Apparently, “funflation” is having a huge impact on retail spending right now.
That, at least, is according to Corie Barry, the CEO of Minneapolis-based electronics retailer Best Buy, who cited “funflation” on weak performance at her company, according to Fortune.
Barry essentially said that consumer spending on entertainment, such as Taylor Swift concert tickets, is taking away from consumer spending on electronics. And consumers are willing to spend on those experiences even as they cost more—funflation. “Those experiences are really where people are willing to pay,” she said at a conference, according to Fortune.
In other words, people are spending so much money on entertainment such as concerts, and restaurants, that they have less left over to spend on big-screen televisions or computers. That spending shift extends to all kinds of other retailers, too.
Sales at electronic store declined 1.8% in August from the same month a year ago, according to federal retail sales data. Sales at furniture and home stores are down 7.8%. Sales at sporting good stores declined 1.4% and sales at department stores fell 3.4%.
On the other hand, restaurant and bar sales rose 8.5%. Grocery store sales increased 2.1%.
Industry executives have long felt that consumers value experiences and are willing to spend on them, particularly younger consumers. Nearly two-thirds of Gen Z consumers, and 59% of Millennials, told credit reporting firm Experian that they would rather spend their money on life experiences than save for retirement.
A June survey for Credit Karma found that more than a third of those generations lost a friend over excessive spending with 43% of Millennials saying they overspend on dining out or drinking.
Even within the restaurant industry, we’ve seen a major focus on experiences. Steak chains thrived coming out of the pandemic, even if they’ve slowed down more recently. And investors are pumping money into eatertainment concepts that let people do everything from complete puzzles to play pickleball.
To be sure, operators will note that their traffic may not reflect that desire. But consumers are unwilling to give those experiences up even as prices for them have soared.
Thus, they’ve been willing to travel or spend thousands of dollars for Taylor Swift concert tickets. And it’s helped fuel restaurant sales even amid a host of industry concerns, from student loan repayments to drained pandemic savings.
None of this is to say those concerns aren’t real and that they couldn’t cause problems for the industry. But it’s another reminder that younger consumers have different spending priorities than their parents, and it’s been helping drive much of the restaurant business.