WEBVTT - Inflation Impacts Back-to-School Spending

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<v Speaker 1>This is Bloomberg Business Week with Carol Masser and Bloomberg

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<v Speaker 1>Quick Takes Tim Stinovic on Bloomberg Radio. We've talked a

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<v Speaker 1>lot about consumer spending. It does seem like consumers are

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<v Speaker 1>out there, and I am curious about kind of the

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<v Speaker 1>back to school shopping season and what she is bringing.

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<v Speaker 1>So let's bring in Mary Lou Gardner, Associate partner for

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<v Speaker 1>Consumer Package Goods, Retail and Logistics at Emphasis Consulting. She's

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<v Speaker 1>on the phone from Naples, Main may Low. It is

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<v Speaker 1>nice to have you here with Paul and myself. Tell

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<v Speaker 1>us a little bit about what the work you guys

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<v Speaker 1>are doing and what you're seeing when it comes to

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<v Speaker 1>back to school shopping. Sure, Hi Carol, Hi Paul. Nice

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<v Speaker 1>to be on with you with bloom So what we're

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<v Speaker 1>seeing right now is kind of an interesting show. We're

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<v Speaker 1>seeing a shift from online shopping more into retail, which is,

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<v Speaker 1>you know, kind of a flip from last year. But

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<v Speaker 1>what we're seeing and what we're expecting is consumers are

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<v Speaker 1>expecting to spend up, going to spend more but get less,

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<v Speaker 1>meaning the I spend more for each item because of inflation,

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<v Speaker 1>and then with the whole shrink inflation. You know that

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<v Speaker 1>if they buy a box of crans, for example, they're

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<v Speaker 1>going to get less crans in the box. So there's

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<v Speaker 1>um that going on. But then there's the other half

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<v Speaker 1>of the population that they're saying they're going to spend less.

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<v Speaker 1>They have to spend less because of the pressures on

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<v Speaker 1>their budget. They can spend They're going to buy what

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<v Speaker 1>they absolutely need for back to school, so be the

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<v Speaker 1>crans and the pencils and the composition books, but kind

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<v Speaker 1>of hold off on some of the other more discretionary items.

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<v Speaker 1>For example, maybe wait to buy that backpack, or wait

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<v Speaker 1>to buy that lunchbox so we use one from the

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<v Speaker 1>year before. So they're really trying to be smart about

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<v Speaker 1>their choices and how they use their spending dollars. How

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<v Speaker 1>are retailers adopting here? Is this simply a function of

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<v Speaker 1>lowering price to lore shoppers in the store or get

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<v Speaker 1>them to click. What's really the strategy for this back

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<v Speaker 1>to school? So retailers are you know there, as you know,

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<v Speaker 1>are struggling because they still have the excess inventory. So

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<v Speaker 1>let's use Walmart and as an example. Walmart and um

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<v Speaker 1>Target have both been very transparent about the fact that

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<v Speaker 1>they had excess inventories. Um, they're trying to pull people

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<v Speaker 1>out of the food aisle where they're spending most of

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<v Speaker 1>their dollars and trying to pull them into the other aisles.

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<v Speaker 1>So clothing is a really good example where they're investing

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<v Speaker 1>in price and clothing in order to pull them beyond

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<v Speaker 1>you know, just filling their basket with their food, with

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<v Speaker 1>their dollars they have to spend. But they're investing in

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<v Speaker 1>some categories like that that the retailer isn't look like

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<v Speaker 1>they're going to win. Back to school? Are the more

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<v Speaker 1>discounted mass retailers dollar store versus kind of online and

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<v Speaker 1>versus some of the more expensive ones. Merrily, What does

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<v Speaker 1>it tell you about the mindset of the consumer right now?

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<v Speaker 1>More broadly speaking? And um, the outlook for spending which

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<v Speaker 1>has been so it's always important to the US economy specifically,

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<v Speaker 1>but you know, we all kind of marvel that the

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<v Speaker 1>consumer has been out there and being able to continue spending.

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<v Speaker 1>We do under when it stops. So what does it

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<v Speaker 1>tell you, if anything, more broadly about consumers. Yeah, So

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<v Speaker 1>what we're hearing from the consumers is there you know,

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<v Speaker 1>there are little cautiously optimistic but also being still being cautious.

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<v Speaker 1>So they are still spending, but what you know, inflation

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<v Speaker 1>has come down a tiny bit and gas prices have

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<v Speaker 1>come down a little bit. That hasn't necessarily translated to

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<v Speaker 1>prices coming down in retail because there's still the increased

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<v Speaker 1>labor costs are still the you know, supply chain pressures,

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<v Speaker 1>so they're not seeing it. So they're still being cautious

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<v Speaker 1>and they don't want to be in a situation where

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<v Speaker 1>we really do head into a recession at some point

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<v Speaker 1>in time. And you know, there's they have only so

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<v Speaker 1>much in that budget, so if they're not out there,

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<v Speaker 1>they're not making more, it's you don't be salaries didn't

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<v Speaker 1>keep pace with inflation, so there dollars have to stretch further.

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<v Speaker 1>So while they're spending more going into this season, there's

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<v Speaker 1>still trying to be a lot smarter about it. And

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<v Speaker 1>I think through Caustius, how yeah, may us, how about electronics?

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<v Speaker 1>It seems like every kid when he or she was

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<v Speaker 1>working from home, I had to have a laptop or

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<v Speaker 1>chrome thing. Majigi, where are we now? And that kind

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<v Speaker 1>of spending is that facing some tough comps? So yes,

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<v Speaker 1>there there forecasted to be down year over year. Electronics

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<v Speaker 1>definitely will be down. There's two things contributing to that.

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<v Speaker 1>One is that many of the schools have provided some

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<v Speaker 1>of the technology, you know, that was needed when we

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<v Speaker 1>were in that hybrid model and people didn't have the technology.

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<v Speaker 1>And then it's one of those categories where if you

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<v Speaker 1>look at if I don't need the technology right now,

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<v Speaker 1>why don't I wait until Black Friday where the prices

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<v Speaker 1>may be a lot more competitive. Or I'm going to

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<v Speaker 1>use that laptop or you know that the iPad or

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<v Speaker 1>whatever technology I have been using, I'm used that for

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<v Speaker 1>another year or two because I don't need it. Um,

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<v Speaker 1>I don't need to upgrade it to still be able

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<v Speaker 1>to go to school and do my homework. All Right,

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<v Speaker 1>we're gonna leave it there, Hey, Mary Lou, thank you

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<v Speaker 1>so much. Mary Lou Gardner. She's Associate partner for Consumer

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<v Speaker 1>Package Goods, Retail and Logistics of an Emphasis, Consulting on

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<v Speaker 1>the phone from Naples, Main