Hitha Herzog on Retail Sales, Prime Day Distortions & Smarter Consumer Spending

**SPEAKER_1** (0:00)
Joining us now is Hitha Herzog, who's the retail analyst at Cash App and Afterpay. Hitha, thank you so much for your time. Happy Friday. What did you make of the retail report?

**Hitha Herzog** (0:09)
You know, it's interesting. You see these numbers and immediately you think, oh no, this could be really worrisome because these numbers have, this first time they've been down in nine months. But if you dig into them, they actually really indicate that the consumer isn't completely shut down. They're just being more intentional about what they are spending on. So let's dive a little bit deeper. We saw that Amazon Prime, Walmart Plus, and Target Circle all had their big shopping days, right? Amazon Prime Day was moved to June, Walmart Follow, Target Follow. Last year, that was in July.
That spending, especially online where we saw the numbers fall, moved to June in addition to the fact that we still have that K-shaped economy going on. So the top of the K, those spenders are not price sensitive, but the bottom of the K, they still are. But again, it's that intentionality of how they are spending and what they are spending on that we are seeing play out in these numbers.

**SPEAKER_3** (1:07)
Hitha, you make a good point here about some of these one-off things that are calendar related with the movement of some of those sale days, also the tax refund support expiring. So as you look at that and we strip those factors out, how much genuine weakness is left? How concerned should we actually be about the health of the consumer?

**Hitha Herzog** (1:27)
I don't think we should be that concerned at all. I mean, we saw gasoline prices fall. I mean, year over year, they were up 16 percent, but they fell in July. Well, we had a heat wave going on here. I don't know. I'm here in New York. It was insanely hot. No one wanted to really drive around. So people were hunkering down.
We saw that play out in grocery, which ended up being flat, but also restaurants were up a little bit. So that indicates that the consumer is still resilient, and they're just spending differently.

**SPEAKER_1** (2:00)
We're certainly seeing that in the corporate breakthroughs. I mean, we've got a big week of retail earnings next week. I'm just wondering exactly what you're expecting to hear from those companies because there is an argument to suggest that Walmart is more important than retail sales.

**Hitha Herzog** (2:15)
Sure.
That's certainly the case. But part of the reason why too, and I just want to bring it back to really quickly about the spending and how the consumer is spending. We were talking about grocery just now, and it's really interesting because we see this play out a lot, certainly with the way that the numbers are being reported across the board. Grocery, utilities, any sort of restaurants. When you look at the Afterpay for cash out credit card, the data that was coming out of there, 42 percent of the transactions that were happening on that were actually moving towards those type of transactions, right? The more everyday type of transactions. So what we are seeing is that the consumers focusing on everyday, they're being really specific about those eight everyday purchases. Those big, those bigger items that we tend to buy sometimes in the summertime, aren't really happening. They may be being pushed to later on in the year, but it's the everyday purchases that are happening, that people are being more intentional about.

**SPEAKER_3** (3:20)
And Hitha, I want to dive into that because I thought that was a very interesting piece of the data that you sent over about that Afterpay spending, going towards groceries, gas, restaurants, utilities, daily interactions that we have, as opposed to this concept that buy now pay later is sort of reserved for these more big ticket discretionary items. Are you noticing a full shift in the consumer and how they are viewing buy now pay later as a part of the management of their daily life instead of just these discretionary one-off purchases?

**Hitha Herzog** (3:52)
Yeah, there was a quote that I saw when I was doing my research and it was that the consumer isn't shutting down, they're just thinking differently. And that's exactly what's being played out in the buy now pay later, especially with Afterpay Cash app. I think the consumer is using this more as a tool to manage their expenses and managing the way that they are spending.
It's not just something that we use at the register anymore to finance purchases, but really in a way of managing how we spend. And really, it's interesting too, because when you talk about the everyday purchases, when you have a younger generations, these generations are really working the gig economy, and payments come at different times in different ways. So that is another way that Buy Now, Pay Later is really helping younger generations specifically, Gen Z, all the way up to the older generations, manage that cash flow.