July saw the return of the in-store shopper, as well as a significant uptick in apparel and department store sales, according to Mastercard SpendingPulse.
The shopping surge helped propel U.S. retail sales for the 11th consecutive month, Mastercard said. The monthly survey tracks in-store and online retail sales across all forms of payment. According to current data, more cash in hand— fueled in part by the Child Tax Credit and pent-up savings—helped consumers drive retail spending growth up 10.9 percent, excluding automotive and gasoline, versus July 2020 levels.
“While e-commerce continues to play an increasingly significant role for retail, nothing replaces the in-store experience,” Steve Sadove, senior advisor for Mastercard and former CEO and chairman of Saks Inc., said. “July numbers reflect a return to the store. Consumers are shopping, spending and splurging across channels.”
How significant was in-store shopping? Mastercard data found that brick-and-mortar sales made up 81.9 percent of total retail sales for the month. When compared to year-ago figures, in-store shopping rose 15.5 percent. The data also showed that weekends saw positive spikes in brick-and-mortar spending.
But the good news wasn’t just centered on the return of shoppers to stores. For those in the mood to spend, apparel sales climbed 80 percent year-over-year, while department store sales rose 44.8 percent, also year-over-year. Mastercard attributed the upticks to the Child Tax Credit payments, which gave parents more cash in their pockets during the peak back-to-school shopping season. According to Mastercard data, the spend was “concentrated in the days immediately following the first distribution on July 15.”
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“Back-to-school shopping is back. Combined with greater savings and higher demand, the Child Tax Credit has provided a boost for families and is putting more money into retailers’ pockets,” Bricklin Dwyer, Mastercard’s chief economist and head of the Mastercard Economics Institute, said.
Tight inventories due to ongoing supply chain constraints drive concerns around back-to-school shortages, with even the National Retail Federation (NRF) suggesting that consumers shop early.
And a Pitney Bowes study indicated that consumers across all demographic groups plans to start their holiday shopping over the summer or fall. Sixty-seven percent expect shortages of product and inventory, while 63 percent expect delays in the supply chain from manufacturers overseas. Generally, early shopping usually helps retailers sell either at full-price or at their initial targeted promotional price without the need for significant markdowns. That, in turn, would support their margins.
If early shopping trends pan out, there’s a greater chance NRF will hit its targeted forecast for 2021 retail sales to rise between 10.5 percent and 13.5 percent, a significant upgrade from prior guidance of a range between 6.5 percent and 8.2 percent.
Separately, the home furnishings sector saw positive momentum, growing 3.2 percent year-over-year. There’s been some concern that the home categories would not see as much growth as last year now that more people are returning to their offices. Still, the category grew 26.8 percent compared to the 2019 period.