In the United States, consumer demand drives the economy. For most supply chain managers, therefore, consumer behavior matters.
And how is the American consumer faring these days? Even in the face of uncertainty—about anticipated economic growth, expected improvements in job prospects, and growth in housing wealth and equity markets—consumers have continued to manage their household finances and spending. But when they do shop, they are less likely to spend their money at traditional brick-and-mortar stores than in the past.
More spending, less saving
Real personal consumption expenditures grew 2.6 percent (annual rate) in the final quarter of 2013—the strongest annual increase since the first quarter of 2012. That growth was not uniform across all sectors, however. Although the fourth quarter saw stronger-than-usual spending on nondurable goods and services, durable goods spending was weaker than expected. Some of the added strength in nondurables was weather-related—spending on clothing, heating oil, natural gas services, and electricity increased—because November and December were unseasonably cold.
For the full year 2013, real consumer spending growth came in at 2.0 percent, the weakest showing since 2010. Real disposable income, meanwhile, grew a measly 0.7 percent, the weakest growth since 2009. Both are shown in Figure 1. The payroll-tax cut that expired in January 2013 took 2 percentage points out of households' paychecks and approximately 1 percent out of disposable income. With less after-tax income, many Americans put less money aside, sending the savings rate down to 4.5 percent in 2013, the lowest since 2007. (See Figure 2.)
Despite the weak growth in disposable income and spending during 2013, the average monthly reading of the Reuters/University of Michigan Consumer Sentiment Index for the year was the highest since 2007. Indeed, consumers had some encouraging news in 2013, as the housing market gained traction, job prospects improved, and inflation remained relatively subdued.
Housing strength and consumer spending
Housing prices and sales gained significant traction in 2013, although they are still below their 2006 peaks. The relatively strong housing numbers helped boost consumer spending in two ways. First, new and existing home sales are associated with increased purchases of "white goods" (home appliances, such as refrigerators, dryers, and washers). And second, the so-called "wealth effect" also had an impact. Many economists believe that people are likely to increase their spending when they "feel" wealthier or when their actual assets (typically real estate and stock holdings) increase in value, and that appeared to be the case in 2013.
In the third quarter of 2012 household net worth surpassed its previous peak, registered in the third quarter of 2007, by US $511.5 billion. By the fourth quarter of 2010, household financial asset holdings surpassed its previous peak, also set in the third quarter of 2007. In addition, household nonfinancial asset holdings (mostly real estate) are likely to surpass their previous peak, registered in the first quarter of 2007, during the second quarter of 2014.
Then again, not all wealth is created equal. Econometric research by Nobel laureate Robert J. Shiller clearly indicates that an increase in real housing wealth has a stronger impact on consumer spending than does an increase in financial wealth. Rates of home ownership are still elevated in the United States, so gains in housing wealth are distributed more widely through the economy. Since the fourth quarter of 2012 and through the third quarter of 2013, household nonfinancial asset growth outpaced the growth of household financial assets. In fact, year-over-year quarterly growth in household nonfinancial assets was in the 9.3-percent to 10.2-percent range in every quarter of 2013. Thus, due to higher household wealth, consumer spending kept pace with 2012 despite anemic increases in disposable income.
A few other indicators suggest that consumers' prospects may be improving somewhat. For instance, wage gains have started to outpace price increases on a year-over-year basis, mostly because price increases were very modest. (See Figure 3.) This helps consumers' budgets, as they are able to maintain a certain level of purchasing power. Both job opportunities and the unemployment rate improved in 2013; however, declines in the unemployment rate were mostly attributable to many people leaving the labor force.
Lackluster holiday retail sales
Holiday retail sales—defined as not seasonally adjusted November plus December retail sales less autos, gasoline, and food services—increased 3.3 percent in 2013 compared to 2012. Any increase is a boost to the economy, but last year's growth was the weakest since 2009.
"Black Friday" week (the busy holiday shopping period immediately following Thanksgiving) was not particularly stellar on the brick-and-mortar front. In fact, many retailers experienced an inventory build-up in November due to lackluster sales. Moreover, many retailers introduced heavy price discounting in order to lure shoppers into their stores, hoping to increase revenue by bringing in more foot traffic and generating more sales even as their per-unit margins were hurt. In addition, slower growth in many emerging markets and eurozone economies has kept global commodity and import prices relatively muted. Consumer goods prices, excluding food and energy, fell on a year-over-year basis every month in the last two quarters of 2013.
Looking ahead
Retailers whose profitability took a strong hit last year are unlikely to discount as heavily in the last quarter of 2014 as they did during the holiday season of 2013. In addition, they are likely to keep inventory holdings on the low side next holiday season to minimize the risk of engaging in excessive price discounting in order to move product if sales are weak.
The outlook for online retailing is more upbeat, however. E-commerce retail sales represented 6 percent of retail trade (total retail sales less food services) in the fourth quarter of 2013 and are likely to grow to 7.0 percent of retail trade by 2016.
In sum, although retail supply chain managers should see relatively robust purchasing activity by American consumers this year, retail chains will be very cautious with their inventory stocking levels. With online sales growth expected to outpace the growth of traditional in-store sales, 2014 could turn out to be a challenging year for retail store supply chains, especially in the last two quarters of the year.
The venture-backed fleet telematics technology provider Platform Science will acquire a suite of “global transportation telematics business units” from supply chain technology provider Trimble Inc., the firms said Sunday.
Trimble's other core transportation business units — Enterprise, Maps, Vusion and Transporeon — are not included in the proposed transaction and will remain part of Trimble's Transportation & Logistics segment, with a continued focus on priority growth areas following completion of the proposed transaction.
Terms of the deal were not disclosed but as part of this agreement, Colorado-based Trimble will become a shareholder in Platform Science's expanded business. Specifically, Trimble will have a 32.5% stake in the newly expanded global Platform Science business and will receive a Platform Science board seat. The company joins C.R. England, Cummins, Daimler Truck, PACCAR, Prologis, RyderVentures, and Schneider as a key strategic investor in Platform Science along with financial investors 8VC, Activant Capital, BDT & MSD Partners, Softbank, and NewRoad Capital Partners.
According to San Diego-based Platform Science, the proposed transaction aims to enhance driver experience, fleet safety, efficiency, and compliance by combining two cutting-edge in-cab commercial vehicle ecosystems, which will give customers access to more applications and offerings.
From Trimble customers’ point of view, they will continue to enjoy the benefits of their Trimble solutions, with the added flexibility of the Virtual Vehicle platform from Platform Science. That means Virtual Vehicle-enabled fleets will receive access to the Virtual Vehicle Marketplace, offering hundreds of new and expanded applications, software, and solution providers focused on innovating and improving drivers' quality of life and fleet performance.
Meanwhile, Platform Science customers will enjoy the added choice of Trimble's remaining portfolio of transportation solutions which will be available on the Virtual Vehicle platform, the partners said.
"We believe combining our global transportation telematics portfolio with Platform Science's will further advance fleet mobility and provide our customers with a broader portfolio of solutions to solve industry problems," Rob Painter, president and CEO of Trimble, said in a release. "Increased collaboration between the new Platform Science business and Trimble's remaining transportation businesses will enhance our ability to provide positive outcomes for our global customers of commercial mapping, transportation management, freight procurement, and visibility solutions. This deal will result in significant synergies along with tremendous opportunities for employees to continue to grow in a more-competitive business."
The acquisition comes just five months after Platform Science raised $125 million in growth capital from some of the biggest names in freight trucking, saying the money would help accelerate innovation in the commercial transportation sector.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
Economic activity in the logistics industry expanded in August, though growth slowed slightly from July, according to the most recent Logistics Manager’s Index report (LMI), released this week.
The August LMI registered 56.4, down from July’s reading of 56.6 but consistent with readings over the past four months. The August reading represents nine straight months of growth across the logistics industry.
The LMI is a monthly gauge of economic activity across warehousing, transportation, and logistics markets. An LMI above 50 indicates expansion, and a reading below 50 indicates contraction.
Inventory levels saw a marked change in August, increasing more than six points compared to July and breaking a three-month streak of contraction. The LMI researchers said this suggests that after running inventories down, companies are now building them back up in anticipation of fourth-quarter demand. It also represents a return to more typical growth patterns following the accelerated demand for logistics services during the Covid-19 pandemic and the lows of the recent freight recession.
“This suggests a return to traditional patterns of seasonality that we have not seen since pre-COVID,” the researchers wrote in the monthly LMI report, published Tuesday, adding that the buildup is somewhat tempered by increases in warehousing capacity and transportation capacity.
The LMI report is based on a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
That hiring surge marks a significant jump in relation to the company’s nearly 17,000 current employees across North America, adding 21% more workers.
That increase is necessary because U.S. holiday sales in 2023 increased 3.9% year-over-year as consumer spending grew even amidst uncertain economic times and trends like inflation and consumer price sensitivity. Looking at the coming peak, a similar pattern is projected for this year, with shoppers forecasted to drive a 4.8% increase in holiday retail sales for 2024, Geodis said, citing data from Emarketer.
To attract the extra workforce, Geodis says it will offer competitive wages, peak premium pay incentives, peak and referral bonuses, an expedited payment option, and flexible schedules. And it’s using an AI-powered chatbot named Sophie to serve as a virtual recruiting assistant.
“We acknowledge the immense responsibility we have to our customers to deliver exceptional service every day, and this is especially true during peak season,” Anthony Jordan, GEODIS in Americas Executive Vice President and Chief Operating Officer, said in a release. “Because peak season is the most business-critical sales period of the year for many of our retail clients, expanding our workforce is vital to ensure we have a flexible, dynamic team that can handle anticipated surges in demand.”