The COVID-19 pandemic and the resulting government responses have had a significant impact on consumer spending, with retailers closed for months and shoppers staying home starting in the early part of 2020, with the timing of closures varying by country. Many consumers continue to stay home, even as most businesses have reopened. Online shopping has surged due to the pandemic. In the U.S. and Canada, e-commerce orders are up 146%.
Household consumption increased over the summer and is forecast to continue. Certain consumer behaviors that were newly formed during the earlier stages of the pandemic are expected to permanently influence spending habits. Retailers will need to clearly understand these behavioral shifts as they navigate the immediate future, and into the long term if they plan to succeed amid the new normal.
Digital as Key Driver
With brick-and-mortar stores closed during shutdowns of non-essential businesses, there was an obvious surge in online retail. Studies show that 46 percent of consumers increased how frequently they shopped online between March and May, with 63 percent decreasing their frequency of shopping in physical stores.There is plenty of indication that this digital trend will not be short term.
E-commerce was already a major channel for retail, and big box retailers continue to lead the way, as they have the means to pursue innovation, while data from 2019 indicates that middle-market retailers have struggled with this. A key reason is that these retailers are unsure of how to invest and get a return on those investments. But retailers cannot afford not to adapt if they want to survive. This means adopting new technology and infrastructure to accommodate online orders for both delivery and pickup. When retailers began reopening in late spring and early summer, those that offered digital options saw increased volumes, while those that did not, underperformed. Unfortunately, many middle-market retailers could not afford to make major technological adaptations because they already suffered plummeting sales from the earliest stages of the pandemic. For these business owners, a strong digital strategy for customer acquisition will be necessary if they plan to survive the pandemic and thrive in the future, especially through the holiday shopping season. Some big chain retailers have already canceled Black Friday this year, while some have announced plans to roll out deals beginning in October, and Amazon pushed its annual Prime Day back from July to October.
Supply Chain Disruption
The pandemic gradually worked its way across the world’s complex geographical supply chain. Each part of the world was impacted on different timelines and varying levels of severity, making it difficult for supply chains to bounce back at the same time.
These supply chains have also been affected by changing consumer preferences based on changing household needs, with more emphasis on value amid uncertainty and unemployment. This actually offers an opportunity for middle-market retailers because they can be more flexible than big-box stores that typically purchase shipping-container size orders from fewer suppliers. It is beneficial for retailers to be able to carry smaller quantities while identifying and capitalizing on short-term trends. An example of this is how smaller retailers began selling personal protective equipment (PPE) and how distillers began producing hand sanitizer during the pandemic.
2020 Retail Sales Trends
- As many students are learning online from home rather than in person, sales of tech and educational books have increased, and notebook computer sales have reached record levels. Sales have also increased for monitors, keyboards, mice, and docking stations.
- Virtual learning has also created a huge demand for communication devices such as webcams, non-gaming headsets, and routers.
- Home improvement retail sales have increased this year, and do-it-yourself shoppers are expected to continue to drive these sales post-pandemic.
- Sales of personal finance books have increased due to economic insecurity and increased unemployment.
- Toy industry sales increased by 9% in the first half of 2020 across the G12 markets. Games and puzzles were the leading performers in the category, with four other categories recording growth: outdoor & sports toys, building sets, arts & crafts, and explorative & other toys.
- Consumer technology sales are expected to grow 18 percent in the fourth calendar quarter of 2020 because of holiday shopping.
- In China, prestige beauty e-commerce sales skyrocketed to $1.3 billion, up 87 percent in June 2020 from the same period in 2019.
- S. consumer spending on video gaming hit a record $11.6 billion in the second calendar quarter, an increase of 30%.
- Golf equipment sales were up 51 percent in June in the U.S. Sales of golf training aids products grew rapidly in March and April, up more than 140%, with sales growing 78% in June.
The immediate outlook for retail is hard to predict because of the uncertainty that surrounds the virus and a possible vaccine. Different regions may face different outlooks depending on the persistence of cases. Retailers will need to track these patterns closely as they continue to operate in the fall and into the holiday season. Focus should remain on promotion and investment in near-term sales opportunities such as in-store pickup and online shopping regardless of what happens with the virus, as these offerings are likely to continue to pay off in the future. Data from March, April and May of 2020 indicates that more than 60 percent of consumers will continue their new, pandemic-era shopping habits. This means retailers will need to be creative and focus on sales through non-brick-and-mortar channels, through means that range from online sales to social media promotions. Having a detailed plan and being prepared and flexible can make a major difference on whether a retailer survives the crisis.
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