Everybody’s looking for a deal

We got some good news in July regarding the ongoing inflation situation in the United States - consumer prices declined for the first time in four years in June. However, inflation’s impact on prices remains a top concern, with e-commerce giants like Amazon highlighting the cautiousness and deal-seeking behavior of consumers.

For the first time since May 2020, consumer prices declined in June, dropping 0.1% month-over-month, resulting in the consumer price index rising at an annual rate of 3.0%, – its lowest level seen in over three years.

While this is a positive sign in the Federal Reserve’s battle against inflation, prices remain elevated. Comparing the most recent consumer price index reading in June 2024 to February 2020, consumer prices remain 21% higher than pre-pandemic levels. The impact of higher prices remains a major concern to consumers, according to the Federal Reserve’s annual Survey of Household Economics and Decision Making (SHED), which reported that 35% of respondents indicated inflation as their main financial worry.

With higher prices impacting purchasing power, consumers are seeking deals wherever they can, with one avenue being online shopping.

According to the Census Bureau, advance monthly retail sales totaled $704.3 billion in June 2024, virtually unchanged month-over-month but up 2.3% year-over-year. Nonstore retailers’ sales, a category that includes much of e-commerce sales, totaled $122.7 billion - an 8.9% increase year-over-year in June.

Nonstore retailers’ saw an explosive but temporary period of growth in 2020 as stay-at-home orders and public health concerns prevented consumers from shopping in-person, boosting online sales. Following the United States economic reopening in 2021, this pandemic-related boost to nonstore retailers would subside, with their growth tapering down and return to trend over the next two years.

However, shifting consumer shopping habits due to the pandemic cemented online shopping as another mode of shopping and coupled with the current inflationary environment, consumers continue to search for deals online.

Recently, Amazon reported that its overall net sales for Q2 2024 totaled nearly $148 billion, a 10% increase over Q2 2023, with the North America segment contributing $90 billion – a 9% increase over Q2 2023.

Net sales growth for the North America segment has gradually slowed throughout 2024 dipping below 10% year-over-year in Q2 2024 for the first time since Q1 2022.

According to Amazon’s CFO, Brian Olsavsky, in an earnings call with reporters, consumers remain cautious with their spending and are deal-seeking. This is reflective of current consumer sentiment and behavior in the United States as the impact of inflation on prices and purchasing power has led to consumers seeking less expensive products.

While inflation cools and prices remain elevated, we can expect to see consumers continue to remain cautious and look for deals, resulting in growth in retail sales in categories like nonstore retailers as they offer more deals to consumers at lower price points.