Retail Market Analysis

Retail sales look steady. But is that the whole picture? Core retail spending grew 3.2% in 2025 – broadly in line with the long-term average. But under the calm surface, less visible currents are at play – and these are what produce today’s choppier trading environment. One is that retail sales growth includes inflation, which flatters the numbers. Strip that out and last year’s core retail growth reduces to just 0.4% in volume terms. Another factor is the source of growth. Last year, only higher-income consumers contributed to volume growth. Lower-income and middle-income consumers bought less. The downswings were not dramatic, but they compound reductions from prior years. These trends help explain many retail dynamics – polarization, the squeeze of the middle, the zero-sum growth game, extensive discounting, margin squeeze, and so on. Retail is not in a terrible state, and it certainly hasn’t collapsed. But the organic growth available is thinner than ever. That makes retail competitive and it brutally separates winners from losers. #retail #retailnews #economy #consumers #spending

Cracks in Spending and Manufacturing Begin to Form as Tariffs Filter Through the Economy 📉 What we expected for April retail sales has now materialized: a sharp pullback in consumer spending at retail stores and restaurants following months of stockpiling ahead of tariffs. 🏭 In a separate report from the Federal Reserve, manufacturing output declined by 0.4% in April—the first drop since October 2024. Even though prices have not risen as sharply as anticipated, falling confidence and weakened expectations have pushed consumers into a more cautious stance—particularly when it comes to durable goods, which are especially sensitive to both tariffs and income volatility. Within the retail sales report, the decline in the control group—used as a proxy for goods consumption in GDP—is a concerning signal as we head into the second quarter. 📊 Retail sales weren’t the only data pointing to softening demand. The unexpected drop in producer prices also reflected weakening spending, especially for discretionary services like air travel, financial services, and trade services—a proxy for retail and wholesale margins. The wide gap between CPI and PPI data suggests that, in April, businesses relied on existing inventories to shield consumers from rising input costs. But that came at the expense of business margins, which were compressed. That buffer may not last much longer. According to Walmart, the company plans to raise prices later this month in response to rising tariffs. ⚠️ We are now witnessing the first-order effects of tariffs on the economy—through reduced spending. The second-order impact—on prices—will likely emerge in the coming months, adding further pressure on demand. While a recession is no longer our base case over the next 12 months due to the recent reduction in tariffs, the likelihood has increased that the U.S. economy will endure several quarters of sluggish growth, with inflation remaining high enough to prevent the Fed from cutting interest rates.

Range Rovers in the Dollar Tree Parking Lot. How #inflation, trade policy, and the experience economy redrew the map of American retail. "Let me tell you about the very rich. They are different from you and me." Perhaps not. The most telling retail data point of 2026 isn't a same-store sales number. It's Range Rovers in the Dollar Tree parking lot. According to the The Wall Street Journal, 27.5% of high-income shoppers now frequent discount retailers, up from 19.8% in 2021. Sixty percent of new Dollar Tree Stores households earn over $100,000. Walmart's CEO says most of the company's market share gains come from households earning six figures. This isn't a recession story. #ConsumerSpending was up 2.5% in February, adjusted for inflation. The affluent aren't retreating. They're reallocating. A decade of compounding macro forces — pandemic stimulus, #SupplyChain disruption, #tradepolicy volatility, tariff uncertainty, and a Fed that kept rates elevated too long — has produced a price environment roughly 25% above where it was five years ago. Coffee, beef, gasoline, housing, utilities — all meaningfully higher. And regulatory flux means input costs stay volatile. The affluent consumer has responded not with austerity, but with triage. #Households earning $150,000+ spent 2% less at #grocery stores in Q1 and 15% more at consignment shops. They spent more at #luxury jewelers and movie theaters. The pattern: commoditize the commodity, protect the experience. Thorstein Veblen built an entire theory around #ConspicuousConsumption, the wealthy spend to signal status. What we're watching is conspicuous optimization. The signal isn't "I can afford Whole Foods Market." It's "I'm too smart to overpay for yogurt." This shift is structural, not cyclical. #AI powered price comparison tools are driving switching costs toward zero. Discount #retailers are expanding into affluent zip codes. And the geopolitical environment — tariff escalation, shifting trade alliances, unpredictable regulatory regimes — ensures these cost pressures aren't going away. They're compounding. The retailers who understand this are adapting. Dollar Tree is stocking premium items and opening in Plano, Texas. Walmart is investing in digital services and membership perks. ALDI USA is planting flags across Brooklyn. They're moving to where the money already lives. The retailers who don't are still pricing yogurt at ten dollars and wondering where their customers went. The customer doesn't owe you their loyalty. They owe you nothing. When policy, inflation, and geopolitics converge to make them feel the squeeze even on a six-figure salary, they will reconsider everything. Fitzgerald thought the rich were different. Veblen thought they spent to be seen. Turns out they just want the best deal on rotisserie chicken… and a plane ticket to Japan.

One persistent theme about the U.S. economy in recent years has been that it has been more resilient than expected, including in the face of high interest rates. Today's retail sales report is the latest case in point. Despite a challenging retail environment, September saw a surprising 0.4% increase in sales, with a stronger 0.5% gain excluding autos. Notably, sales excluding autos, gasoline, and building materials rose 0.8%, fueled by a solid back-to-school shopping season, particularly in clothing, which was up 1.5%. Leading the gains were specialty retailers, grocery stores, and restaurants. Year-over-year, retail sales are up 1.7%, and a more robust 3.7% when excluding autos and gasoline. While some prices, like gasoline, dropped in September, giving consumers extra buying power, areas like durable goods and car sales remained flat. In the latest job market data, new unemployment claims fell by 19k to 241k, but continuing claims are still above 1.8 million. Employment data in the near term may be cloudy due to various external factors including hurricanes and flooding, but overall, the economy is showing resilience, with falling interest rates and cooling inflation creating a generally positive outlook. The recent economic performance, highlighted by strong consumer spending and a supportive job market, suggests that despite uncertainties—such as the upcoming elections and global events—the U.S. economy is exceeding expectations. The Federal Reserve's recent rate cut of 0.5% signals a shift towards a more accommodating monetary policy, with future cuts likely to be smaller. This environment of potentially falling interest rates, alongside a robust stock market, can provide consumers and businesses with a measure of confidence.

On retail trade: Because this data isn’t adjusted for inflation, the dramatic rise in spending at gas stations can be directly attributed to rising prices due to war, not rising consumption. On the other hand, the lack of growth in spending in other categories — like clothing and restaurants — is likely due to reduced consumption (people buying less stuff). We know this because prices in these categories are actually rising. If you take out gas station spending last month, the growth in overall retail trade was smaller than the growth in CPI inflation. This could suggest people bought fewer things, but the difference is too small to make a definitive call. I’m keeping a close eye on signs of a general pullback in consumer spending, and not seeing it in today’s data. While a few categories are flat compared to the month prior, there isn’t an obvious overall trend that would indicate households overall are reigning in their consumption of goods. Of note, however, goods spending as represented in this retail data only accounts for about one-third of overall measured consumer spending — the bulk of spending is on services. When households are facing financial stress, you often see a decline in retail spending. In previous recessions, retail trade fell pretty dramatically. In 2008, it contracted 4.4% in one month, and in 2020, it fell by 12%, drug even further south by pandemic protocol as much as economic uncertainty and stressors. When consumers pull back on spending, it impacts the broader economy, as consumer spending is responsible for about two-thirds of economic activity overall. Strong consumer spending (along with investments) have kept the economy humming despite periods of considerable economic uncertainty, and for now, it appears that the engine is still running. 

𝗧𝗵𝗲 𝗞 𝗦𝗵𝗮𝗽𝗲𝗱 𝗥𝗲𝗮𝗹𝗶𝘁𝘆 𝗳𝗼𝗿 𝗨𝗦 𝗕𝘂𝘀𝗶𝗻𝗲𝘀𝘀𝗲𝘀: The Fed can cut rates, but it cannot fix an economy where retail is splitting into winners and laggards both on the consumer side and the company side. Retail sales look “healthy.” But peel back the data: almost all of the growth is in dollars, not in units. Most categories are flat or declining. What growth remains is uneven, reflecting both the consumers who spend and the companies they spend with. This is a K shaped economy: 𝗪𝗶𝗻𝗻𝗲𝗿𝘀 (𝗨𝗽𝗽𝗲𝗿 𝗔𝗿𝗺 𝗼𝗳 𝘁𝗵𝗲 𝗞):  • E-commerce and Digital-First Retailers: Online platforms, marketplaces, and digital-native brands capture growth as shopping shifts online.  • Luxury and High-End Segments: Wealthier consumers continue spending on fashion, accessories, and premium experiences.  • Tech-Enabled Retail: Retailers that invested early in AI, automation, personalization, and frictionless checkout pull ahead.  • Discounters and Value Retailers: At the other end, dollar stores and discounters thrive as households trade down during economic stress. 𝗟𝗮𝗴𝗴𝗮𝗿𝗱𝘀 (𝗟𝗼𝘄𝗲𝗿 𝗔𝗿𝗺 𝗼𝗳 𝘁𝗵𝗲 𝗞):  • Mid-Market Retailers: Department stores and mid-tier apparel squeezed between luxury and discounters.  • Brick-and-Mortar Heavy Models: Chains overly reliant on physical foot traffic without digital integration.  • Small and Independent Stores: Many lack the capital to invest in digital infrastructure and lose share to larger players. Even with this divergence, e-commerce is still only about 16 percent of retail after more than 20 years. The real driver is online research, which is not captured in those statistics but quietly influences most purchases. Social and digital channels are the fastest growing, but still the smallest slice. Leaders must therefore keep focus on all channels. 𝗔𝗱𝘃𝗶𝗰𝗲 𝗳𝗼𝗿 𝗹𝗲𝗮𝗱𝗲𝗿𝘀: 1. Optimize visibility in both AI powered and social commerce ecosystems, while maintaining strength in core stores and omnichannel. 2. Build for the research to purchase journey with content, reviews, and experiences that shape considered decisions. 3. Rethink attribution as AI summaries and social feeds increasingly drive intent before checkout. 4. Differentiate on trust, quality, and authenticity, not just promotions. Use AI and automation internally to lift productivity and create investment runway for the next channel shift. Shopping is no longer just retail. It is becoming a behavioral loop. Businesses must harness this responsibly while staying omnichannel, or risk being overtaken by those who do. As we look to the week ahead, data on personal income and spending, trade, and the University of Michigan’s consumer confidence survey will show whether households still have the appetite or the ability to keep driving demand. Jill (Puleri) Standish, Oliver Wright, Tom White, Ajoy Menon, AUDREY DEPRAETER-MONTACEL, Suzanne Randall, Cory Porter Watch: https://lnkd.in/e77HRKtS

This isn’t a downturn. It’s a reset. Lately, it feels like every week there’s another headline: a CEO stepping down, two companies merging, layoffs announced, or a production facility shutting its doors. From the outside, it can look chaotic. From the inside of consumer products and retail, it’s actually very logical. What’s changing isn’t just the economy — it’s the consumer. Consumers are spending differently. Inflation may be moderating, but household budgets are still tight. Shoppers are prioritizing value, essentials, and convenience over brand loyalty and impulse purchases. Volume growth has slowed, promotions are deeper, and price increases no longer stick the way they used to. At the same time, cost structures are broken. Labor, logistics, compliance, and input costs remain elevated, while retailers demand sharper pricing and faster innovation. Margins are compressed from both sides. When growth stalls and costs stay high, companies are forced to resize — headcount, facilities, and portfolios included. This is where leadership change comes in. Boards and investors are no longer patient. The old playbooks built on scale, distribution, and incremental line extensions aren’t enough. CEOs are being replaced not because they failed, but because the business now requires different skills: digital execution, speed, portfolio discipline, and technology-driven efficiency. Mergers and acquisitions are a natural outcome. Scale is being used defensively — to remove redundancy, gain leverage, and survive a lower-growth environment. Plant closures aren’t a signal of collapse; they’re a sign of right-sizing for demand that has fundamentally shifted. The companies that win in the next chapter won’t be the biggest — they’ll be the most agile. Leaner organizations, fewer SKUs, faster decision-making, smarter data, and a relentless focus on what the consumer actually values today. This isn’t a downturn. It’s a reset. And resets are uncomfortable — but necessary.

Every analyst in retail looked at the same number this year and smiled. Consumer spending is up. Every income group. Every quarter. Even the households everyone worried about are spending more than they did a year ago. The verdict was unanimous: the consumer is resilient. But here's what that number didn't say... They're not buying more. They're paying more. Why? Because prices climbed and essentials come first. You can't cut groceries. You can't skip the basics. So the dollars go up even as the cart gets smaller. Spending rose. Buying fell. And the gap is widening fastest at the bottom. That's the story hiding under one lazy word: "resilient." Neil Saunders saw it in the volume data everyone else skipped past. As Managing Director at GlobalData Retail, reading retail's numbers is his entire job, and this one wasn't the good-news headline everyone printed. On this episode of The Retail Pilot, he pulls apart the stories the headlines flatten: - Where tariffs actually landed (only 40 to 45% reached your shelf price; the rest hit margins and jobs). - Why the split between winners and losers comes down to one thing. - Whether department stores really have a future. The takeaway? The headline is never the whole story. Follow the volume, not the value. Listen to the full conversation on The Retail Pilot: https://lnkd.in/g_wwBY9Z #RetailStrategy #ConsumerTrends #ThePilotPodcast #RetailAnalysis #Podcast

🟣 Retail’s biggest problem in 2025 𝗜𝗦 𝗡𝗢𝗧 𝗜𝗡𝗙𝗟𝗔𝗧𝗜𝗢𝗡. 𝗜𝗧 𝗜𝗦 𝗖𝗢𝗡𝗙𝗨𝗦𝗜𝗢𝗡. Everyone is talking about inflation, margins, and consumer fatigue. But those are symptoms. The real problem for U.S. retail in 2025 is the Value Paradox. Consumers are spending more selectively than ever before. They cut costs yet buy premium coffee. They compare prices yet choose the brand that feels right. They want low prices and meaning. Convenience and conscience. Discounts and differentiation. And that duality is breaking many retail models. Because most retailers built their strategy for a world where value meant price. Today, value means relevance. 📊 According to Deloitte’s 2025 Retail Industry Outlook: → 67% of U.S. consumers are shopping more frequently but with smaller baskets. → 56% of retail executives expect consumers to prioritize price over loyalty. → 71% plan to use generative AI to decide what and how to buy. → 80% now spend more on experiences than on goods. The equation has changed: Trust + Clarity = Value. Not Price = Value. Retailers that understand this are rewriting their playbook: • Simplifying assortments instead of expanding them. • Building emotional connection instead of transactional loyalty. • Turning stores into content, not just channels. Because when consumers stop believing your why, they start questioning your worth. 🧩 The takeaway for retail leaders: The next retail transformation will not be technological. It will be semantic, redefining what value truly means for your shopper. What does value mean for your customers today: price, purpose, or peace of mind? More details: https://lnkd.in/dFYSJSkP #RetailStrategy #ConsumerBehavior #BrandTrust #RetailInnovation #Leadership

The balancing act of June Retail Sales vs. Consumer Debt is like walking a tightrope. There was much positive talk about retail sales in June. The month-over-month flat performance and +2.3% versus LY were better than expected. Hooray (read sarcasm here!  According to EMARKETER, “On the whole, consumers are in good shape.” However, a deeper look into the economic fabric woven into the US consumer reveals growing concerns and tells a different story.  Hold the high-fives. Stop talking about the impending rate cuts from the Fed and the possibility of a soft landing. The burden on the average U.S. consumer is growing and intensifying (sorry Jessica Lesesky and Rick Watson. I am not feeling the "happy" in the Happiness Index right now). Auto loan delinquencies surged to 7.9% in Q1 2024 from 4.9% in Q4 2021, and credit card delinquencies doubled to 8.9% from 4.1% in the same period. The picture gets more complex when considering the socio-economic divide. The middle class, already feeling the squeeze, faces mounting pressures to maintain their standard of living. Food prices remain high (Milk Price Index?), pushing the financial strain on households. The growing class divide needs to be addressed in macroeconomic discussions focusing on aggregate retail performance. Moreover, consumers are shifting their spending priorities. There's a noticeable tilt away from apparel and home goods towards experiences like travel and dining out. While beneficial for certain sectors, this shift doesn't mitigate the rising debt levels that loom ominously over the economy. Growing credit card debt, anyone? Bottom line: Despite the optimistic retail data, businesses should exercise caution in inventory planning for 12-24 months. The current economic landscape, riddled with high consumer debt and delinquencies, presents risks that could rise quickly if economic conditions deteriorate. The seemingly positive retail sales figures mask underlying vulnerabilities that could disrupt the economic recovery. In conclusion, while the Fed might be winning the battle against inflation, the war on consumer debt is far from over. Businesses should remain vigilant, balancing optimism with a realistic assessment of economic indicators that signal caution. Better to leave revenue on the table than deteriorate brand and profit making very expensive sins of the past payment.