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Retail: Death of brick-and-mortar 'extraordinarily exaggerated,’ analyst says

Claire Tassin, Morning Consult Retail & E-commerce Analyst, joins Yahoo Finance Live to discuss retail sales, the growth of e-commerce, deal hunting amid inflation, and consumer behavior.

Video transcript

SEANA SMITH: Mixed retail earnings out today. Kohl's falling on revised guidance while BJ's-- you can see it on your screen there-- well, it jumped in-- during the trading day, I guess, after hours. We're not seeing much movement now. The movement coming, though, on strong sales numbers, as inflation creates real clear winners and losers in the industry.

Here with more on the retail sector and consumer spending habits, we want to bring in Claire Tassin, Morning Consult retail ecommerce analyst. Claire, it's good to see you. So talk to us about how we're seeing consumers revise their spending habits and what they're favoring in this type of environment.

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CLAIRE TASSIN: Absolutely. So yesterday's retail sales report was really illuminating and really reflected the impact of inflation on the way consumers are spending. The overall number was exactly flat from prior month, which you don't see terribly often.

But once you dig into the details, you see that thank goodness, gas spending is going down, and that's leaving a little bit more space in people's budgets. So the DIY sector, for example, did really well. We're also seeing an uptick in online shopping. In my data that I track, we're seeing that a lot of folks are using e-commerce more to find deals. So looking for opportunity to save money when you can do a lot of easy price comparing from your couch.

DAVE BRIGGS: What has been the biggest shift out of the pandemic in terms of the consumer spending?

CLAIRE TASSIN: A lot of that has just been finding its way again. We've seen kind of fits and starts with returning to service sector spending, as opposed to good sector spending, which led to some-- or in part, at least, led to some of the supply chain challenges that we've been seeing. But with varying levels of comfort over the last couple of years, that hasn't really resumed to normal levels. And now, of course, with inflation, that's inhibiting some travel and restaurant spending as well. So we're moving back into what feels more like a normal consumer economy, but we're not there yet.

SEANA SMITH: Claire, you're out with a recent report here showing that online shopping in March, 50% of online shoppers preferred shopping online because they enjoyed the experience, down to 41% in June. When we talk about what's to blame and what they need to do in order to reverse that decline, what of that?

CLAIRE TASSIN: Absolutely. So that's kind of that tradeoff between shopping online for fun. Maybe you're sitting on your sofa, kind of browsing, while you're watching TV, as opposed to what we're seeing more of right now, which is that deal hunting. We're also seeing that more people are deferring discretionary purchases because of inflation's impact on their budgets, which means that we're not doing the kind of fun shopping that we might when our budgets are a little bit healthier when we're not so strained with household essentials.

So in order to come out of this, though, we do need to see some improvement in terms of building trust from retailers, specifically online-only retailers, because what we know is that consumers who generally shop in stores, which is most people do have a pretty big trust gap in shopping online-- you can't see stuff. You can't touch it. You can't really evaluate the quality in person.

And there's a lot of promising technology, like augmented reality and fit predictors, that can do a better job of helping to shore up some of those gaps. But in my metrics, we're just not there yet. Consumers are interested, but not really using that. So I think there's a lot of room for improvement, both in the tech itself, as well as in driving adoption.

DAVE BRIGGS: We have been talking for years about the depth of brick and mortar. Is it greatly exaggerated, based on the numbers you're seeing?

CLAIRE TASSIN: It's extraordinarily exaggerated. The vast majority, about 85%, of retail in the US happens in physical stores. More stores in 2021 opened than closed. But you have to remember that the US has a real legacy of excessive retail square footage. So a lot of what you're seeing happening-- I know I see it here in my hometown in Chicago, where you're seeing there's maybe some empty storefronts, but a lot of that is just retailers finding the right space to be closer to their customers and understanding how shoppers are using stores differently than they used to. So for example, prioritizing some of that square footage for Click and Collect fulfillment.

SEANA SMITH: Claire, what's your read on the supply chain issues and the inventory issues that retailers are still facing? I know you talked about the supply chain issues in your piece. And while it has improved, there are some retailers that are still struggling with it. And the consumers now are more likely to blame those retailers, right?

CLAIRE TASSIN: Absolutely. So what's been great is that delays that consumers are reporting are in decline, which-- and there's some demand for goods is subsiding, which is also helping to alleviate some of those supply chain challenges. I think retailers have done a much better job of communicating about those delays and timelines with their customers.

And as a result, we're seeing more customers blame the retailers for their delays, rather than they'll typically blame the shipping provider. So we are starting to see that balance shift. I don't necessarily think that's a bad thing when retailers are being more transparent about the challenges that they are facing themselves, though.

DAVE BRIGGS: Of course, the other risk and challenge is inflation. Are you finding most retailers passing the costs on? And how are shopping-- how are shoppers changing their habits because of inflation?

CLAIRE TASSIN: Shoppers are looking for deals as much as they can. So retailers are really kind of between a rock and a hard place in this situation. On the one hand, they're dealing with their own increasing costs for goods, for moving things around.

Their logistics operations for labor are all more expensive, so they're having to pay those costs, while still needing to be competitive in an environment where many retailers are currently dealing with an excess of industry, which was a huge theme in the earnings reports that have been coming out over the last few days, and then needing to further discount in order to open up space in their warehouses. So they're really continuing to have to play this discounting game because consumers are so deal conscious right now due to inflation.

DAVE BRIGGS: Claire Tassin, excellent information. Appreciate your analysis as well. Thanks so much.