March 2020. It started with the first death from COVID-19 and political news from the Democratic primaries. It ended with the country in complete lockdown, New York City hospitals overrun with coronavirus patients and consumers hoarding necessities as the mysterious global pandemic took hold.
It’s not a period of time anyone would care to revisit.
But a year down the road, although the virus hasn’t been stamped out, the consumer spending picture has changed dramatically. The evidence was clear in Mastercard’s latest SpendingPulse report, which compares March 2021 to last year.
First thing’s first. The SpendingPulse data are eye-popping because they reflect such depressed levels. Thus, the headline numbers show more than 26 percent growth in total retail sales against March 2020 (excluding auto and gas). Drill down a bit and we see 60 percent growth in apparel and a staggering triple-digit 106 percent surge for jewelry, to name just two standout segments.
In an interview with PYMNTS, Mastercard Senior Adviser Steve Sadove said we are certainly rebounding from the dark days of the pandemic. But taking a longer look in the rearview mirror — to two years ago, for example — reveals just how far we’ve come, and how firmly entrenched online shopping really is.
Remarked Sadove: “The categories that have been the winners — I’ll call them home related — the hardware, the nesting types of categories, are continuing to hold up well, while the others recover.”
Furniture/furnishings grew by more than 60 percent; hardware was up more than 20 percent.
eCommerce Holding Strong
Perhaps it’s no surprise that eCommerce sales were up more than 56 percent, reflecting the digital shift chronicled by PYMNTS this past year.
“It’s a continuation of what we’ve seen” over the past several months, said Sadove. “We’ve seen eCommerce go from 12 percent of retail to close to 20 percent of retail. And what’s happening is that despite the opening of more stores [amid vaccine rollouts], you’re seeing a continued momentum on the eCommerce side of the business.”
The consumer still loves and values an omnichannel experience, he said. That contention is backed up by another Mastercard report, which was also released this week, that showed that omnichannel retailers outperformed brick-and-mortar brethren by about six percentage points. There’s plenty of room for online transactions to grow, even when foot traffic rebounds at storefronts.
Department stores? They’ve stanched the bleeding a bit, logging a “flat” stacked performance from two years ago and up 114 percent from last year. There’s still room and need for that sales channel to reinvent itself.
“They have to think differently,” said Sadove of those avenues of commerce. “They have to create new business models” as consolidation is likely to continue. One way to do that is to create and expand loyalty and rewards programs designed to cement stickier relationships with shoppers.
Looking Deep Into The Stack
There may be even better insight to the consumers’ resiliency, he told PYMNTS, gleaned by looking at what he said is akin to a “stacked” view, measuring 2021 against 2019. Through that lens, consumer spending is up nearly 8percent from two years ago.
“That number is telling you that the consumer really is starting to come back, and it’s not just from a recovery off of the terrible numbers that we saw in March of 2020,” he said.
With even more granularity, he said that March 2021 stats show that as stimulus checks started to come in the middle of the month, spending in the second half of March was stronger than the first half.
As to what consumers are spending their money on, Sadove pointed to apparel, which had been among the hardest hit verticals. Even on a two-year, stacked basis, that segment is up 19 percent, he said. Consumers may, at least anecdotally, be craving newness, and in getting ready to go out again and join the world at large, they may want to spruce up a bit.
Jewelry sales, which had been up 106 percent from March 2020 as previously noted, were up 30 percent from 2019, remarked Sadove.
“People are expressing themselves, they are gifting,” he said, and the high-end consumer is doing just fine, buoyed at least in part by the wealth effect that in turn is tied to heady stock market returns. Then there are the other intangibles that drive commerce forward and bring out the digital (and even the leather and the Velcro) wallets.
As Sadove told PYMNTS: “Consumer confidence and psychology plays quite a big role. People are feeling better. They’re hopeful. They can get out again.”
Couple that with higher savings rates and checks that have been coming into their pockets, and “it really does lead you to a pretty good sense of optimism as we go forward into the next several months,” he told PYMNTS.