“Stop the price-discounting because it’s not spurring sales,” said Sarah Quinlan, group head of market insights for MasterCard.
Quinlan had strong words of advice for retailers and was seemingly in contradiction to current market thinking. She stressed that the economy was strong and consumer spending was strong, but where the dollars were being spent had changed.
She pointed out that small businesses were stealing market share from the larger chains and those businesses are not known for their discounting, but for giving shoppers a unique experience. Small business has experienced 3 to 5 percent growth over the last 20 months. “So, it’s saying I don’t need a discount to shop. ‘Make me look different’ is what the shopper is telling you,” said Quinlan. “Create something special and unique.”
Quinlan told the audience that the economy wasn’t the problem, just that the dollars were going to experiential things like restaurants and travel. She was also adamant that the dollar savings from cheaper gas are being spent. “We’re spending about 72 cents of it,” said Quinlan. “It’s given the consumer a huge bonus.”
Quinlan added, “The consumer is evolving and retailers have to adapt to the new ways they are spending. They are spending on experiences.”
Restaurants are the number one category for spending. She suggested retailers bring the restaurant experience wherever they can into the shopping experience. She also noted that many people shop when they travel and that most Americans don’t even leave the country when they take trips. Quinlan told retailers to go after that consumer as well as the foreign tourist.
She had sobering comments for women’s apparel and department stores, where sales have dropped. She pointed out that 75 percent of shoppers are women, yet department stores devote a large portion of their ground floor to men’s wear. “If women don’t have time, then why are you making them walk all over the store to find what they need?” Quinlan asked. Additionally, time limitations are causing women to shop at fewer stores. “Think about the layout, it’s really critical here.” She also noted that the Millennials have not chosen to go to department stores and it’s a big challenge to get them back in.
Quinlan felt that the apparel industry wasn’t seeing the obvious reason behind the ath-leisure trend. “Women want to be comfortable. That’s what they are saying,” she stated. Quinlan shared an anecdote about getting on a plane and observing that every woman was wearing yoga pants. “Think about what her lifestyle is in order to get her to spend.”
Another topic that Quinlan zeroed in on that seemed to go against current retailing trends was e-commerce. She noted that e-commerce was only growing at single digits. It’s only 6.3 percent of total retail sales.” Think carefully about your investment in the space. Of course every company has to have an online presence, but the need to spend billions of dollars made no sense. She said that the only area that made sense to spend millions of dollars was a commodity area like electronics. “It’s more important to reach the consumer via your online channel, but not execute there,” said Quinlan.
Quinlan said that retailers should use e-commerce just to curate the brand. The real issue is understanding how to make me buy. “The majority of the shopping is still done in the stores,” said Quinlan.
She also had lots of advice on how retailers should target their marketing. She said retailers should not only market to the Millennial, but also to Millennials’ moms. “Market to me for her, ’cause I still buy for her,” said Quinlan. She pointed out that Millennials are also behind the big growth in furniture shopping. It’s the second-biggest category for spending.
Quinlan told the audience to go after the mass affluent. “Everybody wants to go after the affluent, but I’m here to tell you that the mass affluent continues to spend on a continual basis.” Luxury spenders dip in and out.
Quinlan also highlighted some geographical areas of the country. She noted that in the southeast, sales are strong due to lots of retirees.
She also pointed out that auto companies are locating factories in the southeast as well. Car sales have been great this year and those workers will probably be getting bonuses at the end of January. “Little hint. Those of you who have stores down there in the southeast, think about running a promotion at the end of January. They will be bonused this year and that money will go directly into the economy down there.”
The northeast, she said, was overstored. Two major headwinds have also hurt this region. The strength of the U.S. dollar, particularly the acceleration and speed at which it rose caused a drop in tourism spending. She also pointed out that there are 250,000 fewer Wall Street jobs and that those jobs will probably not come back.
Looking ahead to holiday, Quinlan again stressed that the economy was good and that holiday sales should see growth of 3.8 percent. “I think things are better than expected.” She told the audience that it’s the Saturday after Thanksgiving that is the number one day, not Black Friday. Then there is the two-week lull in the beginning of December, except for e-commerce because consumers worry about receiving the package in time. The only negative spot she foresaw for holiday was department stores.
“We are expecting ridiculous travel for the holiday,” said Quinlan. “Your consumer might be in a different place for the holidays. They don’t have much time. Curate as much as possible and you will get a lift.”