Household Formation, Confident Consumers Powering Retail Sales Growth



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Research Brief
April 2017
Developing Trends
As consumers steer more spending to online portals, two retail giants are forging different paths for growth. Wal-Mart has initiated a program to provide discounts for online shoppers seeking to pick up merchandise in stores. Meanwhile, Amazon announced a new grocery concept for shoppers to pick up items at new brick-and-mortar locations as the company looks to expand into traditional retail spaces. Amazon will open two stores in Seattle to test the concept before a further rollout to additional locations. E-commerce sales soared 11.9 percent over the past year, the strongest growth of any core retail sales category.
In an effort to capture more sales from the emerging health and beauty megatrend, Walgreens recently announced that it would roll out new store formats and hire beauty consultants in more than 1,000 additional stores this year. The move follows a trend of retailers providing services in addition to traditional products. Health and personal care sales vaulted 5.7 percent over the past year.
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Household Formation, Confident Consumers
Retail Sales Growth
Retail sales remained elevated in March as core retail sales rose 4.1 percent over the past year. Emerging wage growth, with average hourly earnings up 2.7 percent over the past year, coupled with consumer confidence at the highest level in 16 years form a positive outlook for the year ahead. Demand for retail properties pushed the national vacancy rate to 5.5 percent in 2016. Household formation is triggering significant demand for building supplies, with sales up 6.3 percent over the past year. The highest pace of multifamily completions in more than 30 years at 370,000 units will push the residential construction annual run rate to more than 1.2 million units this year as millennials continue to form households. Multifamily conditions remain tight, with vacancy at 4.6 percent.
4.1% Core Retail Sales
2.7% Average Hourly Earnings Y-O-Y*
* Through March
** Forecast
Sources: Marcus & Millichap Research Services; U.S. Census Bureau; National Retail Federation
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