
A mixture of stimulus checks and changes in buyer behavior during the COVID-19 pandemic led to a massive increase in consumer spending. Now, with inflation at 40 year highs, shoppers may have finally reached the limit of what they are willing to pay for certain goods. Suzanne Kapner reports for The Wall Street Journal:
Apparel retailers and department stores are bumping up against pockets of price resistance, a sign that consumers are curtailing spending as inflation remains at the highest level in four decades.
Macy’s Inc. M +1.47% tried to raise prices on some mattresses and sofas by $100, but shoppers pushed back, Chief Executive Jeff Gennette said. Clothing brand Bella Dahl raised prices on its T-shirts by about $20, then sales fell and the company rolled back the price increase. “There was a revolt,” said Steven Millman, its chief brand officer. “If we go any higher, we’ll do half the sales.”
With inflation at a 40-year high, companies across the spectrum have been charging more to offset rising costs with little resistance from consumers. That trend is starting to change, especially on lower-priced apparel and furniture, according to industry executives, analysts and consumers.
Retail sales slowed in February compared with January, according to the Commerce Department. Compared with February 2021, sales are up 17.7%, but a large chunk is due to rising prices. In some categories, such as gasoline and food, all the gains were driven by inflation, according to research firm GlobalData. In apparel, there is “some trading down with more shoppers turning to value players for some of their purchases,” according to Neil Saunders, a GlobalData managing director. “This is likely in response to squeezed budgets.”
Unit sales of general merchandise goods such as apparel, footwear, toys and sports equipment declined in nine of the 10 weeks from Dec. 26 through March 5 compared with the same period a year ago, according to market research firm NPD Group.
Roughly 43% of consumers surveyed by NPD in February said that if prices continue to rise, they will delay less-important purchases to stick to a budget.
“We are seeing less demand as consumers pay higher prices,” said Marshal Cohen, NPD’s chief retail industry adviser. “Price sensitivity is starting to show up. There is a threshold that consumers don’t want to go over.”
Calloway Cook of Northampton, Mass., had been spending freely throughout the pandemic, but he started cutting back in the past two months as higher prices and a stock market made volatile by Russia’s invasion of Ukraine have him feeling less affluent. Instead of buying a new winter coat, he is sticking with the one he has and is forgoing the sneakers he had been eyeing. “It seems like it’s a good time to be more frugal,” said the 28-year-old seller of herbal supplements.
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