June 24, 2024 • 15 mins
Consumers are behaving weirdly. Retailers are responding.
In this special bonus episode, our hosts, Joel Beal and Logan Ensign, dive deep into the latest earnings reports and economic trends. Joel, a recovering economist, brings his expertise to decode the complex relationship between consumer spending, inflation, and market reactions. Discover why higher-income consumers are still splurging, the hidden dynamics of retail pricing and shrinkflation, and which retail sectors are poised to thrive.
If you're keen to understand the economic forces shaping the retail landscape, this episode is a must-listen. Join us for an enlightening conversation that sheds light on what to expect in the second half of the year.
In this episode, you’ll learn about:
- Understanding consumer spending patterns and market reactions can help you navigate these uncertain times and spot opportunities ahead of the curve
- Expect negotiations with suppliers to become tougher, with many retailers pushing for lower prices
- Don’t underestimate the power of private-label products - they offer a way to provide cost-effective consumer options while maintaining control over pricing
Jump into the conversation:
00:00 People are waiting for economic downturn after a long period of prosperity
05:49 Economic data affects markets, rate cuts expected
09:06 Inflation flat, retailers cutting prices for consumers
12:33 Shifts in consumer shopping patterns
13:58 Why and how some brands are now targeting higher-income buyers
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
From Alloy AI.
This is Shelf Life.
Today we have a special bonusepisode.
My colleague and co-host, joelBeal, ceo and co-founder of
(00:25):
Alloy AI and a recoveringeconomist, will have
conversation about the state ofretail consumer spending and the
economy going into summer.
I'm your co-host, logan Ensign,chief Customer Officer here at
Alloy AI, and I'm your co-hostJoel Beal, ceo of Alloy AI.
Speaker 3 (01:06):
We'llOS trends, measure promotion performance
and make better replenishmentdecisions with their retail
partners.
That's why we're trusted by BIC, crayola, valvoline, melissa,
doug Bosch and many more.
Get a demo at alloyai today.
Speaker 1 (01:23):
All right.
Well, excited to dive in here,joel.
A good day to be doing this,with earnings reports happening
today, so lots to react to andexcited to dive in.
Speaker 2 (01:34):
Yep, no, we love to look at the economy, we love to
try to read the tea leaves andfigure out what in the world is
going on, and I feel like we'vebeen talking about this for
years, trying to make sense ofthe vibes, the actual data
beneath it.
I was just thinking I feel likeI've written all these posts
about, hey, the economy is somuch better, at least over the
(01:55):
years, than people have given itcredit for if you look at the
underlying data.
But yeah, we're certainly.
You know we're coming up intoelection season, Everyone's, I
think, watching things carefullyand to your point.
This know we're coming up intoelection season, Everyone's, I
think, watching things carefullyand to your point.
This morning we saw kind ofconsumer spending coming in a
little lower than expected, andso I don't think we should be
reading that much into it.
But of course people do so.
Speaker 1 (02:17):
Well, and I think you've been sort of that
consistent voice over the lastsix, 12, 18 months, but I would
say it probably is at leastnon-traditional.
The different signals and howthey interact Curious just at a
high level from your vantage,maybe just talking about what
you're seeing in the economyright now.
You'd mentioned the recentearnings reports being about in
(02:38):
line with what we expected, butwould love to kind of hear you
unpack what you're seeing at ahigh level.
Speaker 2 (02:44):
Yeah.
So I think we continue andagain, I think this is something
that's been happening the lastcouple of years, where
everyone's just kind of waitingfor the bottom to fall out.
That's what I feel like hasbeen happening is everyone is
just like we are so far removedfrom the last real recession in
this country.
I mean, yeah, technically therewas a recession during COVID,
(03:07):
but it was very short lived andthen there was so much money
that was pumped into the economyand then we had this kind of
insane period and then inflationhit.
So before that, what I mean yougo back, it's like been a
decade or longer since you knowthere was real economic,
widespread economic hardship.
You know there was realeconomic, widespread economic
hardship.
You know a real recession.
(03:28):
So I think that kind ofunderlines all of this is
everybody's kind of looking andsaying, hey, the good times have
to come to an end.
Not that it's been amazing, andwhen is that going to happen?
The inflation, you knowdiscussion I mean mean that's
the one I read the most about isnobody likes inflation.
(03:48):
I mean it's a surefire way toget us all kind of riled up.
We don't like paying more forthings.
And you know this question overwhether the federal reserve
could kind of navigate this withthe increase in interest rates,
which, hey, we don't likepaying more interest either.
Look, I got to give them a lotof credit.
This has been handled as wellas anybody could probably
(04:10):
possibly hope for Now.
That doesn't mean it willcontinue, but you know, interest
rates have come down to aboutwhere you know the Federal
Reserve would like them.
Now I think some people wouldlike them to start cutting rates
.
Inflation has come down to where?
Sorry, yes, maybe I used thewrong term there.
Yeah, so inflation is down inthat what.
(04:31):
I think it's around 2.6, if I'mremembering correctly, right
now the Federal Reserve wouldlike it to be closer to 2.
So it's still a little bitelevated.
And every time you see theseinflation reports, I mean
everyone's trying to againdisentangle.
Well, what is it?
Is it gas, is it housing?
Is it consumables?
But broadly speaking, we don'thave the inflation problem that
(04:52):
we had a year or two ago.
That was upsetting consumersand really matters when we're
talking about consumer spendingand retail and CPG, the world we
really live in.
Again, I think it's beenhandled very well, but there's
still just this general sense ofkind of unease.
When is it going to end?
And there's going to be areckoning for basically our
reckless spending.
(05:13):
I think that's a lot of what'sgoing on in my mind.
Speaker 1 (05:16):
Fascinating.
Well, we have a few variablesgoing on here.
Right, We've got inflation andthe rate of inflation and how
sort of the Fed is managing that.
We've also got the market'sreactions to this, maybe softer
than expected retail spendingand the markets haven't had a
significant adjustment.
Right that?
We've actually seen the marketstoday and we'll see over the
(05:37):
next few days if there's anadjustment based on those
spending reports Curious, if youhave a sense for why that would
be the case and sort of generalmarket trends based on kind of
the consumer spending.
Speaker 2 (05:49):
So the markets are another element in all of this
that make it all confusing,because markets in some ways
almost like negative economicdata, because they treat it as
ooh, if things are softening,the Federal Reserve is going to
go cut rates, and that's reallywhat the markets want right now
(06:10):
in large part.
So I do think it can be thisbizarro world where negative
economic data could actually bebeneficial to markets or,
conversely, you can see greatreports and then people are like
, oh no.
And right now the debate isbasically will there be one rate
cut this year or will there betwo?
I mean, that's kind of what'sbeen signaled.
(06:31):
I think the other thing to keepin mind is, as we look at the
average American I'll talk aboutthe US here the last couple of
years have been amazing forlower income groups.
I feel like my whole life we'vebeen talking about wide income
disparity.
How do we bring that down?
(06:52):
Well, the last couple of yearshave been amazing.
You're seeing the highestincreases in earnings really
happening in those lower groups.
I think that's starting totrail off a little bit, but
that's where a lot of the gainshave been.
But then the stock marketdisproportionately benefits
those who are wealthier, whohave assets.
The run-up in home prices Again,nobody likes that, but at least
(07:14):
if you have a home you'rehedged against it.
You don't have a home right now, you know.
Then you're waiting on thesideline being like, wow, my
homes just went up I think 40%over the last five years or
something and I think we'reseeing that in retail earnings
right now and projections of youknow, there have been comments,
I know, from a couple majorretailers I think Walmart was
(07:34):
talking about hey, we're seeinga softening in that lower income
customer and we're going torely more on our higher income
customers to make up for that,who again are seeing these nice
stock market returns and areprobably feeling okay.
Speaker 1 (07:48):
Yeah well, and so maybe we have some winners and
losers from today or the pastcouple of days where the Fed's
looking and saying, all right,we've got inflation a little bit
more under control, the marketsare doing okay.
On the flip side, we've seen anall time well, maybe not an all
time low, but a continueddecline in consumer sentiment.
We've got higher prices at thecash register and we've got the
(08:10):
sense from maybe manufacturers,brand manufacturers that we work
with that it can be a bit moredifficult time because there's a
lot more pressure on pricing.
So, as we kind of narrow thefocus of our conversation here
more to retail spending, what'syour perspective on that front
and what sort of trends do yousee through H2 or expect through
H2, kind of in that world?
Speaker 2 (08:32):
Yeah, so there's no doubt in the retail world, I
think the conversation is allabout price right now and yeah,
I think we've talked about thisbefore.
We had, I mean, you could justpass through pricing kind of in
prior years in a way you hadn'tbeen able to do for a long time.
People were just passing along,you didn't need to sell any
(08:54):
more units and you were stillcomping, you know, eight, 10
plus percent a year andcompanies were seeing pretty
dramatic increases in sales.
And those days, I think, arevery clearly over.
I think.
Actually, inflation, whenyou're talking about like
consumables right now, I mean, Ithink it's flat, I don't think
it's going up at all.
I think the big news, you know,a week or two ago we saw a
(09:16):
flurry of news articles from,you know, walmart, from Target,
from Amazon, all talking abouthow they were going to be
cutting prices on some of theircore items.
So you could see this kind of wewant to get ahead and we want
to tell those consumers hey,prices aren't going to keep
going up in the way that theyhave.
(09:37):
Now one thing to keep in mindwhen they make those
announcements why are theymaking them?
Is that purely for theconsumers.
No, it's also notice to theirsuppliers that hey, when we're
going to be renegotiating ourcontracts, when we're talking
about our wholesale prices we'renot going to accept increases
and in fact we're going to belooking for concessions we might
(09:57):
be looking for you to startcutting prices.
So I think that is the bigshift on the you know kind of
consumer product side iscompanies knowing that it's like
you got to win now by byselling more units.
You're not going to win throughprice increases and get those
kind of comps that maybe you gotaccustomed to in prior years.
Speaker 1 (10:23):
And that may not necessarily mean just cheaper
prices at the cash register, butmaybe shrinkflation that we see
with.
Well, let's maybe decrease thesize, the volume, the quality so
that we can get those unitsthrough at the price point
retailers are pushing.
Speaker 2 (10:32):
Yeah, everybody's got to figure out how they try to
keep their margins and so you'reright, you kind of you might
have to rely on some trickery,and I find it interesting on
like the shrinkflation.
I consume too much Twitter,slash X in my life.
I don't use any other socialmedia.
Really, I feel like people loveto show those.
You know bag of chips, you knowthat have like four chips in
(10:56):
them now.
So it's definitely something Ithink you have to be pretty
careful of as a supplier, thatyou find that balancing act of
how do I reduce my costs, butnot in a way that's going to
have me go viral in a negativeway.
Speaker 1 (11:12):
The consumer is more empowered, right?
We've all seen the Chipotle.
You know I'm going to fill anabsurd amount of food in my
burrito there.
Speaker 2 (11:18):
The dangerous things that a consumer with a camera
can do these days.
Speaker 1 (11:23):
Absolutely, absolutely, and maybe getting
more specific as we look to H2,are there sort of consumer
spending trends, retailers,verticals that we expect to do
well, given some of theheadwinds, and maybe, conversely
, what they not do so well as welook to H2?
Speaker 2 (11:42):
Well, I think it seems as though people are
talking as though an expectationthat the higher income consumer
is going to be more resilient.
Now that may change, I think,if markets were to really cool
off With how things are goingright now.
That's the group that I thinkis still willing to spend and
(12:05):
that's what we're starting tosee more of, that bifurcation
right now.
Again, just kind of readingthrough the earning reports,
what people are saying.
So who does that benefit?
Well, if we just look at thekind of mass retailers, the big
ones, that we usually talk about, it's amazing.
When you look at Costco'sperformance on the stock market
(12:26):
right now, they are priced very,very richly.
They have a very aggressiveprice to earnings ratio.
I think it's around 50.
And so clearly there's anexpectation Costco tends to
target that higher incomecustomer and that they're going
to be doing well.
I think Walmart's continued todo quite well.
(12:47):
Walmart's been moving up.
They're on a long term.
When I was younger and a kid,walmart had, I think, a very
different profile and differentperception than it has today,
and so they've they've moved up.
You know, I think, on the flipside, how are the dollar stores
going to do?
How are some of those now.
Sometimes they hold up well andbecause people actually trade
(13:07):
down, it's almost like more of amiddling out where it's the
places that are in the middle orthe retailers.
They do the worst becausepeople are either saying, hey,
I'm going to go to the nicerplaces or I'm going to go to a
dollar store because I need toget something that's really
affordable.
You might see that, broadlyspeaking, on the retail side.
The other thing, the long-termshift towards more private label
(13:28):
that I think we're seeingcontinue.
That's another lever thatretailers have to try to bring
down prices.
I mean speaking on the otherside.
This is always kind of secret,but look, who's making the
private label?
Often it's the same brandedcompanies and the companies that
make the branded products thatyou know.
So for them it's also anotherway to bring down their prices
(13:49):
without compromising on theirkind of staple branded branded
goods.
I think you'll probably continueto see that trend go up.
The one that I saw recentlyWalmart just released I can't
remember the exact name of it,but they released a new private
label brand across a lot ofdifferent products.
It looks very Target-esque.
(14:11):
It's interesting.
When you see it, you're likeit's clearly targeted toward
that kind of again I wouldassume slightly higher income
buyer.
So yeah, I think that that'swhat you're going to see will be
interesting on the promotionalside.
How aggressive are companiesgoing to be on that side?
And I imagine we're going intothe summer here, but as we start
(14:33):
to hit the fall and probablypeople have a better idea of how
the holidays are going to shapeup, you know, if things are a
little soft, you're going to seepeople get really aggressive on
that side.
Speaker 1 (14:43):
Yeah, believe it or not, I can't believe.
Speaker 2 (14:44):
We're mid June here, so I think we were looking the
other day at back to school andthe timing of that and it's back
to school starts like in thenext couple of weeks.
It starts to ramp up.
So it is pretty wild.
I always think of back toschool being like late August
and September, but in reality Ithink peak back to school is
(15:04):
like late July these days.
So it's it's not far out and,as you said, that really starts.
Then the train of likebasically holiday, significant
period, significant period tosignificant period as we end out
the year.
Speaker 1 (15:17):
Yeah, no, I think we're going to get a lot of data
and interesting insight overthe next six months.
Well, joel, excellent, alwaysgood to hear from you.
Super insightful, appreciatethe time and we, I'm sure, will
check in more as we get moresignals about broader economic
trends.
Speaker 2 (15:35):
Yeah, Next time we're talking maybe something big
will have changed.
We'll find out Awesome.
Speaker 1 (15:40):
Thanks, Joel.
Thanks Logan, You've beenlistening to Joel Beal, CEO and
co-founder at Alloy AI.
That's all for this week.
See you next time on Shelf Life.
From Alloy AI.
This is Shelf Life.
Today we have a special bonusepisode.
My colleague and co-host, joelBeal, ceo and co-founder of
(00:25):
Alloy AI and a recoveringeconomist, will have
conversation about the state ofretail consumer spending and the
economy going into summer.
I'm your co-host, logan Ensign,chief Customer Officer here at
Alloy AI, and I'm your co-hostJoel Beal, ceo of Alloy AI.
Speaker 3 (01:06):
We'llOS trends, measure promotion performance
and make better replenishmentdecisions with their retail
partners.
That's why we're trusted by BIC, crayola, valvoline, melissa,
doug Bosch and many more.
Get a demo at alloyai today.
Speaker 1 (01:23):
All right.
Well, excited to dive in here,joel.
A good day to be doing this,with earnings reports happening
today, so lots to react to andexcited to dive in.
Speaker 2 (01:34):
Yep, no, we love to look at the economy, we love to
try to read the tea leaves andfigure out what in the world is
going on, and I feel like we'vebeen talking about this for
years, trying to make sense ofthe vibes, the actual data
beneath it.
I was just thinking I feel likeI've written all these posts
about, hey, the economy is somuch better, at least over the
(01:55):
years, than people have given itcredit for if you look at the
underlying data.
But yeah, we're certainly.
You know we're coming up intoelection season, Everyone's, I
think, watching things carefullyand to your point.
This know we're coming up intoelection season, Everyone's, I
think, watching things carefullyand to your point.
This morning we saw kind ofconsumer spending coming in a
little lower than expected, andso I don't think we should be
reading that much into it.
But of course people do so.
Speaker 1 (02:17):
Well, and I think you've been sort of that
consistent voice over the lastsix, 12, 18 months, but I would
say it probably is at leastnon-traditional.
The different signals and howthey interact Curious just at a
high level from your vantage,maybe just talking about what
you're seeing in the economyright now.
You'd mentioned the recentearnings reports being about in
(02:38):
line with what we expected, butwould love to kind of hear you
unpack what you're seeing at ahigh level.
Speaker 2 (02:44):
Yeah.
So I think we continue andagain, I think this is something
that's been happening the lastcouple of years, where
everyone's just kind of waitingfor the bottom to fall out.
That's what I feel like hasbeen happening is everyone is
just like we are so far removedfrom the last real recession in
this country.
I mean, yeah, technically therewas a recession during COVID,
(03:07):
but it was very short lived andthen there was so much money
that was pumped into the economyand then we had this kind of
insane period and then inflationhit.
So before that, what I mean yougo back, it's like been a
decade or longer since you knowthere was real economic,
widespread economic hardship.
You know there was realeconomic, widespread economic
hardship.
You know a real recession.
(03:28):
So I think that kind ofunderlines all of this is
everybody's kind of looking andsaying, hey, the good times have
to come to an end.
Not that it's been amazing, andwhen is that going to happen?
The inflation, you knowdiscussion I mean mean that's
the one I read the most about isnobody likes inflation.
(03:48):
I mean it's a surefire way toget us all kind of riled up.
We don't like paying more forthings.
And you know this question overwhether the federal reserve
could kind of navigate this withthe increase in interest rates,
which, hey, we don't likepaying more interest either.
Look, I got to give them a lotof credit.
This has been handled as wellas anybody could probably
(04:10):
possibly hope for Now.
That doesn't mean it willcontinue, but you know, interest
rates have come down to aboutwhere you know the Federal
Reserve would like them.
Now I think some people wouldlike them to start cutting rates
.
Inflation has come down to where?
Sorry, yes, maybe I used thewrong term there.
Yeah, so inflation is down inthat what.
(04:31):
I think it's around 2.6, if I'mremembering correctly, right
now the Federal Reserve wouldlike it to be closer to 2.
So it's still a little bitelevated.
And every time you see theseinflation reports, I mean
everyone's trying to againdisentangle.
Well, what is it?
Is it gas, is it housing?
Is it consumables?
But broadly speaking, we don'thave the inflation problem that
(04:52):
we had a year or two ago.
That was upsetting consumersand really matters when we're
talking about consumer spendingand retail and CPG, the world we
really live in.
Again, I think it's beenhandled very well, but there's
still just this general sense ofkind of unease.
When is it going to end?
And there's going to be areckoning for basically our
reckless spending.
(05:13):
I think that's a lot of what'sgoing on in my mind.
Speaker 1 (05:16):
Fascinating.
Well, we have a few variablesgoing on here.
Right, We've got inflation andthe rate of inflation and how
sort of the Fed is managing that.
We've also got the market'sreactions to this, maybe softer
than expected retail spendingand the markets haven't had a
significant adjustment.
Right that?
We've actually seen the marketstoday and we'll see over the
(05:37):
next few days if there's anadjustment based on those
spending reports Curious, if youhave a sense for why that would
be the case and sort of generalmarket trends based on kind of
the consumer spending.
Speaker 2 (05:49):
So the markets are another element in all of this
that make it all confusing,because markets in some ways
almost like negative economicdata, because they treat it as
ooh, if things are softening,the Federal Reserve is going to
go cut rates, and that's reallywhat the markets want right now
(06:10):
in large part.
So I do think it can be thisbizarro world where negative
economic data could actually bebeneficial to markets or,
conversely, you can see greatreports and then people are like
, oh no.
And right now the debate isbasically will there be one rate
cut this year or will there betwo?
I mean, that's kind of what'sbeen signaled.
(06:31):
I think the other thing to keepin mind is, as we look at the
average American I'll talk aboutthe US here the last couple of
years have been amazing forlower income groups.
I feel like my whole life we'vebeen talking about wide income
disparity.
How do we bring that down?
(06:52):
Well, the last couple of yearshave been amazing.
You're seeing the highestincreases in earnings really
happening in those lower groups.
I think that's starting totrail off a little bit, but
that's where a lot of the gainshave been.
But then the stock marketdisproportionately benefits
those who are wealthier, whohave assets.
The run-up in home prices Again,nobody likes that, but at least
(07:14):
if you have a home you'rehedged against it.
You don't have a home right now, you know.
Then you're waiting on thesideline being like, wow, my
homes just went up I think 40%over the last five years or
something and I think we'reseeing that in retail earnings
right now and projections of youknow, there have been comments,
I know, from a couple majorretailers I think Walmart was
(07:34):
talking about hey, we're seeinga softening in that lower income
customer and we're going torely more on our higher income
customers to make up for that,who again are seeing these nice
stock market returns and areprobably feeling okay.
Speaker 1 (07:48):
Yeah well, and so maybe we have some winners and
losers from today or the pastcouple of days where the Fed's
looking and saying, all right,we've got inflation a little bit
more under control, the marketsare doing okay.
On the flip side, we've seen anall time well, maybe not an all
time low, but a continueddecline in consumer sentiment.
We've got higher prices at thecash register and we've got the
(08:10):
sense from maybe manufacturers,brand manufacturers that we work
with that it can be a bit moredifficult time because there's a
lot more pressure on pricing.
So, as we kind of narrow thefocus of our conversation here
more to retail spending, what'syour perspective on that front
and what sort of trends do yousee through H2 or expect through
H2, kind of in that world?
Speaker 2 (08:32):
Yeah, so there's no doubt in the retail world, I
think the conversation is allabout price right now and yeah,
I think we've talked about thisbefore.
We had, I mean, you could justpass through pricing kind of in
prior years in a way you hadn'tbeen able to do for a long time.
People were just passing along,you didn't need to sell any
(08:54):
more units and you were stillcomping, you know, eight, 10
plus percent a year andcompanies were seeing pretty
dramatic increases in sales.
And those days, I think, arevery clearly over.
I think.
Actually, inflation, whenyou're talking about like
consumables right now, I mean, Ithink it's flat, I don't think
it's going up at all.
I think the big news, you know,a week or two ago we saw a
(09:16):
flurry of news articles from,you know, walmart, from Target,
from Amazon, all talking abouthow they were going to be
cutting prices on some of theircore items.
So you could see this kind of wewant to get ahead and we want
to tell those consumers hey,prices aren't going to keep
going up in the way that theyhave.
(09:37):
Now one thing to keep in mindwhen they make those
announcements why are theymaking them?
Is that purely for theconsumers.
No, it's also notice to theirsuppliers that hey, when we're
going to be renegotiating ourcontracts, when we're talking
about our wholesale prices we'renot going to accept increases
and in fact we're going to belooking for concessions we might
(09:57):
be looking for you to startcutting prices.
So I think that is the bigshift on the you know kind of
consumer product side iscompanies knowing that it's like
you got to win now by byselling more units.
You're not going to win throughprice increases and get those
kind of comps that maybe you gotaccustomed to in prior years.
Speaker 1 (10:23):
And that may not necessarily mean just cheaper
prices at the cash register, butmaybe shrinkflation that we see
with.
Well, let's maybe decrease thesize, the volume, the quality so
that we can get those unitsthrough at the price point
retailers are pushing.
Speaker 2 (10:32):
Yeah, everybody's got to figure out how they try to
keep their margins and so you'reright, you kind of you might
have to rely on some trickery,and I find it interesting on
like the shrinkflation.
I consume too much Twitter,slash X in my life.
I don't use any other socialmedia.
Really, I feel like people loveto show those.
You know bag of chips, you knowthat have like four chips in
(10:56):
them now.
So it's definitely something Ithink you have to be pretty
careful of as a supplier, thatyou find that balancing act of
how do I reduce my costs, butnot in a way that's going to
have me go viral in a negativeway.
Speaker 1 (11:12):
The consumer is more empowered, right?
We've all seen the Chipotle.
You know I'm going to fill anabsurd amount of food in my
burrito there.
Speaker 2 (11:18):
The dangerous things that a consumer with a camera
can do these days.
Speaker 1 (11:23):
Absolutely, absolutely, and maybe getting
more specific as we look to H2,are there sort of consumer
spending trends, retailers,verticals that we expect to do
well, given some of theheadwinds, and maybe, conversely
, what they not do so well as welook to H2?
Speaker 2 (11:42):
Well, I think it seems as though people are
talking as though an expectationthat the higher income consumer
is going to be more resilient.
Now that may change, I think,if markets were to really cool
off With how things are goingright now.
That's the group that I thinkis still willing to spend and
(12:05):
that's what we're starting tosee more of, that bifurcation
right now.
Again, just kind of readingthrough the earning reports,
what people are saying.
So who does that benefit?
Well, if we just look at thekind of mass retailers, the big
ones, that we usually talk about, it's amazing.
When you look at Costco'sperformance on the stock market
(12:26):
right now, they are priced very,very richly.
They have a very aggressiveprice to earnings ratio.
I think it's around 50.
And so clearly there's anexpectation Costco tends to
target that higher incomecustomer and that they're going
to be doing well.
I think Walmart's continued todo quite well.
(12:47):
Walmart's been moving up.
They're on a long term.
When I was younger and a kid,walmart had, I think, a very
different profile and differentperception than it has today,
and so they've they've moved up.
You know, I think, on the flipside, how are the dollar stores
going to do?
How are some of those now.
Sometimes they hold up well andbecause people actually trade
(13:07):
down, it's almost like more of amiddling out where it's the
places that are in the middle orthe retailers.
They do the worst becausepeople are either saying, hey,
I'm going to go to the nicerplaces or I'm going to go to a
dollar store because I need toget something that's really
affordable.
You might see that, broadlyspeaking, on the retail side.
The other thing, the long-termshift towards more private label
(13:28):
that I think we're seeingcontinue.
That's another lever thatretailers have to try to bring
down prices.
I mean speaking on the otherside.
This is always kind of secret,but look, who's making the
private label?
Often it's the same brandedcompanies and the companies that
make the branded products thatyou know.
So for them it's also anotherway to bring down their prices
(13:49):
without compromising on theirkind of staple branded branded
goods.
I think you'll probably continueto see that trend go up.
The one that I saw recentlyWalmart just released I can't
remember the exact name of it,but they released a new private
label brand across a lot ofdifferent products.
It looks very Target-esque.
(14:11):
It's interesting.
When you see it, you're likeit's clearly targeted toward
that kind of again I wouldassume slightly higher income
buyer.
So yeah, I think that that'swhat you're going to see will be
interesting on the promotionalside.
How aggressive are companiesgoing to be on that side?
And I imagine we're going intothe summer here, but as we start
(14:33):
to hit the fall and probablypeople have a better idea of how
the holidays are going to shapeup, you know, if things are a
little soft, you're going to seepeople get really aggressive on
that side.
Speaker 1 (14:43):
Yeah, believe it or not, I can't believe.
Speaker 2 (14:44):
We're mid June here, so I think we were looking the
other day at back to school andthe timing of that and it's back
to school starts like in thenext couple of weeks.
It starts to ramp up.
So it is pretty wild.
I always think of back toschool being like late August
and September, but in reality Ithink peak back to school is
(15:04):
like late July these days.
So it's it's not far out and,as you said, that really starts.
Then the train of likebasically holiday, significant
period, significant period tosignificant period as we end out
the year.
Speaker 1 (15:17):
Yeah, no, I think we're going to get a lot of data
and interesting insight overthe next six months.
Well, joel, excellent, alwaysgood to hear from you.
Super insightful, appreciatethe time and we, I'm sure, will
check in more as we get moresignals about broader economic
trends.
Speaker 2 (15:35):
Yeah, Next time we're talking maybe something big
will have changed.
We'll find out Awesome.
Speaker 1 (15:40):
Thanks, Joel.
Thanks Logan, You've beenlistening to Joel Beal, CEO and
co-founder at Alloy AI.
That's all for this week.
See you next time on Shelf Life.
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