home in June 2022, to some degree. While still well above pre-pandemic levels, that number has declined from 65 million since January, which is good news for workplace cafeterias and other B&I eateries. In fact, case sales from broadline distributors to B&I operators increased 35% in the second quarter this year compared to a year ago. B&I case volume remains 31% below the second quarter of 2019 (pre-pandemic) volume.
“The work-from-home trend might continue to make full recovery difficult. But, at least for now, B&I is an important growth segment for foodservice manufacturers and their distributor partners,” said David Portalatin, industry advisor for food and foodservice.
Although Broadline Business Under B&I is Below Pre-pandemic Levels, Business is Returning as Offices Reopen
B&I Operator Case Purchases from Broadline Distributors for 3-ME June 2022
An elongated back-to-school season
The school year 2022 – 2023 school year will be the first since the start of the pandemic when parents and students know their back-to-school plans with certainty during the traditional back-to-school shopping season. But some new factors that weren’t part of the equation in 2019, or even in 2021, may lengthen and fragment the back-to-school shopping landscape. In fact, we describe this year’s back-to-school shopping season as having three “semesters” of spending.
“Manufacturers and retailers need to be prepared for consumer spending that will hit different categories at various times over the coming weeks and months,” Cohen said. “Consumers are still shopping in the moment, but now their eyes are focused on finding good deals.”
School supplies set for growth
In office supplies, back-to-school sales are seeing early growth. Unit sales were up 2% through the first three weeks of the season compared to last year (the three weeks ending July 23, 2022, excluding storage categories and janitorial and breakroom supplies). This unit-sales increase for school-list items is driven by e-commerce, where unit sales are up 35% year over year, after a 2% decline for the same period last year.
“We expect the brick-and-mortar channel will see dollar growth as we near the mid-season period, as more consumers head out to stores to take advantage of back-to-school promotions and tax-free holidays preparing for the return to classrooms,” said Leen Nsouli, executive director and office supplies industry analyst.
U.S. Office Supplies Total Retail Weekly Dollar Sales Performance
Return to travel and events
With more spending on travel, concerts, and social events, we might expect general merchandise spending to take a hit, but that has not happened. Instead, unit sales have more or less kept up with previous years. Even with spending on experiences regaining 93% of what they were before the pandemic, retail growth measured by sales revenue remains high in the U.S.
“Just because people are spending on experiences doesn’t mean they’re going to stop spending at retail,” Unser said. “There is a lot of activity happening that’s complementary to spending on experiences outside the home — buying new clothing or shoes for a big night on the town, for example.”
Apparel steps out
With the return of in-person events and weddings comes a renewed interest in dressing up. Dresses, shapewear, and suiting are all growing compared to last year, with some sales even higher than before the pandemic. Even so, consumers continue to redefine how they dress up for these social situations.
In the second quarter, dress sales grew 27% versus the previous year, but most women who purchased a dress during this timeframe opted for more casual silhouettes, like sundresses and t-shirt dresses. Fewer than 10% purchased more formal or restrictive silhouettes.
“As activewear was adapted into our everyday wardrobes last year, we are now seeing the democratization of dressy,” said Kristen Classi-Zummo, fashion apparel industry analyst. “Dressed-up categories that prove to be versatile are continuing to win buyers. We expect this category rebalancing to continue throughout the rest of the year, as consumers replenish their event wardrobes for the holidays.”
Big Events Call for a Wardrobe Refresh
Special occasion dressing has spurred category growth in men’s and women’s apparel, footwear, and accessories. Dresses are stealing the show with double-digit growth year-over-year and compared to the pre-pandemic period.
Shifts in How U.S. Consumers Use Their Free Time
Activities pursued in April 2022, compared to February 2021
Source: The NPD Group/Omnibus Survey, February 2021 vs. April 2022