Retail sales down in December due to consumers’ growing trepidation
Overall consumer spending contracted by 1.1% from November to December of last year, as growing concerns over the economy encouraged penny pinching.
Consumer spending up year-over-year, down month-to-month
According to the most recent consumer spending report, overall retail sales dipped to $677.1 billion in December. This accounted for a 1.1% decline, which was the largest monthly decrease in the past year.
The most likely explanation for this decrease is mounting uncertainty regarding the economy and a potential recession, which made consumers reticent to splurge for the holidays. However, it’s also possible that deep discounts across categories resulted in lower overall numbers, which would indicate persistent demand and positive consumer sentiment, despite the not-so-rosy results. While the latter scenario is certainly more desirable than the former, I think it’s still safe to say this is not exactly the news we wanted (or expected) to start to the year with.
Retail sales did increase year-over-year in December by 6.0%, but even that positive turn is marred by the news of the 6.5% inflation in the same month. Some good news does come in the form of a 9.2% increase in retail sales for the 12 months of 2022 compared to 2021, showing the overall positive trajectory of consumer spending. In addition, specific categories like grocery stores and restaurants saw fairly robust year-over-year growth at 7.3% and 12.1% respectively. All hope isn’t lost! At the very least, we’re eating!
Morphe Cosmetics announces closing of all US stores
Although it’s not broken out in the census spending data, one sector that has seen significant activity in recent years is cosmetics. The latest news comes from Morphe Cosmetics: the company has announced that all 19 of their US stores would be closed effective immediately. Consumers will still be able to purchase products through their website as well as in physical stores outside of the US, as the company’s 11 international locations in the UK and Australia will continue operation.
Morphe was one of the first beauty companies to work with and embrace influencers, which makes this announcement particularly poignant, as it comes in the midst of what can only be characterized as an explosion of celebrity-backed brands entering the cosmetics space. According to Popsugar, 18 new celebrity beauty brands debuted in 2022, on par with the 20 brands we saw unveiled in 2021. Stars like Brad Pitt, John Legend, Scarlett Johansson, and Ciara all launched new brands last year targeting their vast fanbases, which span millions of followers across numerous geographies. With limits on just how much makeup each consumer can use, it’s easy to imagine that the increased competition in the space would ultimately lead to some casualties; for example, Morphe reporting a 66% decrease in sales in 2021.
Overall retail bankruptcies have been down considerably since the onset of the pandemic, underscoring the particular effect this is having on the beauty sector. The bleeding doesn’t stop with Morphe, as competition from new celebrity-backed beauty brands likely contributed to legacy brand Revlon’s decision to file bankruptcy earlier last year. They don’t operate any of their own stores, but it still points to the state of the overall beauty industry, and it offers me an avenue to say the following sentence:
Selena Gomez is indirectly responsible for putting retail space back on the market. Who would’ve thought?
