Apparel, gift cards at the top of consumers’ holiday lists: NRF
00:00 Speaker A
Is there a way to know how much of this spending belongs to the top third or decile of Americans by income?
00:13 Speaker B
Yes, we actually work with our partners Affinity and Pixis who help us analyze this credit and debit card data. and in fact, we’re doing some analysis that we’ll explain shortly, which shows that spending is in deciles, and you certainly see that higher-income households in particular are increasing spending from year to year. So we certainly see all that said about the K-shaped economy in some spending data. When you look at the left-hand side, there’s an almost straight line to low-income households and to the right-hand side to high-income households in terms of their growth and spending across all sectors from year to year.
01:21 Speaker A
Um, and that’s interesting, we’re showing part of the month, part of the month, spending by industry, but it’s probably more interesting year over year than month over month. But as with digital product products, it’s up almost 15% year over year, unadjusted, or I guess non-seasonally adjusted. So what does that tell you about what people spend their money on, what kind of gifts they buy?
01:54 Speaker B
Yes, it’s definitely worth understanding that digital products are a relatively small category. and that’s, you know, things like buying video games or e-books or anything that’s not physical online. But when we talk to consumers and ask them what they’re buying for the holiday season, the number one answer we get is clothing. It’s at the top of this list. And of course gift cards and toys. When we talk to consumers about what they want to buy, the number one thing is a gift card. So after Christmas, we expect to see some really significant spending when people get these gift cards and go shopping for post-Christmas sales.
02:44 Speaker A
Right. So that revenue is recognized when the gift card is purchased, right? Not when it’s spent? If I remember correctly, right?
02:53 Speaker B
TRUE. Yes.
02:54 Speaker A
Um and you know, when we look at these numbers overall and you, you know, as someone who’s been following retail spending for a while, how does that compare? Where are we on the spectrum of what spending typically looks like?
03:22 Speaker B
So looking back, remember we had some pretty strong years before the pandemic, you know, during the pandemic. If we put these aside and look at the 10 years before the pandemic, average growth for the holiday period was around 3.6%. We are heading towards something around 4%. We estimate sales growth for the holiday season will be between 3.7 and 4.2%. We probably expect to reach these figures. This is clearly above the growth trend. So again, I think the bright spot in this economy right now is the consumer, right? They’re going out there, they’re spending, and even if wages aren’t rising as fast, you know, as you’d hope they would, consumers are actually spending more and saving less to ensure they can spend on their families and loved ones. The one trend we see throughout the year is if you think about Mother’s Day, Father’s Day, Valentine’s Day, and back-to-school days, every single event that consumers spend on for their families and loved ones. We’ve seen record or near-record spending. So, you know, consumers are protecting their spending on their families and loved ones during these events.
