Revenge spending continues. American shoppers are on a cut-price binge

The big increase can be partially explained by a slower — and elongated — shopping season last year. Retailers have been ramping up promotions since the summer, causing some fatigue that showed up in a softer-than-usual turnout over the Black Friday weekend, typically the beginning of the holiday season. That pace dragged on through December as some consumers held off until discounts became steeper toward the end of the month. Many of those bargains bled into January, which could have motivated more people to come out and make purchases they had put off till they had a better view of their budgets.

Then there’s luxury shopping, where spending has continued unabated as the pandemic recovery cleaves a deeper wedge between the rich and pretty much everyone else. The Commerce Department doesn’t break out department store categories so it’s hard to compare, but luxury companies have had a strong year and continued to discount through January as they tried to clear out inventories before the beginning of the new fiscal year. For instance, Bloomingdale’s had a clearance sale where items were up to 70 percent off with an additional 50 percent off with a discount code. Saks Fifth Avenue’s New Year’s Day sale discounted designer brands by 60 percent. Even the rich can’t pass up a deal, and a $1,500 designer bag is still $1,500 more spent in-store, whether it’s down from $3,000 or not.

But perhaps the simplest explanation is our eagerness to go out and shop in-person again after two years indoors. With wage and jobs growth still strong and inflation slightly lower, people have money in their pockets. And department stores may be getting better at figuring out how to capitalize on every visit, even if it’s to return a present. With the right marketing, shoppers making a return could be enticed to buy a sweater on the way out. That’s especially true when more than 50 million people receiving Social Security payments got an inflation bump, starting January. The adjustment amounted to an extra $7.3 billion last month, or almost $90 billion annualized, my Bloomberg Opinion colleague Conor Sen pointed out recently. Department stores may have benefitted from that spending, according to National Retail Federation Chief Economist Jack Kleinhenz.

While it’s totally reasonable to be optimistic based on these retail figures, department stores and overall retail spending may not shake out to be totally positive this year. Kohl’s continues to struggle with a weakening balance sheet and fading traffic, while Macy’s and Nordstrom continue to close stores. The Federal Reserve’s interest rate hikes are still working their way through the economy so consumer spending may slow down later in the year. Still, department stores are no longer bleeding as badly as they did during the pandemic, and certainly before. There might be a silver lining for stuffy old department stores after all.

Leticia Miranda is a Bloomberg Opinion columnist covering consumer goods and the retail industry. Views are personal and do not represent the stand of this publication.

Credit: Bloomberg