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Consumers worldwide spent $900B more online in 2020: RPT

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Consumers spent an additional $900 billion in online retail last year, according to Mastercard’s latest Recovery Insights report. Bricklin Dwyer, Mastercard Chief Economist, joins Yahoo Finance Live to break down the company’s latest consumer spending report and discuss the outlook for retailers in a post-covid world.

Video Transcript

BRIAN SOZZI: All right, retail stores being back open for shoppers. The momentum in online shopping doesn't appear to be slowing down. Meanwhile, retail spending overall continues to be solid as people spend their stimulus checks and return to work. Bricklin Dwyer is Mastercard's chief economist. Bricklin, good to see you again here. We've heard from a lot of retailers over the past few weeks that they're seeing a major pickup in their business. Are you seeing that in your data?

BRICKLIN DWYER: Yeah, we've seen a lot of momentum driven by some near-term activity, clearly a lot more shops being online, which has really helped some of that momentum over the pandemic and post-pandemic period that we've begun to see with the reopening. But on top of that, we've seen some of the momentum driven most recently by a lot of the stimulus checks that have gone out and really kind of presented a lot of opportunity for folks to spend more in person, as well as online.

MYLES UDLAND: And Bricklin, before we get into some of the details of your latest report, I mean, you've seen some of the data from your former peers on Wall Street with respect to their current spending data and how it comps to last year, 80, 90, in excess of 100% over the last couple of weeks. Are you guys lapping some of those same comps? And I guess, is-- what's it look like against the last two years? And how are we trying to-- are you guys trying to get a sense of where the consumer stands today relative to some sort of baseline? Certainly April 2020 is not a useful one.

BRICKLIN DWYER: Yeah, exactly. I mean, we've seen these terrible comparisons versus last year when the economy was shut down. It's great to look good against a terrible year. But looking against 2019 is really the right comparison. And if we think about the kind of momentum that we've seen in retail spending most recently, it really has been driven by that momentum story of the vaccine impact, people feeling more comfortable with getting out, the decline in cases that we've seen, in large part, across the country, and that stimulus effect driving spending a bit higher.

That in comparison to where we were a couple of years ago, the evolution drove that $900 billion of additional spending online through 2020. About 20% to 30% of that is expected to stick online. And now as we move into 2021, that momentum is being accelerated by the fiscal package that we've seen. And just putting that in perspective, the fiscal package that we saw in April this year was about twice the magnitude for consumers' pockets and what we saw in the beginning of the year.

And remember that this isn't the first fiscal package or the second fiscal package that people have got in their pockets. We saw that in the right at the beginning of the pandemic, April-- around April last year. And then we saw it in September as the extraordinary benefits played into effect. Then we saw it in January and now again in April this year. So, a lot of sequencing and driving further savings, as well as further spending into the economy.

BRIAN SOZZI: Bricklin, is consumer spending about to fall off a map in the summer once we get beyond these stimulus checks?

BRICKLIN DWYER: So consumers have about $2 trillion in excess savings sitting in bank accounts today. And that money is waiting to be unleashed on the economy. So, pent-up demand in its true sense. So we can expect a lot of that momentum, as well as this fiscal stimulus, to come into effect. Initially, that fiscal stimulus props up spending quite quickly.

And then you see that duration extended, as folks dip more into savings, dip into that cash balance, that $2 trillion in the bank account balances that that we've seen. And so that continues. So, fiscal stimulus going in tends to be quite abrupt going in and tends to trail out quite softly going out. So we don't typically get that big drop-off in spending as one would expect.

MYLES UDLAND: And, Bricklin, finally, something you guys flagged in your report is that online spending at grocery looks to be hanging in there. And I'm curious kind of what exactly the data are saying there and how big a shift this would be for that space specifically.

BRICKLIN DWYER: So online grocery is really interesting. I can remember back in the mid to late '90s when I was in a dotcom business, and we were looking at grocery around us. And we were seeing that hesitation of consumers shopping in grocery stores online. And we've seen this since the late '90s.

We've seen that evolution of trust that really has begun to evolve into people, both consumers spending more online and businesses like grocery that have been more reluctant, more barriers to entry, as well as businesses are more participating online in things like grocery. A lot of logistical challenges to make sure food doesn't spoil, eggs don't get broken on your way to your home. And so we've seen that emergence and that breaking down of barriers, which really has created the opportunity for some of these businesses to participate more online. That's what's created the stickiness going forward.

BRIAN SOZZI: All right, we'll leave it there. Bricklin Dwyer, Mastercard chief economist, always good to see you.