As consumer spending revives, we took a deeper look at income levels to understand how different earnings cohorts are driving the ongoing recovery. We drilled down into various verticals and retailers to analyze the relationship between income and spending in the current environment. Here’s what we found.
- The recovery is largely driven by consumers making less than $100K as higher earners continue to mostly spend at rates lower than their pre-Covid levels. The stimulus check and the federally-granted UI benefits (slated to expire on July 31st) are some of the many variables that may explain this spending divergence.
- Lower-earners’ outspending is consistent throughout categories, but at varying degrees: E-commerce, Home, and Hobbies/Sporting Goods saw ~30 to 45 point outperformance, Restaurants and Apparel saw 15 to 20 points, and General Merchandise, Grocers, Travel, and Leisure saw the narrowest outperformance at under 10 points.
- It is not clear that increased exposure to a lower-income cohort will necessarily result in a retailer outperforming throughout Covid, as seen by Wayfair’s success in the context of it being under-exposed to lower-earners, and J.C. Penney’s decline while being over-exposed. Ecommerce platforms (Amazon, Paypal, Etsy, Shopify, Stripe) appear to have outperformed regardless of income exposure.
Recovery Driven by < $100K Income Cohort
Looking broadly at spending across over one thousand merchants (see Appendix), before Covid, the lowest earners* ($0-50K) were understandably spending less than their higher-earner counterparts, growing their spend ~4% YoY vs. the latter’s ~7%. Throughout the recovery, this relationship reversed to a substantial degree as the magnitude of the lower-earners’ outperformance is a full 18 percentage points higher than those making over $150K. Indeed, the recovery appears to be mostly driven by those making less than $100K, as higher earners exhibit spending growth rates that are mostly still lower than pre-Covid levels.
As a result, the share of spending for those making < $100K (63% of Earnest panelists) increased 2 percentage points from pre-Covid’s 48% of total spend (Jan-Feb 2020), to now 50% (May-June). Those making more than $150K (14% of panelists) saw their share decrease 2 percentage points, from 24% of total spend to now 22%.
There are numerous variables outside of income levels that could be contributing to this divergence in performance. One important variable, however, is the combination of stimulus payments (see our original stimulus analysis here) and the federally granted $600/week in added jobless benefits on top of the unemployment benefits provided by the state; payouts that overwhelmingly benefited lower-income cohorts.
As a result, all of this makes us wonder how the recovery will look once the federally provided unemployment benefits expire, as they are slated to do on July 31st.
Outspending by Vertical
Looking at different income cohort’s spending across verticals, lower-earners outperformed in all categories but by varying degrees. For verticals with strong performance throughout the crisis (E-commerce, Home, and Hobbies/Sporting Goods), those making between $0-$50K grew their spend 30 to 45 points higher than those making over $150K. In the Restaurants and Apparel sectors, the lower-income cohort outspent by 15 to 20 points. In the essential General Merchandise and Grocers categories, as well as in the struggling Travel and Leisure sectors, the lower income cohort saw the narrowest outperformance at under 10 points.
Most Exposed Retailers
Drilling further into the top 40 merchants in broad retail**, we looked at the income exposure for each retailer in 2019, positing that, perhaps, the more exposure to lower income consumers, the higher the potential for sales outperformance throughout Covid.
Pottery Barn, Nordstrom, REI, and Wayfair, to name a few, saw over 60% of their 2019 sales from those making over $100K. On the other end, Big Lots, Harbor Freight Tools, Playstation, and Menards, saw less than 45% of their sales from this higher-income cohort. Industry titans Amazon, Paypal, Lowe’s, and Home Depot saw 53-54% of their sales generated from this higher-income cohort.
We then looked at the resulting YoY sales growth of these merchants throughout the Covid recovery (May and June), and sorted the merchants in the same descending order of sales generated from those making over $100K to see if there was any correlation.
With growth rates varying throughout, it is not clear that increased exposure to a lower-income cohort will necessarily result in outperformance. To the extent that it is a contributing factor, it is interesting to see Wayfair’s success in the context of it being under-exposed to lower-earners, and J.C. Penney’s decline while being over-exposed to this cohort. Ecommerce platforms appear to have outperformed regardless of income exposure, with Amazon, Paypal, Etsy, Shopify, and Stripe growing ~50% to 150% YoY throughout the crisis.
Earnest data is structurally under-representative of unbanked and underbanked consumers, and is therefore over-indexed to higher-income individuals.
*Income levels for all cohorts in this analysis are defined as the total net income in the twelve months ending February 2020 (i.e. pre-Covid). We recognize that income levels may have materially changed for many consumers throughout the Covid crisis.
**Includes the top 40 merchants in terms of sales in the Ecommerce Platforms, Apparel & Department Stores, Home, Hobbies and Toys, and Sporting Goods categories.
Appendix – List of Merchants by Category
Apparel & Department Stores. Apparel: 2UNDR, 6pm.com, & Other Stories, Abercrombie, Adidas, Adore Me, Aerie, Aeropostale, Aldo, Allbirds, Alton Lane, Altra, America’s Best, American Eagle, Ann Taylor, Anthropologie, Aritzia, Ashley Stewart, Asics, Asos, Athleta, AUrate New York, Away, Babies ”R” Us, Backcountry.com, Balenciaga, Banana Republic, Bandier, Barclay Jewelers, Bare Necessities, Bargain Catalog Outlet, Baskins, BCBG, Ben Bridge, Bespoke Post, Betsey Johnson, Betteridge, BHLDN, Blondo, Blue Nile, Bluffworks, Bombas, Bonobos, Boohoo, Boot Barn, Brandy Melville, Brian Atwood, Brideside, Brooks Brothers, Buckle, Burberry, BVLGARI, Calvin Klein, Canada Goose, Carter’s, Cartier, Casual Male XL, Catherines, Cato, Cavender’s, Champs, Chanel, Charlotte Russe, Charming Charlie, Chico’s, Chubbies Shorts, Citi Trends, Claire’s, Club Monaco, Coach, Cole Haan, Columbia Sportswear, Converse, Cos, Cotton On, Country Outfitter, Crocs, Cupshe, DAILYLOOK, Dakota Watch, David Yurman, David’s Bridal, Deckers Generic, Destination XL, Dior, Dolce Vita, Dolls Kill, Dressbarn, Drysdales, DSW, Duluth Trading Company, Eagle Creek, Eastbay, Eddie Bauer, Ellos, EVEREVE, Everlane, Express, Eye Safety Systems, Eyemart Express, Fabletics, Fame & Partners, Famous Footwear, Fanatics, Farfetch, Fashion Nova, Fashion to Figure, Felix Gray, Ferragamo, FIGS, Fila Outlet, Final-Score, Finish Line, Fit2Run, Foot Locker, Footaction, Forever 21, Forward, Fossil, Francesca’s, Free People, Fruit of the Loom, Fullbeauty.com, Gap, Generation Tux, Gilt Groupe, Giorgio Armani, Glasses.com, GlassesUSA, GoJane, Goodwill, Gucci, GUESS, Gymshark, H&M, Hanes, Helzberg Diamonds, Hermes, Hill City, Hoka, Hollister, Hot Topic, Huckberry, Hugo Boss, Hurley, Hush Puppies, Icebreaker, Icing, Ilori, Indochino, Intermix, It’s Fashion, Ivivva, J.Crew, J.Jill, JackRabbit, James Allen, Jansport, Jared, Jessica London, Jimmy Choo, Jockey, Johnston & Murphy, Jomashop, Jos. A. Bank, Joseph Abboud, Journeys, JTV, JustFab, Justice, K&G Fashion Superstore, Kate Spade, Kay Jewelers, Keds, Kendra Scott Design, King Size, Kipling, Kit and Ace, Kmart, L.L. Bean, LA Police Gear, Lands’ End, Lane Bryant, Lee Jeans, Lenscrafters, Levi’s, Lids, Lilly Pulitzer, Littman Jewelers, Loft, London Jewelers, Lone Star Western & Casual, Louis Vuitton, Lucy Activewear, LuLaRoe, Lululemon, M. Gemi, Mack Weldon, Madewell, Maidenform, MATCHESFASHION, Maurices, Mayvenn, Men’s Wearhouse, Merrell, MeUndies, Michael Kors, Missguided, Modcloth, Moncler, MR PORTER, Mytheresa, Nasty Gal, Nautica, NET-A-PORTER, New York & Company, Nike, NIQUEA.D, NOBULL, North Face, Nuuly, Oakley, Of a Kind, Old Navy, Oliver Peoples, Omega, OROS Apparel, Pacific Sunwear, Pandora Jewelry, Patriot Outfitters, Payless ShoeSource, Pearle Vision, Poshmark, Prada, Printify, Puma, Pura Vida Bracelets, Qalo, Rainbow, Rainbow Shops, Ralph Lauren, Ray Ban, Reebok, Reeds Jewelers, Reef, Rent the Runway, Revolve, Roaman’s, Rochester Clothing, Rocksbox, Romwe, Rothy’s, Rue La La, Rue21, Samsonite, Sanuk, Saucony, Savers, SAXX Underwear Co., Scrubs, Sears Optical, Sheplers, Shinola, Shoe Carnival, ShoeBuy, ShoeDazzle, Shopbop, Six:02, Skechers USA, Smartwool, Soma, SPANX, Spencer’s, Stance, Sterling Regional, Steve Madden, Stitch Fix, StockX, Stride Rite, Stuart Weitzman, Suit Supply, Summersalt, Sunglass Hut, Superga, Swatch, Swimsuits For All, Tailgate Clothing, Talbots, Tamara Mellon, Target Optical, Tecovas, Teva, The Black Tux, The Children’s Place, THE OUTNET, The RealReal, ThirdLove, thredUP, Thursday Boot Co., Tiffany & Co., Tilly’s, Timberland, Timex, Tommy Bahama, Tommy Hilfiger, Tommy John, TOMS, Torrid, Tory Burch, Tourbillon, Tourneau, True & Co, True Religion, Trunk Club, TUMI, U.S. Patriot Tactical, Ugg, Under Armour, Uniform Advantage, Uniqlo, Unique, Urban Outfitters, Value Village, Vans, Vera Bradley, Versace, Versona, VF Outlet, Vici, Victoria’s Secret, Visionworks, VKTRY, Wacoal, Warby Parker, Watch Station, White House Black Market, Williamson-Dickie, Wolverine World Wide, Woman Within, Wood’s Boots, Wrangler, Yandy, YOOX, ZAFUL, Zappos, Zara USA, Zumiez. Department Stores: Bealls, Belk, Bergdorf Goodman, Bergner’s, Bloomingdale’s, Bon-Ton, Boston Store, Burlington Stores, Carson’s, Century 21, cusp, Dd’s Discounts, Dillard’s, Elder-Beerman, Goody’s, Herberger’s, J.C. Penney, Kohl’s, Last Call, Lord & Taylor, Macy’s, Marshalls, Neiman Marcus, Nordstrom Full Price, Nordstrom Off Price, Nordstrom Store Card, Off/Aisle, Palais Royal, Peebles, Ross Stores, Saks Fifth Avenue, Saks Off 5th, Sears, Shipt, Sierra Trading Post, Stage Stores, Stein Mart, T.J. Maxx, Younkers,
Ecommerce Platforms: Amazon, Etsy, PayPal, Shopify Payments, Stripe.
Fitness: 24 Hour Fitness, Anytime Fitness, Barry’s Bootcamp, Blink Fitness, Classpass, Crunch Fitness, DailyBurn, Equinox, Exhale, Fitbit, Flywheel, Gold’s Gym, LA Fitness, Life Time Fitness, Miraval, Mirror, MyFitnessPal, Nautilus, Orangetheory, Peloton, Planet Fitness, ProForm, Pure Barre, Retro Fitness, ROMWOD, Rumble, Runkeeper, SoulCycle, Strava, WayBetter, YMCA, YogaWorks, Youfit.
General Merchandise and Grocers. General Merchandise: 99 Cents Only Stores, BJ’s Ex Fuel, Casey’s General Store, Circle K, Corner Store, Costco Ex Gas, CVS, CVS Copay, Dollar General, Dollar Tree, Duane Reade, Duane Reade Copay, Family Dollar, Holiday Station Stores, Murphy USA, Ollie’s Bargain Outlet, Rite Aid, Rite Aid Copay, Sam’s Club, Target, Walgreens, Walgreens Copay, Walmart. Grocers: Acme, Albertson’s, Aldi, Big Y, Central Market, Cumberland Farms, Dillons, Fairway Market, Food 4 Less, Food Lion, Fred Meyer, Fry’s, Giant Carlisle, Giant Eagle, Giant Landover, Grocery Outlet, Hannaford, Harris Teeter, HEB, Hy-Vee, Ingles Markets, Jewel-Osco, Key Food, King Kullen, King Soopers, Kroger, Lidl, Lowes Foods, Lucky’s Market, Mariano’s, Market Basket, Meijer, Price Chopper Supermarkets, Publix, QFC, Raley’s, Ralphs, Safeway, Save Mart Supermarkets, Schnucks, Shaws, ShopRite, Smart & Final, Smith’s, Sprouts Farmers Market, Stater Bros. Markets, Stop & Shop, The Fresh Market, Tom Thumb Supermarkets, Trader Joe’s, Vons, Wegmans, Weis Markets, Whole Foods Market, WinCo Foods, Winn-Dixie. Online Grocers: Amazon Fresh, FoodKick, Fresh Direct, HEB To You, Instacart Purchase, Peapod, Walmart Online Grocery.
Hobbies & Toys and Sporting Goods. Hobbies & Toys: A.C. Moore, Ben Franklin Crafts, BLICK Art Materials, Blizzard Entertainment, Borrow Lenses, Build-A-Bear Workshop, DistroKid, DraftKings, Electronic Arts, Epic Games Other, Epic Games Store, Erin Condren, FAO Schwarz, Fortnite, Funko, Guitar Center, Hobby Lobby, Jerry’s Artarama, Jo-Ann Stores, Lifetouch, Lovepop, Magic: The Gathering Arena, Michaels Stores, Music & Arts, Musician’s Friend, Niantic, Nintendo, Pat Catan’s, Playstation Network, Riot Games, Roblox, Rovio, Scopely, Steam, Toys ”R” Us, Twitch, Ubisoft, Unreal Engine, Vistaprint, Xbox Store, Zwift, Zynga. Sporting Goods: Academy Sports & Outdoors, Big 5 Sporting Goods, Cabela’s, City Gear, Dick’s Sporting Goods, Field & Stream, Gander Outdoors, Golf Galaxy, Hibbett Sports, Modell’s Sporting Goods, Moosejaw, Mystery Tackle Box, Razor, REI Coop, Sportsman’s Warehouse, SquadLocker, Tackle Warehouse.
Home. Home Furnishing: Aaron Brothers, American Frame, American Signature, Arhaus, Art Van, Artifact Uprising, Ashley Furniture, At Home, Bed Bath & Beyond, Bedjet, Big Lots, Bob’s Discount Furniture, Brylane Home, CanvasPop, Casper, CB2, Chef Central, Chefs Catalog, Cooking.com, Crane & Canopy, Crate & Barrel, Decorist, Everything But The House, Framebridge, GhostBed, Gordmans, Grove Collaborative, Havertys, Helix Sleep, Home Reserve, HomeGoods, HomeSense, Horchow, Houzz, Kirkland’s, La-Z-Boy (LZB), Leesa, Mark and Graham, Mattress Firm, MightyNest, Mitchell Gold + Bob Williams, One Kings Lane, Personalization Mall, Pier 1 Imports, Pottery Barn, Purple, Raymour & Flanigan, Rejuvenation, Restoration Hardware, Rooms To Go, Rove Concepts, Ruggable, Saatva, Sealy Cocoon, Sleep Number, Sleep Train, Sleepy’s, Sur La Table, Tempur-Pedic, Terrain, The Citizenry, The Container Store, The RoomPlace, The Sill, Tuesday Morning, Tuft & Needle, Value City, Waterworks, Wayfair, West Elm, Williams-Sonoma, World Market. Home Improvement: Abacus Plumbing, Ace Hardware, All Around Landscape Supply, All Pro Horticulture, Allied Building Products, Alterra, American Builders, Angelo’s Supply, Aspen Valley Landscape, ATGStores.com, Atlantic Irrigation, Auto-Rain Supply, Bissett Nursery, Blinds.com, Boston Irrigation Supply, Build.com, C&C Sand and Stone, Calloway’s Nursery, Care.com, Central Pump and Supply, Comex, Cutting Edge, Do it Best, Fastenal, FilterEasy, Floor & Decor, Green Resource, Harbor Freight Tools, Harmony Gardens, HD Supply, Home Decorators, Homee, Hydro-Scape Products, KeyMe, Kirkwood Material Supply, Landscape Express, Landscaper’s Choice, LawnStarter, Leslie’s Swimming Pool Supplies, Lowe’s, Marshall Stone, Menards, Northwest Exterminating, Northwest Marble, Orchard Supply Hardware, Orkin Pest Control, Plowz & Mowz, Rural King, Shemin Nurseries, Sherwin Williams, SiteOne Landscape Supply, Solar City, South Coast Supply, Southwood Valley Turf, Stanley Black & Decker, Stone Center, Sunrun, The Home Depot, Thecompanystore.com, Tractor Supply, TrueValue, TruGreen, Village Nurseries, Zoro Tools.
Leisure & Travel: Leisure: Acme Technologies, Adventure Island, Alamo Drafthouse Cinema, AMC, AMF, Animal Kingdom, Aquatica, Atom Tickets, AXS, Bowlero, Bowlmor, BrunswickZone, Busch Gardens, Carowinds, Castaway Bay, Cedar Point, Century Theatre, Cinemark, Darien Lake, Dave & Buster’s, Discovery Cove, Disney’s Hollywood Studios, Dorney Park, Epcot, Eventbrite, Everfest, Fandango, Frontier City, Gilroy Gardens, Great America, Groupon, Hunt A Killer, Kings Dominion, Kings Island, Knotts Berry, Liftopia, Live Nation, LivingSocial, Lucky Strike, Magic Kingdom, Main Event, Michigans Adventure, Pinstripes, Punch Bowl Social, Rave, Reading International, Redbox, Regal Cinemas, Round One, San Diego Zoo, Schlitterbahn, SeatGeek, Seaworld, Sesame Place, Sinemia, Six Flags, Six Flags Hurricane Harbor Concord, StubHub, Ticketmaster, TickPick, Tinseltown USA, tixr, TodayTix, Topgolf, Universal Studios, Valleyfair, Viagogo, Water Country, White Water Bay, Worlds of Fun. Travel: AC Hotels by Marriott, Airbnb, Alamo Rent a Car, Alaska Airlines, Allegiant Air, Aloft Hotels, American Airlines, AmericInn, Andaz, Avis, Baymont, Best Western, Budget, Budget Truck, Cambria Hotels, Canopy, Carnival Cruise Line, Celebrity Cruises, Clarion, Classic Vacation, Comfort Inn, Conrad Hotels & Resorts, Courtyard, Crowne Plaza, Cunard, Days Inn, Delta Airlines, Delta Hotels, Disney Cruise Line, Dollar Rent A Car, DoubleTree, Econo Lodge, EDITION, Egencia, Embassy Suites, Enterprise, Enterprise CarShare, Expedia, Fairfield by Marriott, Four Points, Gaylord Hotels, Grand Hyatt, Hampton, Hawthorn, Hertz, Hilton, Hilton Garden Inn, Hilton Grand Vacations, Holiday Inn, Holiday Inn Club Vacations, Holiday Inn Express, Holiday Inn Resort, Holland America Line, Home2 Suites, HomeAway, Homewood Suites, Hotel Indigo, Hotels.com, Hotwire.com, Howard Johnson, Hyatt, Hyatt Centric, Hyatt House, Hyatt Place, Hyatt Regency, InterContinental, JetBlue, JW Marriott, Kimpton, La Quinta, Le Meridien, Mainstay Suites, Marriott Hotels, Marriott Vacation Club, Megabus, Microtel, Moxy Hotels, National Car Rental, Norwegian Cruise Line, Oceania Cruises, Orbitz, Park Hyatt, Payless Car, Priceline.com, Princess Cruises, Quality Inn, Ramada, Regent Seven Seas, Renaissance Hotels, Residence Inn, Rodeway Inn, Royal Caribbean Cruises, Seabourn, Sheraton, Silversea Cruises, Sleep Inn, Southwest, Spirit Airlines, SpringHill Suites, St. Regis, Suburban Extended Stay, Super 8, The Luxury Collection, The Ritz-Carlton, Thrifty Car, TownePlace Suites, Travelocity, Travelodge, Tru, Trump Hotels, TRYP, United Airlines, W Hotels, Waldorf Astoria Hotels & Resorts, Westin, Wingate, Woodspring Suites, Wyndham, Wyndham Garden, Wyndham Grand, Zipcar.
Meal Kits: Blue Apron, Dinnerly, Freshly, Green Chef, Hello Fresh, Home Chef, Purple Carrot, Sun Basket.
Pets: Banfield, Chewy, Pet Supplies Plus, Pet Valu, Petco, PetFirst Healthcare, PetMed Express, Petsense, PetSmart, PrettyLitter, PuppySpot, Trupanion, VetSource, VIP Petcare, WagWalking.
Restaurants: Applebee’s, Arby’s, Baja Fresh, BJ’s Restaurants, Blaze Pizza, Bojangles’, Bonefish Grill, Bubba Gump Shrimp, Buffalo Wild Wings, Burger King, California Pizza Kitchen, Carrabba’s Italian Grill, Cheddar’s Scratch Kitchen, Cheesecake Factory, Chick-fil-A, Chili’s, Chipotle, Chuck E. Cheese’s, Chuy’s, Cold Stone Creamery, Cracker Barrel, Culver’s, Dairy Queen, Del Frisco’s, Del Taco, Denny’s, Domino’s Pizza, Dunkin’ Brands, Dutch Bros. Coffee, El Pollo Loco, Firehouse Subs, Five Guys, Freddy’s Frozen Custard & Steakburgers, Golden Corral, Habit Restaurants, Hardee’s, Hooters, IHOP, In-N-Out Burger, Jack in the Box, Jason’s Deli, Jersey Mike’s Subs, KFC, Krispy Kreme, Little Caesars, LongHorn Steakhouse, Maggiano’s Little Italy, Marco’s Pizza, McAlister’s Deli, McDonald’s, Mellow Mushroom, Miller’s Ale House, MISSION BBQ, MOD Pizza, Moe’s Southwest Grill, Noodles, Olive Garden, Outback Steakhouse, P.F. Chang’s, Panda Express, Panera Bread, Papa John’s, Papa Murphy’s, Peet’s Coffee, Pizza Hut, Popeyes Louisiana Kitchen, Portillo’s, Potbelly, Pret A Manger, Qdoba, Raising Cane’s, Red Lobster, Red Robin, Ruby Tuesday, Ruth’s Chris, Schlotzsky’s, Shake Shack, Smashburger, Sonic Drive-In, Starbucks, Subway, sweetgreen, Taco Bell, Taco Cabana, Texas Roadhouse, TGI Fridays, Torchys, Twin Peaks, Waffle House, Wendy’s, Whataburger, Wingstop, Yard House, Zaxby’s, Zoe’s Kitchen. Restaurant Delivery: Caviar, Delivery.com, DoorDash, GrubHub and Seamless, Postmates, UberEATS, Waitr.
Streaming: AT&T TV NOW, Bandcamp, CBS All Access, Crunchyroll, Disney+, ESPN+, FloSports, fuboTV, Gaia, Google Play Music, HBO Now, Hulu, Itunes, Living Scriptures, Netflix, NFHS Network, Philo, Plex, Pure Flix, Showtime Networks, SiriusXM, Slacker Radio, Smule, Splice, Spotify, TiVo, VidAngel, Vudu, World Wrestling Entertainment.