Even as trade disputes and other economic headwinds surface in 2019, the U.S. consumer has held strong and continues to fuel growth in the domestic economy, albeit at a slower pace than in recent years.
Last Wednesday, the Federal Reserve cut the federal funds rate by 25 basis points. Another 25-basis-point cut before the end of 2019 would not be a surprise. On Friday, the Department of Labor released monthly jobs data demonstrating that the while the labor market may not be as strong as it has been, wages and unemployment are stable.
Lower interest rates and a steady jobs market have set the stage for consumer spending to remain strong through the second half of the year and into the critical retail holiday season.
The challenge for the consumer ecosystem will be costs. The impact of tariffs imposed by the United States on imports of Chinese goods is starting to work its way through supply chains and cut into margins. On August 1, the administration announced its latest levy – a 10% tariff on an additional $300 billion of Chinese goods, set to take effect Sept 1. And while stable wages help fuel consumption, they also result in higher costs to retailers to staff their warehouses, back offices and stores.
Now, more than ever, retailers must make smart investments to enhance their consumers’ digital experience; these investments are critical to capturing consumer dollars, as well helping to hold the line on rising costs associated with tariffs and labor.
In its recent back to school survey, the National Retail Federation reported that 45% of shoppers plan to shop online, more than any other channel. The NRF findings are consistent with the hard data that shows that non-store retail sales numbers are up 11% year over year. The trend is clear. Opportunity still exists for growth for those retailers with a clear digital strategy that can attract today’s digital savvy consumer, who also has money in their pocket to spend.
Source: NRF Annual Back to College Spending Survey, conducted by Prosper Insights & Analytics
Earlier this year, the IBM Institute for Business Value conducted a global survey of 1,900 consumer entities entitled “The coming AI revolution in retail and consumer products.” One of the key findings, as summarized by the NRF follows:
“Companies invest in intelligent automation with an eye toward improving efficiency and their bottom line. However, as these capabilities mature, they realize additional benefits beyond their original expectations. Executives say some of the top wins from implementing intelligent automation are greater operational agility, the ability to make faster, smarter decisions and improving the customer experience.”
Taking advantage of cheaper capital resulting from lower interest rates to make investments in technology is a smart business decision. It can help consumer businesses capture higher sales through stronger digital platforms and also help to offset rising costs on the back end.
