I don’t like to say I told you so.
Actually, I love it.
Home Depot’s stock got hammered this week because of lower-than-expected same-store sales in Q2. Growth was still up, just not as much as analysts assumed. But that’s not the I-told-you-so part. In fact, in February, we thought the home improvement boom would last through the summer – before we knew vaccines were coming fast and furious.
Meanwhile, Disney put out their Q2 earnings and killed it, as people returned to theme parks in droves (the explosive growth of Disney+ helped too).
In related news, I went to my first two live music events last week – my favorite guitarist, Billy Strings, and my favorite band, the Wood Brothers. The line for Billy was longer than the show. You could probably see the weed cloud at the Wood Bros show from outer space. Both were totally packed.
Indeed, experience spending came back in a big way (which I did tell you in January). But that’s not the I-told-you-so part either. Anybody could have predicted that.
If you go way back to last December, I told you my “Word of the Year” for 2021 was “bifurcation.” Sure enough, America, its economy, and culture have been diverging more and more among the rich and poor, whites and BIPOC, men and women, Rs and Ds, etc. That was also too predictable for me to rub it in your face.
Hardly a day goes by when someone doesn’t ask my prediction about the coming holiday retail season. What I tell them is that the average American household is sitting on piles of cash and credit capacity, which bodes well for bountiful holiday spending. Count on it.
But where will they spend it? That’s the gazillion-dollar question.
If Delta recedes, if kids return to school and workers to the office, bet big on apparel, beauty, travel, dining, and more experiences. But, if a continued surge — and cold weather — push people back into their sweatpants, bet on home interiors, electronics, games, and outdoor equipment.
Alas, I’m still not an infectious disease expert. Or a meteorologist. Unless you’re both of those things AND you have my magical data at your fingertips, thinking you can predict where we will be in four months is somewhere between delusional and dangerous.
Hedge your bets.
Because everything affects everything. And everything is constantly changing.
I told you so.
Here’s what we’re seeing:
Consumer confidence is officially in a tailspin. Maybe I shouldn’t be so confident about household spending capacity down the road if things keep trending like this. Our Economic Sentiment Index just hit its lowest point since April of 2020 – when businesses were shuttered and unemployment was in double digits. Delta concerns are an obvious culprit, but continued increases in home prices and overall inflation aren’t helping matters. Confidence in the political leadership in Washington isn’t exactly soaring right now either. Let’s hope this funk doesn’t last or I’ll need to rethink my holiday optimism.
Public support for mandatory vaccines in the workplace is accelerating. Not unrelated to declining consumer confidence, all of our COVID metrics are trending hard in the wrong direction. Eighty percent of Americans are now concerned about the Delta variant. The largest group (31%) say they expect to practice social distancing for six or more months. For context, on June 6, the largest group (also 31%) said it would only be one to three more weeks. That group is now only 9%. Anyway, it’s all going sideways. The upshot is people are warming up to the idea of more aggressive precautionary measures, like workplace vaccine mandates, where support is fast approaching 2 to 1. It’s only a matter of time.
COVID and the consumer cash flow boom have been a perfect recipe for mobile payment platforms. As household debt shrunk over the past year or so, the number of Americans who rely on credit cards as their primary payment method has fallen, including a 6 percentage-point drop in just the past seven months. One of the beneficiaries has been mobile payment services, like Venmo or PayPal, which have seen impressive gains during the same timeframe. Quarantine even brought a new wave of older consumers into the mobile payment game for the first time. This feels like a trend that won’t go anywhere but up.
In other banking news, people really, really hate overdraft fees. I’m totally in the majority on this one. And when we study the things that are most likely to make someone switch from one bank to another, it’s the elimination of those fees that rises to the top. Meanwhile, 80% of Americans are happy with their current banking relationship, so maybe they don’t have a lot to worry about. The story gets a bit sketchier, though, when you look at younger bank customers. Remember everything I’ve told you about the cynical, fickle, untrusting Gen Zs of today? Here you go.
The pandemic gave a lift to the online pharmacy category, too. This one makes a lot of sense. COVID-cautious Americans boosted nearly all things digital over the past 18 months and drug-buying is just another example. The number of Americans who buy the majority of their prescription drugs online grew by 30% since March of 2019. The erosion hit the big national chain pharmacies, who also lost share to in-store pharmacies during the pandemic. When given the choice between venturing into one store or two for their drugs and groceries, a lot of people made the more efficient choice. As an aside, online drug-buying might be one of the few digital categories that over-indexes among older age groups.
It’s impossible to decouple the growth of Netflix from the growth of social media. We published the first lightweight version of a deeper study we’re doing about Netflix laggards, namely the 35% of Americans who don’t currently watch content on the platform. Among the many things we’re discovering is the powerful link between social media influence and NFLX adoption. When people hear about shows on Facebook or wherever, it’s a powerful driver. However, the remaining Netflix laggards appear to be more impervious to social media pressures. So, how do they break through? Stay tuned.
A few more studies this week:
- Online betting is on the rise – where parlays and prop bets reign supreme;
- Target’s partnership with Ulta is attracting men and women;
- Device addiction is way lower among pickup truck drivers.
These were our most popular new questions:
- Have you ever participated in an adult treasure hunt?
- How often do you make an effort to arrive at places “fashionably late”?
- What is your favorite kind of fish to eat?
- How many times have you seen your favorite band or artist in concert?
- Which type of suitcase do you prefer: hard luggage or soft luggage?
- How assertive are you, if at all, in asking friends to return money they owe you?
Answer Key: No, but it sounds fun; Never, ever; All of it – but tuna if I have to pick; Once, last week; Hard; Not at all.
Hoping you’re well.
Was this email forwarded to you? Sign up here.