According to the latest figures published by the Commerce Department, consumer retail sales logged their biggest increase in a year last April. That’s great news for the economy as consumer spending accounts for over 2/3 of the GDP.
Looking at last weeks earnings reports, however, it became clear these consumers weren’t shopping at Macy’s, Kohl’s or Nordstrom’s. The assumption now being - these people moved their apparel shopping to Amazon. However it was understood that Amazon does not sell well with home improvement goods, and as expected Home Depot and Lowes both reported earning beats. So with that composite, we’re coming to understand Amazon is the preference for one portion of consumer retail space with home improvement brick and mortar’s taking care of the other.
That sounded great - I can get that model in my head. But wait a moment, not so fast. The Children’s Place reported a smashing quarter yesterday. And tonight, two more brick and mortar retailers just surprised Wall Street. American Eagle Outfitters and Urban Outfitters. I must say I didn’t see that coming.
What are these speciality retailer’s doing that the big department retailer’s aren’t? I think if we answer that question we’ll get an even firmer grasp of the new American consumer, and we’ll know which companies have the potential to cater to an evolving new profile.
I have some theories and observations. The main one being: our bigger ticket spending generation is shifting from Gen-X’ers to Millenials. Gen-X’ers grew up in large homogenous retail shopping malls to hang out with their friends. Millennials are growing up with social media and iPhones. They favor experiences, personalization and ease of use. They dislike giant multi-national, faceless corporate-like entities that can’t deliver on the first three (with exception for Apple, Facebook, Amazon and others who have figured this out already). They will sooner buy something through crowd-funding, just to see the idea come to market, than to settle on something from that big faceless corporate entity. They prefer to be part of the decision making process: It was brought to market because it was chosen.
Personalization. Social. Friction-less. Experiences. I’m sure there are others that help to paint the composite.
I would love to hear your thoughts on this, and hopefully use that information to help navigate through to a selection of companies that stand to deliver to our next generation’s needs. After all, in the world of capitalism it’s evolve or die.
Best,
–Kevin
