2021 to Present: An Overview of the Economy From A Retail POV

I will be publishing models and thesis on retail stocks based on this backdrop… in future Posts.

Target recently announced a new strategy called “10-4”

Macy’s has implemented an approach called “Genuine Hospitality”

• Why did they implement these strategies?
• Do they believe that upgrading their customer experience will re-invigorate growth?

Many other companies have implemented similar strategies, here is a partial list:

• Walmart- “Store of the Future” service model
• Costco – “Member Experience 2.0”
• Nordstrom – “Service+” Enhanced Personalization
• Best Buy – “Retail as a Service” (RaaS) and Advisor Program
• Sephora – “Service First Beauty” and In-Store Tech
• Apple – “Ownership Experience” Evolution
• Ulta Beauty – “Humanized Loyalty”
• Home Depot – “Pro Service Overhaul”
• Starbucks – “Connection First”

Let’s dive deeper into the economic backdrop.

The birds eye view (30,000′) of the economy post covid.

• Rapid post-COVID boom
• High, sticky inflation
• Fed tightening and disinflation
• Slower, but still positive growth with wage pressure and tariff concerns.

2021–present

Growth and inflation

Real GDP growth (annual) was 6.2% in 2021, 2.5% in 2022, 2.9% in 2023, 2.8% in 2024. (FRED) We can see a huge contraction resulting from COVID shutdowns, then infection rates and death tolls livestreaming on every news station. Once the vaccines rolled out en-masse to everyone we saw “vaccine passports” become a thing. Consumption of goods was very strong in 2020 while the services sector took a beating.

We went from our expected long run growth rate of about 3% to a dramatic reduction due to shutdowns, to a massive overcorrection due to re-opening. Now we’re back to our 3% average growth rate.

Inflation was 7.0% in 2021, 6.5% in 2022, 3.4% in 2023, 2.9% in 2024 (Inflation Calculator). The Fed prefers to target a rate of 2% inflation- slightly under or slightly over is acceptable. (Federal Reserve of Dallas)

GDP actually contracted slightly in Q1 2025 as tariff noise and weaker consumer spending hit, then rebounded later in the year; inflation is still hovering around 3%. (Reuters).

Keep in mind Nominal GDP = Real GDP + Inflation

On an unrelated, but related note

When the Spanish Flu ended in April of 1920 anywhere from 17 million to 100 million (varies by source) people were killed. Following the Spanish Flu, we had a minor recession which led into the post-pandemic boom of the roaring ’20s.

In this infographic we see a minor contraction followed up with a massive growth spurt with very minimal inflation. This is what I hoped our post-COVID boom would’ve been like – excluding the 1929 crash. The 2029 crash may be realized, but we’ll have to wait to see what happens with AI’s capex spend and geopolitics.

Wage growth and real incomes

Nominal wages have been rising in the 3.5–5% range in recent years (varies by measure), with the national average wage index up 4.84% in 2024 vs 2023. (Social Security). The wage measure used is provided by the Social Security Admin for the calculation of social security benefits upon retiring, then inflation data is used for annual adjustments to “maintain” a standard of living.

Because inflation was 6–7% in 2021–22, real wages for many workers were negative during that phase. Only in 2023–24 do you see real wages turning positive again (e.g., real average hourly earnings +1.1% from Aug 2024 to Aug 2025). (DOL) (Real Earnings in August 2025 PDF)

Net effect for retailers: 2021–22 were great for nominal sales, but painful for margins and lower-income demand; 2023–24 shifted to more price-sensitive but not collapsing demand with some margin relief.

Consumer preferences and channel mix

• Pandemic era saw a huge tilt into goods and e-commerce and an unnatural desire to hoard toilet paper. By April 2021, real durable-goods consumption was about 33% above pre-COVID levels while services were still below pre-pandemic. (FRED Blog post)
• Post-2021, consumers steadily rotated back toward services (travel, restaurants, experiences), while goods spending normalized. Food-away-from-home rebounded strongly and has been above pre-COVID levels since 2021. (Economic Research Service)
• E-commerce: U.S. online sales hit almost $1.2T in 2024, more than double 2019, and still growing at 7–8% yoy. (Digital Commerce 360) Amazon’s share is massive (37.6% of U.S. e-comm in 2024), but big-box omni retailers like Walmart and Target have carved out meaningful, growing slices. (Red Stag Fulfillment)
• Price sensitivity: surveys in 2023–24 show price now dominates behavior—about 30% of consumers say they’d switch retailer for better prices vs only 18% for better product selection. (BCG Global)
• Holiday spending: still growing but slower, with holiday sales up 3.9–4.0% in 2023–24, roughly in line or slightly above long-run averages, but with more budget consciousness and “practical” gifting. (AP News)

Final Thoughts

COVID was great for some retailers and select sectors and industries. Others were hammered by shut downs, stay-at-home mandates, and remote work.

When I look at middle market retailers such as Dillards, Kohl’s, Macy’s, and Nordstrom. I see companies that had large revenue declines in 2020-2021 then a return to pre-COVID revenue levels and lack-luster performance post COVID. Stores such as Ulta took a hit during covid due to stay-at-home and remote work. Post-COVID Ulta’s sales quickly surpassed their Pre-COVID revenue levels.

Lastly we have the companies that excelled during COVID such as Walmart, Costco, Best buy, Home Depot, Lowe’s, Apple and are either still growing due to niche product offerings or declining on commoditized offerings.

When I look at the list above. I see companies with highly commoditized products. Sure, some have private label offerings, but they’re all highly substitutable. This is why they’re focused on the customer service aspect of their business, to attract and retain customers, to increase shopping frequency and basket size. Apple is the only company on the list with a truly unique product with arguably one competitor which I’ll group in to the “android ecosystem”

As I look deeper into these companies to determine how well these shifts are being implemented, we’ll have to keep in mind these are very new ideas for these companies with minimal time in market and in the case of Walmart, has perhaps a handful of stores which we cannot segregate from the broader changes in revenue, SG&A expense, or cap-ex.