After practicing social distancing for over a year, U.S. consumers are ready to launch into the next chapter of their lives. Vaccination rates continue to rise as mask requirements and restrictions on gatherings loosen. As we enter Q3 2021, social progression will drive consumption, with more consumers making travel plans, attending events, and going out on the town.
The pandemic demonstrated that no business exists in a vacuum. To stay ahead of the market, companies must remain agile and responsive to evolving consumer needs. In the near term, that means businesses must consider how the return to experiences might affect consumer spending. Read on for a cross-industry look at the effects experiential spending is having on the retail landscape and how brands and retailers can best position themselves to capitalize on increasing demand for products that help consumers reemerge into the public sphere.
June 2021
The Experience Effect:
How Reemergence is Impacting Consumer Spending
Our May 2021 Omnibus Survey found that across discretionary consumption, apparel, footwear, and beauty are the categories consumers most expect to purchase within the next 60 to 90 days. In the near-term, summer events and gatherings are expected to be a boon for the softlines categories that struggled throughout much of the pandemic, according to Chief Industry Advisor, Marshal Cohen. Though consumers now show willingness to spend on a number of categories, purchase behaviors have fundamentally changed. As a result, brands and retailers must identify and stay ahead of these shifts to capitalize on evolved consumption patterns.
Softlines Expected to Gain as Experiences Return
Source: The NPD Group / May 2021 Omnibus, n = 1013
In our recent “Future of Style” event, we explored the key opportunities and challenges faced by retail companies and brands, as retailers and consumers begin to emerge from the global pandemic. Below are three considerations businesses must make as consumers return to experiences and change their purchasing behavior. Click on the boxes to explore further.
Retail Looks to the Future
Pent-up Demand Leads to Robust Spending
Pandemic Lifestyle Pillars Continue
Retail’s Cadence Shifts
With U.S. and global vaccination rates on the rise, consumers will once again start spending on travel, dining out, and other experiences. This socialization shift will create more movement in products related to emerging needs. As consumer behavior starts to bounce back, leaders in the retail industry are looking beyond what happened last year to determine the behaviors that will change, as well as those that could remain in force for months, or even years, into the future.
“Some experiential spending is already coming back strong, as consumers do more, dress up more, place more emphasis on appearance and health, and start to spend more on tangible products related to travel and other experiences,” said Marshal Cohen, chief retail industry advisor for NPD. “However, as this pent-up demand works itself out in the coming months, we can also expect those rising sales to throttle back a bit in apparel, footwear, and other categories.”
Pent-up Demand Leads to Robust Spending
Purchasing related to home-based work, education, fitness, entertaining, and healthy home all ramped up mightily last year, and the continuation of these lifestyle pillars continues to propel retail growth upward. Even so, these pandemic pillars will eventually start to moderate, as restrictions ease and consumers revive more of their pre-pandemic activities.
“Sports equipment, home products, consumer technology, and toys enjoyed strong sales last year,” Marshal Cohen said. “While some categories, like activewear, will continue to receive a complementary boost from the continuation of the pandemic lifestyle pillars and renewed experiential spending, sleepwear and others will not.”
Pandemic Lifestyle Pillars Continue
Consumers used to plan their shopping carefully weeks or even months ahead of time, but that forward-looking focus shifted appreciably last year. Due to all the uncertainty surrounding the pandemic, along with the convenience of one- and two-day shipping, curbside pick-up, and other convenient options, the retail cadence became much more immediate.
“Consumers began to shop mainly for their immediate situations, rather than thinking about what they might need down the road or for the season ahead,” Marshal Cohen said. “We can expect some of that behavior to continue, even as more stores reopen and consumers get comfortable shopping in-person again, and retailers will need to adjust their seasonal planning in order to win the purchase.”
“Shoppers have deferred purchases for many reasons,” said Matt Powell, senior sports industry advisor for NPD. “There was a recent surge in softlines sales when kids went back to school this spring in some areas of the country. This is one example when the shift to buying when it’s needed could disrupt the traditional back-to-school shopping season.”
Retail’s Cadence Shifts
As the consumer engages in social progression…buying the products they need to complement and accessorize [for a more experiential lifestyle] is the main focus.”
Categories on the Move
Last year was difficult for many softlines categories, but demonstrable progress has already been made heading into summer 2021.
Marshal Cohen
Chief Industry Advisor, Retail
Sales of women’s dresses were nearly $7 million higher in May 2021 than in May 2019. While that figure represents modest growth over 2019 levels, it's welcome news for players in a category particularly vulnerable to pandemic-induced lifestyle changes.
Source: The NPD Group/ U.S. Retail Tracking Service, May 2021 vs. May 2019
+$7M
Though still lower than pre-pandemic levels, luggage sales have shown signs of a rebound in recent months. In May 2021, dollar sales of luggage reached 84% of their 2019 levels. “There is a lot of pent-up demand driving consumer travel aspirations, so travel accessories that are both functional and innovative will be the hot ticket items,” said Accessories and Footwear Industry Analyst Beth Goldstein.
Source: The NPD Group/ U.S. Retail Tracking Service, May 2021 vs. May 2019
84%
Dollar sales of makeup products returned to 78% of their 2019 levels in May 2021. This rebound is expected to accelerate as consumers increasingly return to in-person activities and mask requirements loosen.
Source: The NPD Group/ U.S. Retail Tracking Service, May 2021 vs. May 2019
78%
Apparel
“Apparel lost 1.8M buyers over the age of 18 last year. That means, nearly two million adults did not buy one article of clothing for the entire year! Not only does this finding point to the potential need for a wardrobe refresh, but it also poses the question: will items that have been hanging in our closest, for over a year now, even fit?
When asked if their clothing sizes have changed, compared to a year ago, nearly 40% of women stated they were a new size, compared to 30% of men, our March 2021 survey found. While several reasons could be behind these changes, there are two prevalent behavioral shifts that have come to light . . . snacking and exercising.
NPD’s Future of Apparel report anticipates more consumer interest in wardrobe refreshes. This data finding, coupled with more occasions to attend outside the home, will especially hold true, since ‘making do’ will no longer work if it no longer fits.”
Maria Rugolo
Industry Analyst, Apparel
Footwear
“Brands and retailers should be ready to capitalize on the momentum in dress footwear during the upcoming months, but it is important not to overcorrect. Shifts were happening in the market even prior to the pandemic, and the continued demand for casual, comfortable footwear is one that will likely stick.”
Beth Goldstein
Industry Analyst, Accessories and Footwear
Beauty
“As restrictions continue to be lifted throughout the country and people feel more comfortable going to social gatherings, we’re going to see a boost for prestige beauty, and specifically for makeup. With consumers able to show off their faces again, we’re anticipating a return to growth for products like lipsticks and lip glosses, as well as continuing rising sales of contouring makeup highlighters and bronzers.”
Larissa Jensen
Industry Advisor, Beauty
Consumer Tech
“We don’t expect the return to experiences will have a significant impact on the consumer electronics market, as other personal activities don’t typically affect spending in this industry. With consumer electronics at the core of modern life, providing our connections to family, shopping, communications, education, entertainment, and work, consumers will continue to prioritize their ownership of the appropriate level of technology for their personal needs.”
Stephen Baker
Industry Advisor, Technology & Mobile
Home
“Hosts and guests will need to consider whether their social activities will take place indoors or outdoors. Other considerations include comfort with sharing foods from the same tray or bowl, or whether to serve guests in individual containers or packages.”
Joe Derochowski
Industry Advisor, Home
Industry Commentary
As e-commerce penetration increases across industries, brands and retailers will need to be increasingly proactive in developing enhanced digital touchpoints with customers. This may mean identifying and targeting new segments of online shoppers and investing more in enhanced fulfillment capabilities for digital orders.
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