It looks like the easy money has been made.
Consumers are pulling back on their purse strings and becoming more intentional on where they spend, but apparel players could still flourish if they keep a close eye on what their customers want.
Those are the key conclusions from the Alvarez & Marsal consumer retail group’s fall 2021 Consumer Sentiment Survey. Conducted this past August and September, the study polled 1,500 U.S. consumers around the time Covid cases were starting to rise again. Survey data points to the “fragility of consumer confidence,” according to Alvarez & Marsal’s Jonathan Sharp, who added that consumers no longer have the enthusiasm to return to their pre-pandemic shopping behaviors.
Shoppers general inclination to spend less and save more is due to several factors, according to the study. “The most prevalent reason was they didn’t like the in-store experience,” Sharp said, noting that the “second reason was because the products are too expensive.” Another reason was because goods were not readily available due to supply chain disruptions.
“While products are too expensive, and prices are going up, we also found that consumers are not optimistic. They’re not exuberant when it comes to looking forward to the next six months. So when you put the two together, there’s a real caution that’s there, and they’re really paying attention to ticket price. There’s a lot of discretion going on in terms of whether they do or do not want to spend,” he said.
In fact, when looking at the back-to-school season, fewer than one in five respondents between ages 18 and 55—identified as the studying or parenting life-stage—intended to spend more than they did in 2020. Moreover, the intention to spend less extends beyond those with a dire outlook on the general economy.
Fifty-four percent of respondents expect things to stay the same or get worse for them or their family in the next six months, while 58 percent said they expect to have the same or less money. In general, non-white respondents and lower-income respondents appear more optimistic than the general population. Sixty-five percent of African-American respondents, along with 55 percent who identified themselves as Latinx, said they expect to have more money in the next six months, compared with 34 percent of white respondents.
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That shouldn’t be a surprise, according to Sharp. A deep dive into the data shows that there’s a correlation from the time of the study between respondents who were economically optimistic also being recipients of governmental support, such as enhanced universal income, he said. Sharp acknowledged that one could argue that the results might be different if the survey was done now, considering that the stimulus payments are over. But he also countered that the demographic groups whose wages are currently being bid up are those who primarily work in the service sector. “One can make the case that the macro-economic trend is benefiting this group,” he said.
What does this all mean for apparel and footwear?
As for expectations on where they would spend in the next six months, apparel and footwear did make the top seven—but at a net negative rate. Fresh food was the top choice at 18 percent, followed by wellness and fitness, at 5 percent. Apparel took the number five spot, at minus 7 percent, while footwear was number seven, also at minus 7. While both apparel and footwear had net negative spends, Sharp said those figures were actually good because “apparel made the top one-third” of the 18 categories surveyed.
The Alvarez study concluded that apparel spend is driven by a wardrobe shift as consumers emerge from the pandemic, while footwear is driven by new needs for the same reason. Part of the reason for the net negative spend intentions was due to the shift from five days at the office to working from home part of the time post-pandemic. And for those who plan to return to the office, one in three said they intend to change either their wardrobe, look, hairstyle or makeup. Thirty percent of older consumers expressed a preference for a more formal wardrobe, while 30 percent favor an easier or more relaxed look. Gen Z respondents said they were looking for edgier, on-trend apparel.
“The challenges for manufacturers will be ‘what are your trend signals?’ and how they will meet those needs,” Sharp said.
As for the bottom seven, alcohol took the last spot at minus 23 percent, with accessories just ahead of it at minus 20 percent. Rounding out the bottom three was jewelry at minus 17 percent.
As for retail channel shifts, 19 percent of respondents said they plan to shop more, rather than less, at Amazon in the next six months. Next in line is Walmart, where a net nine percent said they intend to shop more, and not less, over the same time period. One loser was the department store sector, which registered a net negative—an indicator that respondents intend to shop there less over the next six months. In addition, 33 percent said they use Amazon’s mobile shopping app weekly. Walmart, social commerce sites such as Instagram, and Target make up the rest of the top four most prevalently used mobile apps. The study also found that Latinx consumers “significantly over-indexing in mobile shopping.”
One plus for brick-and-mortar retailers was that physical stores remain the preferred channel for the actual purchasing of goods, while online was the preferred channel prior to an actual purchase.