January 2022 Consumer spending shows momentum

At first glance, it may come as a surprise that consumer spending remained buoyant in the new year. Inflation has accelerated and, depending on where you look, supply chains have been rocked by the lingering pandemic.

Steve Sadove, senior advisor at Mastercard, told Karen Webster of PYMNTS in a recent interview that, overall, “the high-end consumer still feels good…and it’s still e-commerce that drives results.”

The conversation took place in the context where earlier in the month Mastercard released its SpendingPulse data for the month of January. It showed digital sales jumped 10.4% in January from a year ago and grew much faster than the total US retail sales estimate of 7.2%. Additionally, digital commerce data from Mastercard showed sales were up 110% from January 2019 levels.

Clothing, Luxury and Services

Luxury goods sales jumped 45.3% and jewelry sales were up 18.8% year-over-year ahead of Valentine’s Day. Sadove noted that high-end spending held up as high-income consumers felt confident in their financial gains, buoyed by robust stock returns last year.

SpendingPulse found apparel sales rose 37.6% year-over-year for January, the strongest growth in the index’s history. Clothing has become a popular commodity lately as more consumers return to the office or start attending social events.

Sadove said we are entering the early stages of a new fashion cycle and no one will be wearing sweatpants in the office anymore. The move to restock the wardrobe also helped department stores, with January sales up 10.5% year-on-year and 9.8% from pre-pandemic levels .

Strong results for online and physical spending show that commerce has truly become channel independent, he said, and that consumers are navigating both types of interactions with retailers with confidence. Spending is also poised to rise as travel resumes, particularly to theme parks and other vacation destinations.

A note of caution

Mastercard’s latest wave of data is particularly noteworthy because it covers a period in 2021 when consumers were teeming with money from stimulus payments and tax credits.

However, some caution is in order: the January data is backward-looking and, as noted in a recent PYMNTS report, inflation remains a major hurdle to watch as we move forward.

Related: Inflation and COVID variants pose new challenges for paycheck-to-paycheck consumers in 2022

In fact, a growing number of shoppers see themselves as living paycheck to paycheck – more than 60% do so, up from an average level of 50% 10 months ago.

Sadove said supply chain constraints are stoking inflation, which is currently at 7%. Wages have risen, he said, but not necessarily enough to keep up with rising prices. This means that paychecks don’t stretch as far and, by necessity, cash cushions (in terms of savings) shrink a bit.

Truly Omnichannel

As the pandemic shows signs of waning, digital must be an integral part of the shopping experience, even for businesses with large physical footprints.

Sadove said there is inherent value in the digital experience because a company’s website gives instant information about price comparisons, what’s in stock and where, what can make the experience more efficient in-store shopping.

He added that as omnichannel shopping becomes even more firmly entrenched, the most important consideration for merchants will be to make the experience frictionless. He cited Amazon Go as an example of how consumers don’t need to interact with in-store staff at all, because shoppers simply pay for scanned items and, well, walk away.

This is a marked departure from the standard department store checkout experience, which has remained unchanged for a very long time. The retail experience can also take inspiration from sports arenas and stadiums, where people can check out and initiate cashless transactions from the comfort of their seat, which also reduces massive queues.

“Everything is automated,” Sadove said, referring to these technological changes, “and therefore the [on-site] transactions increase. There can be a lot of positive impact in making the experience seamless and better overall for the consumer. »

As he pointed out to Webster, “I struggle with the concept that trading is ‘one channel’ or ‘the other’ – among traders, the winners are those who navigated and figured out how to play in the omnichannel environment.”



On: Seventy percent of BNPL users say they would prefer to use the installment plans offered by their banks – if only they were made available. PYMNTS’ Banking On Buy Now, Pay Later: Installment Payments and the Untapped Opportunity of FIssurveyed over 2,200 US consumers to better understand how consumers view banks as BNPL providers in a sea of ​​BNPL pure-players.

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