Headlines of the week? The NRF predicts greatest holiday sales season gains ever, despite supply chain challenges and inflationary pressures. Consumers (not all) are sitting on roughly $5 trillion more in their bank accounts today than in pre-pandemic February 2020… that can buy a lot of candy corn. Halloween candy sales are skyrocketing. Dentists get ready, and retail landlords get ready for more dental and medical tenants, in general. Consumer confidence is also growing as Delta variant wanes. Debate continues over inflation; supply chain will not move from just-in-time to just-in-case quickly… but that’s not the only pressure on pricing… Median hourly wage for retail salespeople jumped 19.8% annually according to latest data from BLS. Retail and restaurant workers forced into frontline work, 13 years of no minimum wage increases and thirty of (adjusted for inflation) flat or decreasing wages… combined with having to be enforcers of Covid mitigation policies and dealing with crazy customers… we just may be dealing with a bigger problem than the removal of extra UI benefits can remedy quickly. It’s a perfect storm of long-term and immediate pressures that will take some time to be resolved. Which is why QSRs are ramping up their investment in robot burger flippers, more retailers are adding self-checkout aisles and AI-driven customer service bots are increasingly the norm.
Back to inflation… some of the pressures are clearly transitory but, not all… and inflation has a ripple effect that creates its own upward pressures. Wage growth = price growth = dollar stores becoming $1.25 stores, rising prices across the board and inflationary pressures that will remain even when the Port of L.A. doesn’t have 70+ ships backlogged in the harbor and the trip from Shenzen to Long Beach isn’t taking 150% more time. The transition of retail continues; coworking space in suburban malls, explosion of store-within-store concepts, densification via mixed-use redevelopment ramping up across retail assets. IPO activity is exploding—heavy with digital natives hoping to follow the successful Warby Parker omnichannel model of building eCom infrastructure first. And then blowing it up with stores that act as embassies of the brand, low-cost return hubs for online sales… and, yes… some of us still like shopping in person. We aren’t just seeing digital natives going public, but also traditional players… including some that have either endured BKs in the last 24 months or that reached the edge… have bounced back hard. Americans with full wallets went shopping both with money they saved in 2020 by not spending on services, but also from the disparate impacts of the crisis and a whole lot of government stimulus. And… apparently, there is a former Toys R Us in Sunnyvale that is haunted… but not by a giraffe ghost.
See you next week,
Garrick
