Throughout the first quarter (Q1) of 2023, only a few general merchandise industries grew. But when we dig deeper to explore retail sales at the category level, more stories of growth emerge.  Clearly, consumer lifestyle changes are leading to shifts, large and small, in the retail environment.  

“Whether it’s social media’s growing influence, returning to the office, or just getting out to more activities and socializing, the social side of life is back,” said Marshal Cohen, chief retail industry advisor for Circana. “However, the enduring high prices of grocery items are now forcing consumers to prioritize their spending decisions and make trade-offs. 

Seven of the 20 top-performing general merchandise categories in the first three months of the year were prestige beauty categories, led by face makeup and fragrance juices. Apparel accounted for another four of the top growth categories, including woven shirts and sportscoats. 

Source: Circana, Retail Tracking Service (general merchandise), top growth based on absolute dollar change versus last year and positive unit growth versus last year. 

“Consumers are still feeling financially crunched, but they are also resuming their busy social schedules, which is reflected in how they are spending,” said Don Unser, president of thought leadership for Circana. “Manufacturers and retailers should carefully consider their customers’ changing priorities and be prepared to respond to the opportunities that will come with the next phase of changes.”  

Social progression’s influence goes beyond what consumers are buying. It affects when, where, and how they engage in many of their daily activities. Read on to learn how social progression is affecting retail momentum in this sampling of general merchandise and CPG categories. 

Apparel greets new ways to match today’s consumer needs 

Maria Rugolo, Industry Analyst 

For brands and retailers, the winning sales strategy has evolved from category recovery to a focus on the momentum created by expanded lifestyle needs. Today’s transformed consumers will shop differently than they did during each of the past three years now that they are fully outside the walls of their pandemic cocoons. As consumers look to bring their wardrobes full circle, brands and retailers can grow by delivering on this evolution of need. 

Key takeaways

  • In 2023, the blurred lines of active and fashion apparel are becoming clearer, which presents brands and retailers an opening to grab both attention and share of wallet. 
  • Styles are being mixed and matched together in nontraditional ways: blazers with shorts, active pants with dressier tops, and even mini dresses over jeans. 
  • Education by brands and retailers will be key to guiding consumers in pairing and pulling their wardrobes together in this interconnected way. 

Consumer technology bright spots emerge while anticipating a broader rebound 

Paul Gagnon, VP, Industry Advisor 

During the pandemic, consumers invested in upgrading the home technology environment. Investment in home office work and school setups drove dramatic spending growth on computers, monitors, tablets peripherals, networking equipment, and more. Entertainment outside the home shifted inside, and sales exploded for TVs, sound bars, and headphones. Fast-forward to 2023, and consumers have shifted to spending more time (and money) outside the home. Sales revenue from consumer technology products has declined by 13% compared to a year ago. The only categories with strong growth are related to traveling more, especially products like item trackers to keep track of luggage and other valuables away from home.  

Key takeaways

  • The surge in demand during the pandemic pulled forward these long replacement cycle tech products. Demand will eventually rebound, likely starting in 2024. 
  • Innovation could drive consumers to replace pandemic-era devices earlier if the value proposition is compelling enough. 
  • Reinforcing the need for technology on the go that helps support a consumer away from home could boost CE companies while planning for an at-home technology refresh in the years ahead. 

Beverage alcohol taps new opportunities 

Scott Scanlon, EVP 

Beverage alcohol is closely linked to the human need to belong. Social settings of bars and restaurants were replaced by patio barbeques and home bars during the pandemic. Consumers liked the at-home drinking experiences, and many of those behaviors continue. Total beverage alcohol weekly comps have been positive for 15 of 17 weeks in 2023, with anomalies driven by calendar adjustments for St. Patrick’s Day and Easter. U.S. consumers soon will fire up their grills for the biggest beer occasion of the year, the Fourth of July holiday. This year’s Independence Day weekend will deliver more than just fireworks — sales are poised for another surge as families and friends gather for celebrations. 

Key takeaways

  • From “Dry January” to “Sober October,” there is increased awareness of reducing beverage alcohol consumption. Circana data suggests premiumization continues in favor of value-oriented selections as consumers have elected the “drink better, not more” mindset. 
  • Celebrity-supported beverage alcohol sales remain. Celebrities instantly attract eyeballs and consumer attention to new products. This may be more critical than ever as consumers shift more beverage alcohol trial occasions to the home versus the bar.    
  • Despite a relatively lackluster post-pandemic return to on-premises sales beverage alcohol remains a focus of holiday celebrations. The most recent example is last month’s Easter holiday sales, which surpassed the previous year’s sales across beer, wine, and spirits with only a slight reduction from pandemic-driven at-home surge in 2020 and 2021.   

Foodservice traffic increases as busy out-of-home routines make a comeback  

David Portalatin, SVP, Industry Advisor 

People are resuming the out-of-home routines they had before the pandemic. This puts convenience at the forefront of their needs, especially when it comes to eating. Grabbing portable breakfast and lunch foods on the go, whether from the home or foodservice, is a growing behavior. Another is having a restaurant or foodservice outlet prepare the food that is eaten at home. Visits to restaurants and foodservice outlets increased by 2% in Q1 over a year ago. The search for convenience shows itself in at-home and away-from-home eating behaviors and food sales at retail. 

Key takeaways

  • Visits to restaurants and foodservice outlets for breakfast or a morning snack increased by 9% over a year ago, showing consumers are on the go again and looking for quick morning meals.   
  • Convenient and portable foods from foodservice and retail, like breakfast sandwiches, coffee, hash browns, chicken nuggets, burgers, and breaded chicken sandwiches, show significant year-over-year growth.  
  • Convenience store year-over-year sales growth accelerated in Q1 2023, up 4.7% versus a 3.4% increase in Q1 2022.  

CPG snacks are finding new cravings to satisfy 

Sally Lyons Wyatt, EVP 

Snacking throughout the day gained momentum when we were home during COVID, and it has not lost traction.  In fact, snacking is still a lifestyle in the U.S. Nearly half (49%) of consumers consume three or more snacks per day, which has increased by 4 points in the past two years. Although younger generations fuel future sales potential, all generations snack three or more snacks throughout the day but at varying levels. However, in 2022, the economic situation hit core snack unit sales negatively compared to the year prior while dollar sales increased. Although several snack categories have proven to be inelastic, there was a change in the snacks consumers chose and the sizes purchased, which directly impacted unit sales.    

Key takeaways

  • Social progression has been a driver of dollar sales success. We see 37% of consumers snacking in the morning (up 6 points versus two years ago).   
  • In addition, smartphone apps have stepped up as an influencer for purchasing snacks (growing 8 points versus two years ago), especially when consumers are out and about.  
  • Given that 50% of consumers eatsnacks instead of a meal because they are on the go (rising 6 points versus two years ago), the future is bright for snacking as social progression evolves. 

Beauty benefits from the treat mindset 

Larissa Jensen, Industry Advisor 

As consumers settle into their new normalized behaviors, including gathering with each other, the beauty industry continues to benefit. Combined sales of beauty products sold in the mass market and prestige grew 13% in the first quarter. But while both markets are growing, the prestige beauty industry continues to be the standout, defying expectations with continued strong double-digit unit growth. Several behavioral shifts are at the core of prestige beauty’s success, including: 

Key takeaways

  • The treat mindset is a pivotal sales driver as consumers look to treat themselves with small indulgences. This plays out in the premiumization of fragrance, hair, and other categories and makeup’s roaring comeback. In fact, 50% of U.S. consumers say makeup gives them confidence; 30% say it brings them joy. This treat mindset is also evident in luxury products’ sales growth, not only in beauty but also across other industries, like footwear and handbags and even coffee machines and spirits. Luxury items in those industries are outperforming overall beauty industry growth.  
  • The shift in wellness is closely tied to the treat mindset in many ways. While physical wellness remains important, consumers are focusing on their mental wellness more than ever before. This is a shift that began in 2020 and has only accelerated, contributing peripherally to beauty sales. This plays out in fragrance, with consumers taking to this category as a form of self-care. They are choosing scents to lift their mood and provide a wellness benefit. As mental wellness priorities become the norm, beauty stands to benefit.  
  • Consumers are shopping their values more than ever before, looking for brands and products that are clean, vegan, cruelty-free, or sustainable. Looking at sustainability specifically, depending on the beauty category, anywhere from 34% to 44% of U.S. consumers tell us they value sustainability and social responsibility. These numbers are higher for younger consumers, and they are higher when we look outside beauty. Over three-quarters of consumers say they believe sustainability is important when selecting products in the CPG space. 

Related Content