The new year is off to a strong start in retail.
The latest figures from the Commerce Department show shoppers going against the grain of inflation, loosening their purse strings and spending at rates not seen since March 2021.
Despite rising prices and hiking interest rates, retail sales actually jumped 3% to $697bn in January, representing the quickest one-month increase since pandemic-era stimulus checks spurred shoppers to spend more in the Spring of 2021. Economists had initially predicted sales would go up by around 1.8% after their 1.1% December decline, but spending surged past expectation, making this most recent jump the largest January uptick in two decades. Compared to January 2022, retail sales were also up by 6.4%.
There were particularly strong upticks in spending at department stores (17.5%), food services, and drinking locations (7.2%), as well as auto dealers (6.4%), with experts theorizing that the unseasonably warm weather drove shoppers out and about to more restaurants, shops, and away on vacation. The labor market also saw immense growth in early 2023, with close to half a million jobs added in January.
These reports point to a stronger economic outlook overall and will be welcome news to retailers such as BJ’s, Hy-Vee’s, and Dollar General, all of which recently revealed plans to extensively expand their brick-and-mortar footprint this year.
Meanwhile, retailers will continue to innovate and invest in tech solutions in order to keep up with this uptick in customer demands. Immersive experiences, more sustainable practices, and gathering real-time consumer data all look set to transform the industry as we head further into 2023.
Retailers Change Tack, Shutter Stores
While these latest spending figures show many bright spots – and even point to a light at the end of the tunnel for inflation-weary shoppers – retailers are still grappling with ongoing volatility and economic uncertainty. Amazon recently pumped the brakes on its brick-and-mortar expansion, announcing plans to close Amazon Fresh and Amazon Go physical stores and pause new Fresh openings.
One of Amazon’s main competitors, Walmart, has also made recent headlines with their planned closures of several stores across multiple states due to poor sales. According to sister publication, Retail Leader, these closures are to take place in Albuquerque, NM; Homewood, IL; Plainfield, IL; Milwaukee, WI; and Pinellas Park, FL on Mar. 10. The mega-retailer also plans to shutter their Chicago-area pick-up-only concept stores in Lincolnwood and Bentonville, IL, on Feb. 17.
Meanwhile, troubled home goods retailer Bed Bath & Beyond continues its fight to remain afloat, recently announcing the closure of 150 stores, bringing their total number of stores closed over the last year to 400.