Retail earnings may have long been looked upon as a benchmark for measuring the growth of the economy but not anymore.
The shift in calibration comes as signs of weakening sales in the earnings reports of numerous major retailers were counteracted by the U.S Commerce Department report that showed a spike in retail sales last month — thereby, clearing doubts of a softening American economy.
The disconnect, The Wall Street Journal pointed out, stems from changing consumer behavior, which is fast heading outside the physical store for the convenience and speed of eCommerce. Online retailers, such as Amazon, with their easy shipping and return policies, are fast becoming the go-to stores for American shoppers.
Even various major brick-and-mortar stores, like Macy's and Nordstrom, are observing a shift toward online sales and are bracing for the new tide of eCommerce. This is calling for a change in the ways that economists calculate numbers, pushing them to widen their data sets for measuring the state of consumer spending, WSJ noted.
“Today, the performance of some big-box retailers — and, to an even greater extent, online stores and leisure and hospitality companies — should be considered equally important bellwethers for cyclical changes in consumption,” said Goldman Sachs Economist Zach Pandl, who pointed out three major trends that are changing the retail game.
One of the trends that's fueling the shift in consumer habits is the growing affinity for online subscription-based services. Consumers are increasingly choosing to spend more of their income on such services rather than in stores, Pandl said.
Another significant factor affecting the spending trends is a growing consumer preference for shopping at big-box retailers for daily goods. An example of which, he pointed out, is Walmart, which posted positive growth. Walmart reportedly sold three times more goods than Kohl's, Macy’s, Nordstrom and Target combined.
Finally, the year-over-year growth of online sales is now beginning to bite into core areas, which have long been the bastion of physical retail stores, including apparel, appliances, food and grocery and furniture, among other things.
The shift in the trends is fiddling with the math behind calculating the strength of one of the major pillars of the U.S. economy — retail. The long-term growth seems to be nothing but sound, Pandl said.