A permanent shift in spending could be more visible this holiday season, and economist Diane Swonk sees it coming at the expense of department stores.
“They can’t seem to lure into the department stores those millennials,” she said recently on CNBC’s “Trading Nation.” “The move from bricks to clicks, and the hybrid of the two is going to be a real problem.”
Swonk, who runs DS Economics, is concerned this retail area is seeing a permanent secular shift — even as a strong economy and record-breaking stock market are expected to motivate consumers to open their wallets wider this season.
According to a recent National Retail Federation survey, 39 percent of consumers between 25- and 34-years-old plan to spend more than last season, with nearly a quarter of those 18 to 24 also adding to their shopping lists.
The NRF finds young adults will be spending the majority of their money on apparel, electronics, books, music and video games. Their top destination: online shopping.
“The department stores are really being left behind,” said Swonk. “Overall, spending will do great this holiday season, but will it be enough to sort of stave off some bankruptcies going forward? I don’t think so.”
Even though department stores are expected to face more challenges, there are other areas expected to see a big boost.
“Not only are we spending on homes again because they’re worth investing in again … people are finally catching up on all that pent-up demand and repairs and remodeling,” she said.
Swonk is also seeing strength in vehicle sales and some clothing categories.
But she notes most consumers are shifting to experiences from things this season, particularly going out to dinners, bars and traveling.
She observes weekend rates at hotels in crowded cities are now exceeding weekday rates, which are typically high due to demand generated by business travelers.
“We’re now seeing that much travel. That’s even with Airbnb,” Swonk added.