A Burning Out Consumer?

In the summer, conversations with friends and acquaintances often lead to the topic of travel plans. With schools on break and the days warmer and longer, many families opt to hit the highways or the tarmac in the summer months. Having just returned from a trip ourselves, our family can attest to the popularity of getting away around the July 4^th holiday. In fact, TSA checkpoint volumes for commercial air travel through US airports reached an all time high on Sunday, July 7 with over 3 million travelers screened.

Not to be outdone by the purveyors of experiences, sellers of goods are again proffering novel incentives in an attempt to capture the disposable income of American consumers. This week, Amazon will hold its annual Prime Day to stoke demand during what might be an otherwise slow time of year for e-commerce purchases. This Prime Day will be Amazon’s 10^th and will be exclusively accessible to Prime members, which in the U.S. requires spending $139 a year on a membership. Those U.S. members and members in about 20 other countries are able to participate.

Whether those members are well served by Prime Day, or whether Amazon shareholders should be more pleased, has become more openly debated since the original Prime Day. Using price tracking tools like CamelCamelCamel, some critics point out that many “Prime Day deals” tend to be marked up in the weeks leading up to Prime Day only to be marked back down for Prime Day itself.

Competing retailers, including Walmart, Kohl’s, Target and Temu, have also been running summer promotions. This year, we will be lightly shopping for some back-to-school items, although the list for a rising kindergartener is fairly succinct.

Recent consumer surveys have revealed consumer fatigue, particularly for the middle class. Over the past couple of years, middle income earners have reported declining confidence about making large or elective purchases after covering fixed payments. With the costs of food, transportation, housing, insurance and other necessities remaining elevated, it is unsurprising that middle income households report plans to regulate discretionary spending with less left over each month.

Overall consumer spending remains in an uptrend, largely thanks to higher income consumers who have retained greater flexibility to spend discretionarily. However, within that higher income segment, consumers have begun to report growing caution. Millennials and Gen X in the high-income segment indicated greater reluctance to splurge this summer versus earlier in the year.

Part of that reluctance may simply be overload. Many millennial parents, including my wife and me, aspire to avoid the predicament of having homes that are packed with excess. Whether it is a version of minimalism or intention to depart from the storage unit culture popularized by their baby boomer parents, we hear many millennial parents talk about being committed not to relive the packed basements of their childhoods. As future Prime Days arrive and other retailers work to appeal to younger consumers, it will be interesting to watch what American consumers decide to prioritize.

Cam Simonds