Despite a decline in consumer confidence for January, analysts say the outlook remains bright. In its monthly report, the Conference Board said “consumers remain confident that the economy will continue to expand in the coming months.”
That’s good news for total retail sales. But that doesn’t mean shoppers will flock to department and specialty stores to buy up apparel. Linda Kirkpatrick, executive vice president of market development in the U.S. at Mastercard, said the retail landscape has gone through a transformation and consumer behavior in regard to shopping preferences isn’t likely to change anytime soon.
“It’s definitely a different environment than even a year ago,” Kirkpatrick told WWD. She noted that sales data for 2016 shows consistent month-to-month growth of about 3.5 percent — excluding expenditures on automobiles and gas. This compares to flat sales in prior years.
“But if you look at where their money is going — where shoppers are spending — this is where you see evidence of a shift,” Kirkpatrick said. “And it is significant.”
Citing data from the firm’s most recent Spending Pulse report, Kirkpatrick said sales have been strong in experiential segments. “Dining, travel and hotel are all doing well,” she said. “Relative to the rest of the market, these segments are performing well.”
Kirkpatrick said apparel sales have struggled. However, the category saw an uptick during the holiday shopping season. Mastercard said its data showed a 0.2 percent gain for the period — driven by a 7.4 percent increase in the men’s business. Women’s apparel was down 2.9 percent during the period. And jewelry was off 2.2 percent.
And it’s not just clothes. The Spending Pulse report showed a 2.4 percent decline in sales of electronics and appliances. “Why?” she said. “Because the reality is we’ve moved toward experiential spending, which involves consumers who value experiences more than things.”
This change was first recognized in 2003 by Leaf Van Boven from the University of Colorado and Thomas Gilovich from Cornell University who conducted experiments to see if materialism led to less overall happiness. They found that consumers spent more time thinking about their experiential purchases than they did on buying things. And as time wore on, the memories of the experiential purchases were looked upon more fondly.
Since then, scholars and sociologists have observed that experiential purchases tend to add greater context and meaning to people’s lives as compared to buying things. As a result, sales at restaurants and resorts continue to grow. And categories such as outdoor gear and apparel continue to grow as consumers — particularly Millennials — spend time and money on adventures, which include camping, hiking, mountain biking and kayaking, among other activities.
And there’s a lesson here for retailers and fashion brands, Kirkpatrick said. “Retailers need to figure out how to bring the experiential into the store environment,” she said.