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HomeNEWSConsumers are spending more money on experiences – NRF CEO

Consumers are spending more money on experiences – NRF CEO

Customers have changed since the 2008 recession and retailers have to keep up with them, the CEO of the American National Retail Federation says. He says there’s been a shift to more experiential spending, rather spending on material goods. Plus: his thoughts on the TPP, retail as a career and single-store retailing.rn

Matt Shay is the chief executive of the world’s largest retail body, the National Retail Federation (NRF). Retail makes up one in four jobs and 20 percent of the GDP in the US.

At Retail NZ’s shop.kiwi event yesterday, Shay spoke of the US’ recent tough holiday season, with warm weather disrupting winter apparel sales.

The US retail sector saw three percent growth in retail spending, rather than the forecasted 3.7 percent.

Shay said a shift in consumer spending was evident in this result and had been occurring since the 2008 recession, as the recovery has had a “very long tail on it”.

“We haven’t seen the kind of growth, job creation and investment that you’d normally see from the recovery from a recession like that,” Shay said.

One of the things that he said was different post-recession was the way people look at discretionary retail purchases.

“They’re spending less on what we would consider to be traditional retail, such as the apparel category, and spending much, much more on experiences.

“So we’ve seen over the holiday quarter and into the coming year people are going to be devoting more of their discretionary spending to travel and leisure and hospitality, and the experiential kinds of spending, as opposed to material acquisition we saw in the middle-2000s in the run up to the recession.”

The change is being spearheaded by a generation of new spenders, he says.

“The young people of today, or tomorrow’s real consumers over the long-term, just don’t think of things the same way.”

This is what The Register found in January when it explored the topic in the story, ‘Experiences over stuff: the new consumerism – and what retailers can do about it’.

When a group of people in their 20s were asked to share why spend more on experiences rather than things, most said because experiences last longer.

“Material things will be around forever, the opportunity to have a certain experience at a time in life when you’re most capable, financially as well as mentally, physically etc is the best opportunity I’ve had. Life is too short and I’m aware of that firsthand, travel the world, follow your dreams… You can buy your ideal handbag or new car when you’re 80,” said one respondent.

Shay said this shift in attitudes towards spending has also had a trickle-down effect into other industries, such as housing and automobiles.

People are spending more on houses, home renovations, healthcare and automobiles, he said.

“We sold 18 million autos last year – a record number for the US – back way above pre-recession numbers,” Shay said.

Furniture sales were also up 70 percent over the holiday season.

Other key issues in retail Shay touched on included promoting retail as a respected, professional career.

He said retail was traditionally perceived in the US as a low wage, low skills, career, so the organisation conducted research and launched two series called ‘#thisisretail’ and ‘Retail Across America’ to elevate the visibility and favourability of the industry.
 

A key finding of the research was that 78 to 80 percent of people in retail were satisfied with their jobs, he said.

They had also started a discussion with universities about how to get students identifying retail as a long-term career once the left college.

Shay also touched on the recent TPP signing, saying the NRF were “very pleased with the progress”.

“We’re very convinced that with trade, broadly speaking, the TPP is going to be excellent for the people of the US, for the people of New Zealand and the other affected countries.

“It’s not a ‘nice to have’ sort of thing, it’s an absolute essential thing if we’re going to compete globally with the other economies.”

He also mentioned his beginnings in retail as a high school student, working in a shoe store as a stock boy in an Ohio surrounded by stand-alone stores and merchants.

For a while, retail had gone the other way with the “big-box stores and category killers”, but now he thinks there’s been a renaissance.

He made sure to note his organisation represents everyone from “Walmart to single stores”.

“There’s a real recognition in the US, and in many communities, the enlightened thinking is a realisation, a recognition that the entire [retail] ecosystem matters. You need the small businesses,” he says.

“If you kill off small business, indirectly you’re going to kill off big business too.”

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