In May 2023, total retail sales revenue, encompassing both discretionary general merchandise and consumer packaged goods (CPG), increased by 2% compared to the same month the previous year, while unit sales declined by 3%. Although consumers are engaged and spending, they are not doing so at full throttle. And while price plays a role in today’s consumer spending habits, it is not the primary driving force.
No big general-merchandise shopping channel shifts
Clearly, spending on general merchandise categories is still being affected by rising prices and declining consumer sentiment, but the anticipated changes in where people shop have not materialized.
Source: Circana, Checkout Omnichannel Tracking, general merchandise, January – April 2023. Industries include accessories, apparel, auto products, footwear, home décor, home improvement, home textiles, housewares, juvenile, office supplies, remaining gm, sports equipment/team sports, prestige beauty, small appliances, technology, toys, video games. Excludes grocery/drug, convenience/gas, restaurant channels; not displaying “all other” channels.
“E-commerce has gained the largest share of general merchandise sales revenue so far this year, and department stores are maintaining a steady share of the market,” said Marshal Cohen, chief retail industry advisor for Circana. “Typical consumer behavior during economic uncertainty would have consumers flocking to value-oriented options. But mass merchants, warehouse clubs, and off-price retailers have yet to gain the expected traction.”
“Recent directional spending shifts, elevation in unemployment, air-quality concerns in the U.S., and other factors that could jolt consumer behavior will be critical to monitor,” Cohen said. “But for the time being, consumers are still buying prestige beauty products and luxury items, and they continue to pay a premium for most of their purchases.”
CPG shopping shift: a harbinger of larger retail changes
The way consumers are adjusting their CPG shopping behavior reveals brewing retail changes. According to Don Unser, president of thought leadership for Circana.“While overall spending remains elevated due to higher selling prices, consumers are approaching their shopping trips differently, and basket size is smaller than it was a year ago. CPG consumers have also started their migration to value-focused retail options.”
Source: Circana, OmniMarket™ Core Outlets, Circana OmniConsumer™ Scan Panel, all outlets, CY 2019 — CY 2022, 52 weeks ending 4/23/23 vs. YA, NBD aligned. Note: Walmart is not included in grocery or mass/super. Convenience data is from Circana OmniMarket™ Core Outlets; data for other channels is from Circana OmniConsumer™ Scan Panel.
Only warehouse clubs and dollar stores have had sustained growth since 2019. And during the 12 months ending April 2023, unit sales at warehouse clubs declined just 3% from a year ago, which is much lower than most other channels. These changes in CPG channel shopping behavior are likely a precursor of the changes on the horizon for the rest of the retail world.
General merchandise and CPG retail categories tell their own stories
While certain retail sectors will continue to experience fluctuations, consumer engagement can be elevated by offering innovative products, leveraging technology, providing exceptional customer service, and actively involving customers in the shopping process. By understanding and catering to the shifting landscape of consumer preferences, retailers can achieve increased sales and cultivate long-term customer relationships.
Read on to learn how retailers and manufacturers can elevate shopper engagement, in this sampling of general merchandise and CPG categories.
Video Games: New Games are the Industry’s Lifeblood
Mat Piscatella, Industry Analyst
New games are the lifeblood of the video game industry. As a hits-driven business, these new experiences not only fuel game sales – they also encourage adoption of hardware, accessories, and subscription services. Several recent blockbuster new video game releases have reinvigorated the category, including The Legend of Zelda: Tears of the Kingdom, Diablo IV, and Final Fantasy XVI, among others. Combined with improved availability of PlayStation 5 and other console hardware, consumer spending has increased across video game console software, hardware, and accessories so far this year.
Following months of production delays, many big new games are finally finding their way into the hands of video game fans.
PlayStation 5 and Nintendo Switch hardware have benefitted most from this increase in blockbuster releases.
Accessory sales have also benefited, including headsets and premium gamepads.
Toys: Changing Channels and Elevating Engagement
Juli Lennett, VP, Industry Advisor
With consumers spending more of their budgets on food and other necessities these days, you might expect consumers to flock to off-price or dollar stores to seek out low-priced toys. In general, off-price stores – and some (but not all) dollar stores – are gaining share. However, it’s the online channel that is gaining the most share, specifically marketplaces. This shift likely doesn’t have anything to do with buying low-priced toys; instead, it has more to do with finding a specific toy that isn’t readily available in the usual channels because it is out of stock or not carried at all. While most of these channel-share gains tie back to an increase in the number of buyers, not all retailers within these channels gained those buyers.
Regardless of the channel, here’s what retailers and manufacturers can do to elevate shopper engagement and grow share …
Optimize marketing effectiveness in media by pinpointing consumers that have the highest propensity of buying into your brand or competitive brands based on actual purchase behaviors (using Circana Audiences).
Reach your buyer across all ages where they are, whether that is through social media, old-school email marketing … and everything in between.
Create brand moments that will electrify existing buyers to buy deeper into the brand while winning over new buyers.
Deliver your toy brand across multiple price points so consumers have choices based on their financial needs.
While consumers are shopping with you, remind them of future purchase occasions for toys like a birthday or holiday.
Plan and execute a seamless omnichannel strategy allowing consumers to find the right toy online and giving them choices on how to acquire that toy (i.e., in-store, curbside or ship-to-home).
Apparel sales success requires a multi-dimensional approach
Kristen Classi-Zummo, Industry Analyst
When examining the channel trends in the apparel industry, there isn’t one single narrative that is winning with consumers. Consumers continue to shop where they like and buy what they want. If the experience and product offering isn’t ideal, they aren’t trading down, they just won’t buy. Retailers must understand that a one-dimensional approach, such as solely focusing on offering the lowest price, is not the key to success.
The growth of warehouse clubs is a good example of a successful multi-dimensional approach, with an increase of 14% in dollars and 5% in units in 2023 (Jan-April 2023, Circana consumer data).
The warehouse club channel effectively leverages value, convenience, and strategically placed apparel.
By pulling this variety of levers, warehouse clubs successfully convert their grocery shoppers into apparel buyers.
Food: Winning the Grilling Season with Meat
Chris DuBois, Protein Practice Lead
Summer has arrived and with it the start of grilling season, outdoor entertaining and travel. Across entertaining, every day and weekend occasions, two-thirds of shoppers plan to grill as much as (50%) or more (19%) than last summer. New grills (31%) and the enjoyment of trying new foods and new barbecue recipes (34%) are important drivers behind the growth in grill occasions, according to shoppers surveyed in May.
The meat department is well positioned to benefit retailers and consumers. While perimeter departments were the first to feel inflation’s surge back in 2021 and 2022, price increases are moderating and reversing.
Target special occasions and events that are centered on home entertaining. Keep in mind that 67% of consumers who like to entertain at home plan cookouts and barbeque gatherings this summer and 21% of consumers plan to watch sporting events together with friends — opening the door to sports-focused cross-merchandising opportunities.
Offer grill-ready meat and poultry offerings, in addition to cross-merchandising displays encouraging shoppers to add a few more items in the basket. “With traditional grocery ceding meat market share to other channels throughout the past year, summer grilling is the key to winning back trips”, shared Chris DuBois, Practice Lead, Protein for Circana (formerly IRI).
Home-centric Lifestyle Leaves the Door Open for Shopping Inspiration
Joe Derochowski, VP, Industry Advisor
The pandemic increased demand for home-related products because all our activities and attention were focused on our homes. Although we’ve returned to many of the same things we did out of the home before the pandemic, we still live a more home-centric lifestyle than before the pandemic and spend most of our time caring, cleaning, feeding, and comforting our families. Our needs have shifted from the height of the pandemic as more of us live a hybrid work life, and we’re looking for new inspirations and solutions for our current lifestyle, including how we shop.
Over 50% of home goods are purchased online, opening the door for social media platforms, like TikTok, YouTube, and Instagram, to influence many online purchases. This momentum will continue making social media a critical marketing channel for the home industry.
Although unit sales of home products are declining, they are still above the pre-pandemic level. The industry is in a pull-forward phase and will see declines until 2025.
To be innovative and inspire your customers, it’s critical to follow the consumer’s path to purchase. You need to find ways to make the consumer’s journey on this path more convenient, faster, and better as their needs shift, their life moments change, and their lifestyles evolve.
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