April 2022 – NPD Group – Throughout the course of the pandemic, spending by consumers in all income levels has been critical to retail performance. As the pandemic has worn on, higher-income consumers have played an even more significant role in the continuing growth of retail sales. This shift in spending was evident throughout most of 2021, as prices rose and spending among lower-income consumers was no longer shored up with stimulus checks.
“We can expect to see continued consumer retail spending pull-back in the coming months,” said Marshal Cohen, chief industry analyst for NPD. “There’s no way to maintain the elevated level of demand because there are just too many components tugging at consumers right now. The rising cost of living and other drags on spending, combined with demand that is waning from pandemic-highs mean the elevated level of consumption will increasingly become less tenable.”
Spending Per Buyer by Household Income
Consumers at the upper end of the income spectrum are likely to continue the spending spree they have been on in the near term, as they may be less likely to feel the pinch of rising grocery and gas prices and other forces, keeping the high-end and upgrade-worthy products moving. But all the macroeconomic conditions at play will have a greater impact on lower-income consumers, so it’s also important for retailers and manufacturers to also sharpen the value side of their product offerings.
“U.S. consumers across the board have been able to increase their personal savings levels during the pandemic, and employment rates are high,” said Don Unser, chief retail strategist for NPD. “However, when we adjust for rapidly rising prices for gas and discretionary retail goods, spending power from savings and wages is falling rapidly. And that’s especially true for lower-income consumers.”
High-income consumers will still retain their willingness to spend, when there are products that drive them to do so. A varied approach when going to market, keeping in mind both income groups, will be vital to maintaining retail growth in the months ahead. “We will continue to monitor consumers’ response to evolving market conditions, while identifying the most significant developments in retail behavior as the pandemic mindset settles into what may be forever-altered lifestyles,” Cohen said. “It’s an inflection point that could have significant effects across the retail world.”
Read more at NPD Group.