Mastercard Sr. Adviser on spending: ‘The consumer is clearly coming back’

Mastercard Sr. Adviser & Former Saks Chairman and CEO Steve Sadove joins Yahoo Finance Live to discuss the new Mastercard SpendingPulse survey.

Video transcript

ZACK GUZMAN: Of course, we are now one year past the beginning of when lockdowns began here in the US, and we're starting to see year over year differences. This is where it becomes very difficult to compare year over year to spending habits. And Mastercard's latest spending poll survey shows exactly that, a serious bump back in the way that Americans are spending now. For the month of March, total retail sales x auto and gas jumping 26.3% over last March, according to their data, with e-commerce purchases up 56.8% as well.

And for more on how we're seeing spending pick up, let's bring in Steve Sadove, Mastercard Senior Advisor and former Saks chairman and CEO as well. He joins us now. And Steve, this is the tricky piece of this, right, because year over year comparisons are not exactly going to be anything like we're used to seeing. But walk me through what you're seeing in terms of how Americans are getting back out there to spend.

STEVE SADOVE: Well, thanks so much. And really, it's quite interesting to watch. The consumer is clearly coming back and spending. And you see it in the March numbers with a 26% growth versus year ago. But to me, what's even more important, it was that it was a 14% growth versus year ago x auto and versus, two years ago, on x auto and gas. And that says that remember, versus 2019, we're seeing substantial growth.

And what's happening, is that the e-commerce world continues to be very strong at a 57% growth, and the categories that had been killed, like apparel, are starting to come back. You saw 19% growth versus two years ago in apparel. 61% versus year ago, and categories that have been doing really well during the pandemic, like hardware and home, they're continuing to see positive momentum.

So the consumer is taking their stimulus checks, you saw a very big improvement in growth in the middle of the month of March, where when the stimulus checks started getting into people's pockets, they started to grow. So if you had a 26% growth for the entire month, you're essentially up 1% in the first half of the month and up 46% or so in the second half of the month.

So a combination of more shutdowns and the stimulus checks said that the consumer was really starting to spend. And remember, this isn't just the Mastercard numbers, this is the aggregated numbers for Mastercard, cash, surrogate for other forms of tender. So this is really a look at the overall retail space during the month of March. It's really quite interesting to see.

AKIKO FUJITA: Steve, it if it is about the stimulus checks, to what extent do you think that this type of growth can be sustained? I mean, what are you finding in your study about where consumers are willing to put their cash to work as the economy opens up and as they get the vaccine and feel a little more comfortable?

STEVE SADOVE: Yeah, I think that this is a, every time we've seen the stimulus checks come in, we've seen a bump. You saw it in the December, January period, you're seeing it right now, and the consumer has, the savings rate has been quite strong, so the consumer is absolutely spending. What happened during the pandemic when they were nesting, they were home, all the spending went around the home-related types of goods, and grocery performed exceptionally well.

What you're starting to see now, is as the consumer comes out of their shell, apparel is picking up, jewelry is picking up. Consumers in apparel, all they were buying were comfort clothes, athleisure. Now you're starting to see newness, novelty. So the consumer wants to start getting out and expressing themselves and start living again. Yet, the categories that were performing so well, the home-related categories, are continuing to do well. So because the savings rate's so high, the consumer has in their pocket and they're spending.

ZACK GUZMAN: Yeah, Steve, if there was one area that jumped out at me in the report for kind of where they're not spending, it would be grocery. And again, kind of difficult to kind of stack up year over year, but that was down when you think about where they were this month. But up 7.5% compared to March 2019. So I guess that would be more to the idea of stockpiling.

STEVE SADOVE: Think about March last year. All of a sudden, we were hit, we were hoarding, we were going in and stocking up on the toilet paper and all the paper goods and we were just going vast volumes in the grocery store. So I think it's important to look at the two year ago number on grocery, which is showing a 7%, 7 1/2% growth, which is a very healthy performance. So you really can't look at just the minus 20% on month on month, because it was such a high level of performance in the year before.

Contrast that to department stores, for example, which are showing 100% growth in the month of March, 114% growth, yet on a two-year basis, it's showing flat. So they basically, the year ago shut down and you're now starting to get to see it more coming back to a normalized level as the stores reopen.

I think it's really interesting that the internet is continuing to grow really well, when you're seeing 56% growth or 57% growth on the internet against the growth that you saw a year ago. So this internet omnichannel digitized experience is here to stay. Two years ago we were at 12% of commerce digital. Now we've been pushing 20% of commerce digital.

Mastercard came out with a survey of recovery insights two days ago that talked about probably 20%, 30% of all of this behavioral change is here to stay. So that you should expect to see, have continued growth of internet, but probably you picked up two or three years worth of growth in a year that's going to stick with us over time.

AKIKO FUJITA: Steve, to what extent are you looking at that physical store experience post COVID? I mean, everything you've pointed to seems to suggest more and more is going to be transacted online, and yet we had a guest on from Cushman and Wakefield earlier this week who said they expect a big retail real estate boom.

STEVE SADOVE: Oh, I think that they're in some ways right. Remember, when I say that the internet is growing rapidly, even if you got to 20%, that means that 80% of commerce is still being done in a physical store. And as stores reopen, it becomes an opportunity. Go out to a mall right now, and you're starting to see where they're opening, you're starting to see a lot of volume. This is a critical period, I think, for the brick and mortar stores to show that they can create a unique differentiated experience.

Because what the consumer has been missing is the experiential side. They want to get out. When they can, they want to travel. Local travel's already starting to pick up. They want to get into a store, but that store's got to deliver against that experience either customer experience, something unique, products, and as people come in, they're going to have a shot at doing this, because a lot of the consumers haven't been in their stores. And you're going to see winners and losers based upon those stores that adapt and create those unique experiences. But I think the malls are right that they're going to have traffic in the stores.

AKIKO FUJITA: Well, Steve, it's always good to get your perspective. Steve Sadove, Mastercard Senior Advisor and former SEC chairman and CEO.