Katie Thomas is the lead of the Kearney Consumer Institute (KCI), acting as the architect of Kearney’s consumer-first approach to a broad variety of industries. She is the firm’s chief spokesperson on all things consumer, from overseeing cutting-edge research projects to authoring provocative opinion pieces and interfacing with key clients and prospects.
Hardware Retailing spoke with Thomas who shared her insights on what the economy holds in 2022 and what consumer confidence looks like in the face of supply challenges, labor shortages and inflation.
Hardware Retailing (HR): How is the pandemic continuing to affect the economy and consumers?
Katie Thomas (KT): The biggest thing we’re watching right now are some of these broader inflation trends, whether it’s price increases from an overall increase in inflation or supply issues or any other factors. For consumers, they are definitely becoming aware of these issues; they see that prices are going up on everyday items. You’re seeing a lot of general merchandise retailers start to pass through those price increases to customers.
There is a good side of all this though; at Kearney, we’ve been working on a piece called “Inflation Is Your Friend.” It is all about understanding the positives from this inflation. With consumers, you’re seeing that in the labor market right now. It’s a competitive labor market, which is driving up wages. We’re ripe for an adjustment in wages that hasn’t happened in something like 30 or 40 years, which could potentially offset some of the stress we’re seeing right now around price increases.
HR: What does consumer confidence look like going into 2022?
KT: It’s on an upswing after taking some dips when the delta variant of COVID-19 picked up. So, we’re trending positively, but the reality is, we are still dealing with a large amount of uncertainty. Consumer confidence is going up and down and up and down, and while it’s on a positive trajectory, there is still a lot of uncertainty around exactly how people will be impacted.
What we’ve seen throughout the pandemic is people aren’t impacted by something until they’re actually impacted by something. For example, with the supply chain issues, consumers aren’t impacted directly by those issues until something they’re trying to order isn’t available. I think that’s where there is a lot of uncertainty around when we’ll finally be out of the woods with COVID. Overall, I think we’re on a strong trajectory, and having a strong holiday season will prepare us well for 2022, but you’ll still see some dips here and there as consumers respond to the changing market.
HR: What can retailers do to help boost consumer confidence and better serve consumers?
KT: With everything that has happened in the last two years, consumers have stress around stockouts and supply availability, and so one area where retailers can really win is through transparency and communication. That’s something we’re seeing retailers get increasingly better at—figuring out how to communicate better with consumers around anything from product availability to alternative options and more. And that communication flows through to other areas like customer service.
In terms of technology and other offerings, what we’ve seen is sheer optionality from a consumer’s perspective. Consumers were forced to get more comfortable with technology during the pandemic, even with something simple like QR codes, and have come to expect those features now. Consumer expectations have gone up as well with options like curbside pickup, and they expect all retailers to offer all these options for them to use.
HR: DIY sales skyrocketed in 2020 and 2021. Will consumers continue to spend their money in the home improvement industry in 2022?
KT: Candidly, I anticipate a softening there. We are starting to see a softening already in some of the categories that were more immediate at the beginning of 2020, such as home furnishings and decor. On the positive side, we are all more appreciative of our homes and willing to spend to improve our spaces, but a finite amount of discretionary spending will be a hurdle. So, you’ll start to see some of those dollars start to shift back to areas like travel. Homeowners won’t struggle so much with wanting to do home improvement projects in the new year, but more with wanting to spend money elsewhere instead.
Consumers aren’t spending until they’re ready to spend. With the different uncertainties facing consumers like inflationary issues, they are asking whether they really need to do a home improvement project or if it can wait until another time.
HR: Is there any legislation planned for 2022 that may impact the economy for consumers?
KT: I think some of the legislation that will have the biggest impact on consumers is the data privacy legislation we are seeing come up everywhere. There’s a lot of confusion there on the part of consumers. They don’t want to share their data and have that information out there, but on the flip side, they underestimate the value of those companies having their information to help them. There will be a lot of discussions leading to legislation to try and tease out what kind of data we should be sharing and what maybe shouldn’t be shared so easily. When talking to retailers, they say it’s been challenging to be able to target consumers more effectively in light of data privacy issues. Retailers need to ask if the features they are offering are serving the customer in a beneficial way.
There are smaller things too; consumers are increasingly using features like buy now, pay later, which aren’t regulated in the same ways that credit agencies are. I think we’ll start to see some small legislation pop up regarding those to make sure the consumer is protected.