• by Sarah Mahoney  @mahoney_sarah, July 1, 2024

Even though inflation has eased, employment is strong, and the economy is stable, there are many signs that the consumer spending landscape is dramatically different from a year ago. Marshal Cohen, chief retail expert at Circana, said brands should pay closer attention to these shifts: America’s credit card debt has passed $1.11 trillion, and 30% of consumers have used a “buy now, pay later” financing platform in the last three months. He tells Marketing Daily how consumers might behave heading into back-to-school and election season.

Marketing Daily: Where do you see consumers right now?

Marshal Cohen: We're at a true inflection point. All the noise of elevated food prices causing pullbacks in discretionary spending has finally leveled off, and we’ve gotten back to meeting last year's numbers. We're not seeing negative growth year over year. That’s important because when prices went so high, the consumer had to prioritize food, shelter, insurance and transportation. They couldn’t buy what they wanted. Everything became what they needed. Americans aren't used to that. We’re buying very differently.

Marketing Daily: And that’s where credit and the “buy now, pay sater” shift becomes so important?

Cohen: Yes. For several years, we’ve been tilting toward “wear now” or “use now.” We aren’t spending in advance. We don’t go out and buy an umbrella or raincoat to get ready for rain. We wait until it is raining. It’s changed how consumers prioritize their spending and even how they think.

Last year, for example, back-to-school didn’t happen the way it usually would. Instead of shopping in July and August, many parents waited until the end of September. They didn’t buy sweaters and coats until late October. And because prices have leveled off, they don’t feel this “buy it now before the price goes up” pressure.

Marketing Daily: Is some of that delay about deal-hunting?

Cohen: Yes. That shows in the increase of private-label brands, as well as where we shop. Online continues to see the biggest growth in retail, but much of that is in marketplaces. Stores are just now beginning to show signs of growth. People are thinking about going back into stores again.

But it’s also about changed attitudes about replenishment cycles. We’re not about to upgrade our TVs unless some new technology comes along that makes our set feel obsolete. That slowed approach is even true for beauty products.

Marketing Daily: But beauty has been a hot growth area for several years, right?

Cohen: Yes. And while consumers were willing to give up other things, they felt beauty and skincare was a relatively affordable way to feel good -- especially if you spent all day on Zoom calls. But even the beauty business is leveling off: no more double-digit growth rates. And much of the gains are coming from the under-16 crowd.

Marketing Daily: We aren’t spending in advance on anything?

Cohen: No. The way we think now is, if it's a good deal and a reasonable price, and I'm going to use it today or tomorrow, I can have it delivered to me today or tomorrow; therefore, I'll get it today or tomorrow.

And if I need it today but don’t have the money? I’ll put it on my Visa card. We’re at more than $1 trillion in credit card debt. Delinquency rates are rising, too.

Marketing Daily: What will that mean for back-to-school spending?

Cohen: Last year was bad, so when retailers report, it will sound like they did well because of easy comparisons. Another thing that will help is that if you skipped buying your child a full wardrobe last year, they’ve outgrown everything. And your kid is not going to want to go to school in two-year-old clothes. So while we are poised for a decent back-to-school season, it won’t be great.

Marketing Daily: As the election gets closer, people will inevitably predict that the media frenzy is casting a pall over spending. True?

Cohen: I love this question, and I've studied this for five presidential elections. Every time, if the party you voted for loses, there is this fear factor for those people. They think, "The world will end, and I have to go out and shop because I need retail therapy."

If your party wins, you feel great. You say, "The economy is going to flourish, the world is going to be safe and to celebrate, I’m going shopping." We all go out and spend after the election. It doesn't matter who wins.

Before, though, we do see a pullback -- in a normal election, in about mid-October until about three days after the election. But this year feels very different. We're polarized and politically heated. But who knows?

There are always distractions. There's always a hurricane that interrupts the supply chain. There's always political unrest. There's always some Middle Eastern crisis that causes gas prices to rise. Somehow, consumers navigate through them in a relatively quick fashion to recover.