Q2 Preview: Consumers Continue to Prioritize Value

At the recent Q2 Store Brands Retail State of the Industry Webinar, Elizabeth Lafontaine, Retail Leader Pro’s chief retail analyst, recapped the first quarter of 2023, and detailed what trends could manifest in the coming months.

Lafontaine said that the most recent quarter’s year-over-year success is compared to a period when COVID-19 was still prevalent (January 2022), and that Q1 2023 was the beginning of the first full year of “normalcy.” Compared to Q1 2022, retail sales were up 6.4% in January, 4% in February and 1.5% in March.

“We actually outperformed expectations, particularly in January, and that’s due to a few factors,” said Lafontaine. “One being that we sort of had a tepid holiday season that carried over a little bit more into January. We also had that huge winter storm that hit the week of Christmas that delayed some of those late December purchases. We also had a bit more mild winter for most of the country, and we were comping against the Omicron variant this time last year.”

She added that she expects retail sales to continue to decelerate, and that unit demand is “most likely” down for the retail industry. Lafontaine added that consumers are continuing to focus on value as inflation remains high, leaving many consumers “anxious” about their spending overall.

“Retailers are really leaving heavily into that [value],” she said. “In a lot of earnings calls during the first quarter, there was a lot of recommitment to providing value to consumers through a variety of things like increased private label penetration, price-point marketing for consumers, increased promotionality where possible, but also increasing things like loyalty programs and benefits and customer services, so that even if a consumer is paying more for a product, they feel like they are getting a good experience and getting that inherent value out of retailers overall.”

The full webinar can be viewed on-demand here.