A Real Economy publication

Retail and restaurant industry outlook: Fall 2022

Sep 07, 2022

Retail and restaurant industry outlook key takeaways

Consumers will continue to shift to buying earlier in the holiday season, allowing them to look for discounts.

Generic or store brands for some items are increasingly popular with budget-conscious consumers.

growth chart

Monthly spending on food away from home continues to rise.

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Economics Retail Restaurant

Behavioral shifts of the creative consumer

Over the last few months, the consistent question from retailers and restaurants has been, what is next? Driving this question is spending behavior that has changed over the last six months as consumers tighten their belts due to pressure from both the income and expense sides. Economic headwinds are forcing consumers to adjust their spending habits as they start tapping into the relatively healthy savings they had built earlier in the pandemic. Companies that serve families or lower-income individuals were the first to be affected as those consumers adjusted their purchasing habits, foreshadowing how all consumers are now looking to increase their buying power.

When budgets are tight, consumers get creative

The pressure on the consumer is on full display in data from the U.S. Bureau of Economic Analysis, which shows the percentage of disposable income dipped to 5.2% in April 2022, a low last seen in October 2009. Consumers are resorting to various methods of stretching their budget by extending purchase timelines, buying generic or simply doing without.

Impact to consumer personal savings

Impact to consumer personal savings graph | Retail and restaurant industry outlook

Consumers are also shopping earlier for seasonal purchases to take advantage of deals prior to the prime shopping seasons. Most recently, 56% of consumers had already started their back-to-school shopping by early July this year, compared to the 44% of consumers who did the same in 2019, as tracked by the National Retail Federation. This was despite only 12% of consumers having received a list of items needed for classes, according to the NRF. Consumers are hoping to take advantage of deals from companies that have been forced to discount their inventory due to excess purchases earlier in the year.

The largest change in consumer buying behavior is the shift to buying generic or store brands for some items. According to the NRF, this year 35% of consumers shopping back-to-school and 32% of consumers shopping back-to-college looked to purchase generic or store brands. These are dramatic increases over the previous four-year highs of 27% for back-to-school and 22% for back-to-college. Retailers and brands have an opportunity to gain market share during the upcoming holiday season and should look to leverage their cost-saving value propositions heading into fall.

Consumers are also working to get the most out of their monthly budgets by cutting back on nonessential items. Early data from the 2022 back-to-school season shows 24% of consumers willing to make do with last year's school items compared to 13% in 2019. This willingness to utilize existing items will continue into the holiday season as headwinds persist in the second half of the year.

Service pressure

One area in which consumers continue to increase their monthly budget spending is food away from home. In June, retail sales in nominal dollars for the food services and drinking places sector hit a record high of $86.09 billion. OpenTable’s seated diners data, a leading indicator, signals U.S. consumers are returning to food away from home, as July saw a 9.5% increase compared to the same month in 2019. July is only the third month in the last year to be above 2019 levels.

Returning diners

Returning diners graph | Retail and restaurant industry outlook

While consumers continue to show a willingness to spend on food away from home, restaurants still struggle with staffing, with May seeing a shortage of “750,000 jobs—or 6.1%—below their February 2020 pre-pandemic employment peak,” according to the National Restaurant Association. Value-conscious restaurants able to maintain margins and provide a customer-centric experience have an opportunity to gain market share as consumers look to make the most of their budgets.

Learn from today to improve tomorrow

As headwinds for the consumer budget continue in the second half of 2022, the cost-saving methods of the back-to-school season will continue into the holiday season, with consumers shopping earlier to look for discounts—a trend since the start of the pandemic, in which October has become a key sales month for retailers. But unlike the past two years, in which early shopping was motivated by inventory concerns, this year will be driven by consumers’ determination to get the most out of their constrained budgets.

RSM contributors


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