Red alert: Consumer fears over inflation are mounting, potentially wiping out the momentum retailers have seen so far this year.
This story first appeared in the April 14, 2011 issue of WWD. Subscribe Today.
The bad news for retailers came Wednesday, when Deloitte released its latest survey on consumer spending.
Seventy-four percent of Americans believe higher prices could curb their spending in the months ahead, and 53 percent see spring merchandise prices as inflated, according to a Deloitte survey released Wednesday. It’s currently up only a few percentage points, but inflation on most apparel is expected to be up 10 to 15 percent for fall due to higher raw material and labor costs. Higher energy costs, higher medical costs, unemployment levels and job concerns — and political unrest in Africa, the Middle East and Asia — are further driving down the will to spend.
While it will be mass and midtier retailers like Wal-Mart Stores Inc., Target Corp., Kohl’s Corp., J.C. Penney Co. Inc. and The TJX Cos. Inc. that will be hit the hardest, no company is expected to escape unscathed.
Among the other key findings in the Deloitte survey:
• Fifty-eight percent of consumers say they’ll spend more or the same this year, but that’s down from 63 percent at this time last year.
• Forty-three percent of consumers believe the economy is still in a recession.
• Twenty-seven percent of consumers said stores are offering more value for their money, but that’s down from 45 percent who said so at this time last year, meaning good deals are getting more scarce.
• Sixty percent of consumers are searching more online and using mobile tools to find the best product or price.
However, higher income consumers, those households earning $100,000 or more, say their confidence in the economy has improved over the past six months, compared to 24 percent among those earning less than $100,000. That bodes well for upscale and luxury retailers.
Alison Paul, vice chairman and U.S. retail sector leader, Deloitte LLP, gave the following advice to retailers: “By interacting more intimately with consumers through mobile, social media and other emerging platforms, and articulating a message of value and quality, retailers will do well with worried shoppers.”
Consumers have other concerns, with more than half complaining that there’s less sales help in the stores, and almost one-third stating that stores are running out of merchandise faster.
The survey, commissioned by Deloitte, polled 1,050 consumers from March 1 to 3, and was conducted online by an independent research company. It has a margin of error of plus or minus three percentage points.