As Food Prices Rise, Shoppers Rein in Other Retail Spending
U.S. general merchandise retail sales revenue dropped during the three weeks ending Nov. 5, and year-over-year sales revenue in October fell 5% below a year ago, followed by a 14% decrease in the first week of November. Although several factors contributed to these declining sales, the rising cost of living was paramount, according to The NPD Group, a global market information company that recently merged with Information Resources Inc. (IRI).
“The growing weekly grocery costs and monthly credit card bills have begun to chip away at discretionary purchases,” observed Marshal Cohen, chief retail industry advisor for Port Washington, N.Y.-based NPD. “Consumers can only absorb climbing expenses for so long before they begin to reassess their spending capacity.”
For much of this year, higher average prices have kept GM sales revenue at or above 2021 levels, and until recently, sales have seen healthy gains over 2020. At the same time, spending on food and beverages and other consumer packaged goods continues to exceed results of any of the past three years. Particularly, rising food and beverage prices and the shift toward consumer spending on food in general is now affecting spending in other areas.
As well as the increasing competition for the consumer’s wallet, many shoppers’ GM needs are still being met by purchases made in the past two years, leading to lower demand levels. Exacerbating these challenges are endless discounts on existing product inventory, prolonged warmer-than-normal temperatures slowing the usual seasonal shift to cold-weather items, and the distractions of the midterm elections.
“Rising interest rates and other aspects of the economy are affecting consumer confidence, and the lack of new product is impairing their need and desire to spend,” added Cohen. “Over the holidays and into the new year, consumers will be looking for exclusive product offerings, uniquely compelling benefits, and promotions that break through the noise and create a sense of urgency to make the purchase.”
