Richard Chichester Spending, Stimulus, Stagflation

Retail’s Current Watchlist: Spending, Stimulus, Stagflation

by Sarah Daniels

Retail, when it really boils down to it, is dictated by the almighty dollar. This, of course, means those who hold those dollars are in control. Consumers have been on quite the wild ride over the past 16 months, and sitting up front with them is the retail industry.

“Brick and mortar will come back, but it’s going to come back differently,” says Richard Chichester, president and CEO of Irvine, Calif.-based Faris Lee Investments. “There is pent-up demand after a year of being shut down. The pandemic accelerated the emphasis on quality retail and heightened the expectations of the consumer on their brick-and-mortar experience. But the pandemic also significantly expanded the consumer’s comfort with buying all things online.”

Years ago, it was brick and mortar versus online, then it became a tag-team approach of brick and mortar and online – better known as omnichannel. Now, it’s not a matter of where the dollars will go, but if and how the dollars will come as the pandemic has caused consumers to re-examine their spending habits. The pandemic has caused a lot of change in this regard relative to needs and wants.


Chichester notes the pre-pandemic savings rate was 7 to 8 percent. This jumped to nearly 34 percent in April 2020 and is expected to continue, at least in the short-term. The result is $2 trillion in savings that is expected to grow to $2.5 trillion by this summer, particularly if the Biden administration continues to provide additional stimulus.

Extra money in consumers’ pockets sounds great, but that matters little to retailers unless consumers spend it.

“The pandemic — like many significant economic disruptions — has changed consumers’ behaviors and the retail landscape,” Chichester says. “The retail offering is now, more than ever, critically important and has to be unique, well defined and understood, or its survival will be at risk.”

Spending is set to continue in the short-term, Chichester notes, citing pent-up demand and a honeymoon phase where consumers get reacquainted with the brands and experiences they’ve missed for more than a year.

Online shopping will generally continue to attract those who value ease, comfort and efficiency. Brick and mortar will be there to reinforce the personal interactions and social aspects of shopping, with a renewed appreciation for physical stores and spaces after spending so much time at home.

“What brick and mortar provides is a relationship between the retailer and the consumer,” Chichester says. “Retailers will be far more creative moving forward, and they’ll remain flexible as they look to provide a physical environment and experience that’s relevant to consumers. One of the reasons Amazon is opening brick and mortar is to build a more personal relationship with its customer base because, right now, its online business platform, while efficient, is very transactional by nature.”

Increased cash and a renewed interest in getting out of the house will benefit brick and mortar in the short-term, but that doesn’t mean the industry’s problems have gone by the wayside. Online shopping is still taking a major bite out of physical spaces, which means issues like over-retailing still need to be addressed.

High-quality, Class A malls will survive, Chichester believes, though shopping center owners and tenant rosters will likely need to diversify.

“Many large center owners will see themselves moving away from their retail-only expertise into a  creative, mixed-use environment with a high competency in integrating residential, retail, office, medical and hospitality,” he says. “You’ll see changes to the retail design and the relevancy of a property. Where you see opportunities for the mixed-use, live, work, play concept, the catalyst to that is the ‘play.’ That’s because retail is the experiential centerpiece. High-quality mixed-use needs to start with what the retail will provide to the overall ethos of the development.”


Whether they spend online or at neighborhood centers, many Americans are flush with cash. The increase in personal savings due to lockdown restrictions is one reason for this. The other is the stimulus programs. These have included direct stimulus payments to households below a certain income, unemployment benefits that include additional weekly stipends, tax credits and hardship-based emergency assistance for small businesses, renters, homeowners with mortgages and the homeless population.

The stimulus certainly appeared to boost the economy, with the Peter G. Peterson Foundation noting each round of stimulus payments coincided with a significant boost to personal income and consumer spending. The non-partisan organization that focuses on America’s long-term fiscal challenges states that 74 percent of the first stimulus checks received was deployed back into the economy, though the rate decreased from there. Conversely, only 14 percent of the first check was put toward savings, with that number increasing for subsequent checks.

“I see people continuing to buy now and through the fall,” Chichester says. “Many have extra money due to increased saving as a result of the pandemic.  They have the mentality of ‘I’ve been doing things differently with my money during the pandemic.’ They’ve saved, invested. Many are simply ready to go back outside and enjoy the many facets of brick-and-mortar retail.”

This is great for the industry in the short-term, even if consumer habits are trending toward spending less and saving more. After all, every stimulus penny spent is still one more than the consumer would have had without this government intervention. Plus, some of those savings may eventually be deployed to bigger-ticket purchases like cars, vacations or homes.

The big question, however, isn’t what will consumers buy next, but what will happen to the economy, retail and these consumers when this stimulus eventually dries up.

“This stimulus has contributed a lot of money to the overall economy,” Chichester says. “It’s created a level of comfort that’s almost like insurance. When we pull that away, the sector that was reliant on it is not going to be spending.”

Chichester adds that the burdens from these stimuli won’t just be felt at the retail level.

“The $2 trillion modified infrastructure proposal is another form of economic stimulus,” Chichester states, “though it’s at a cost. It will raise taxes on corporations and those in the higher income brackets. It will modify capital gains taxes; it threatened to eliminate 1031 exchanges. From the government standpoint, they’re trying to pass these costs onto the taxpayers, whether that’s a corporation or individual. That doesn’t sound like real high-quality expansion to me, but it will significantly boost the economy in the short-term.”

Then there’s the issue of unemployment. The nation boasted a 3.2 percent unemployment rate pre-pandemic. It currently sits at 5.8 percent.

“What’s not being accounted for in that number are early retirees and people who are just not looking for jobs,” Chichester says. “The government wants to pull its assistance away in June because we have significant employment issues and employers like retailers can’t find enough people to fill jobs. We can’t just continue to support an entitlement mentality to build the economy, but if you pull the stimulus away, that’s going to change a certain buying segment.”


Part of the reason Chichester believes spending will stay healthy through fall is also due to the fear of inflation. Prices rose five percent year-over-year in May, according to the latest Consumer Price Index report, which has consumers worried that if they don’t buy now, items may be even more expensive later.

“A fair amount of people know enough about inflation that they’ll buy now, but be more disciplined about their buying,” Chichester says. “Longer-term spending could be dampened if inflation remains elevated.”

If inflation does stay and unemployment remains at its current level while stimulus dries up, Chichester fears we’ll enter a period of stagflation.

“That’s what I’m worried about in the medium term,” he says. “It’s when we’ve gotten through the euphoria tied to reopening the economy and changed our outlook on spending. We may become cautious and choose to save more than we did pre-pandemic since we know it’s an inflationary environment. Caution on long-term spending, paired with inflation, can result in stagflation, which is the biggest economic risk we face, if not managed well.”

Stagflation could impact consumers, the economy and the retail environment for two to three years, Chichester believes. Inflation may also be compounded by a mandatory increase in minimum wages, as the retailers will likely pass these added costs onto the consumer.

Consumers may not be feeling the pinch in many product categories yet, though Chichester says there are noticeable differences in the prices of essential items, such as groceries and gas. The Fed is trying to allay some of these concerns by announcing it will ease the rate of inflation once it believes the economy and employment are in strong positions.

That may be a tough sell, as only 559,000 jobs were added in May, a lower than expected rate. Of course, it’s hard to get a clear picture of anything when stimulus is still being deployed and many expect — or, at least, hope — for this to continue for the foreseeable future.

If the world’s foremost economists can’t predict what will happen next, there’s little chance the retail industry can, either. Instead, Chichester recommends that the industry do what it does best: focus on the customer. Listen and learn. Prepare and embrace the change as a fundamental competency, and continue to improve and evolve.

“Retail is always going through significant change and transformation,” he says. “But as it does so, it increases its value offering and value construct with regard to the consumer and the economy. The local community is becoming increasingly more relevant and less ubiquitous. Retail in all its forms will continue to evolve, and its relevancy to the economy and the consumer will continue to expand.”

— By Nellie Day. This article was written in conjunction with Irvine, Calif.-headquartered Faris Lee Investments, a content partner of Shopping Center Business. For more articles from Faris Lee, click here.

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