US retailers experience biased consumer spending post pandemic

In the aftermath of the Covid-19 pandemic, the world has changed in fundamental ways. Consumer sentiments have changed and so have their buying patterns and channel preferences. The gradual recovery of the economy has begun globally, but emerging trends show that the pandemic has affected different businesses differently.

The US economy started showing a positive streak with consumer spending picking up despite pulling back of the weekly supplement to unemployment benefits in the last week of July. In September, consumer spending in US touched new heights. According to Statista, the preliminary findings of the U.S. Census Bureau suggest that retail and food services sales (seasonally adjusted) amounted to $549.3 billion in September – an increase of 33% since April 2020, but more importantly up by 5.2% from the same period in 2019.

While the bounce back in consumer spending is an extremely encouraging sign for businesses, the uneven and biased nature of the recovery cannot be overlooked. Global analysts have pointed out several times that the pandemic has created a favorable ambience for some businesses to flourish while making things difficult for others. As a result, although some retailers have witnessed a healthy growth, consumer spending in other retail segments are yet to get back to pre-crisis levels.

Higher end of the spectrum

Three retail segments in US have experienced double digit sales growth in January-September 2020, in comparison to the same period of last year. With social distancing norms in place, online shopping has seen an unprecedented surge since the onset of the pandemic. The repercussion of the trend is clearly visible in the 20.5% increase in sales registered by the Non-store retailers.

Due to the Covid-19 threat, people were compelled to stay indoors and also had more time on their hands. People thus started spending more time and money on outdoor activities, hobbies (like reading, sports, gardening, cooking, etc.) and selfcare.

In alignment to these trends, building materials and garden retailers saw 12.8% rise in sales, while grocery stores sales increased by 11.9%. Sporting goods, hobby and bookstores along with stores selling health and personal care products also witnessed a marginal increase in sales.

Worst hit retail segments

With a drop of 32.6% in their sales in the first three quarters of 2020, stores selling clothes and accessories were worst hit by the pandemic. Since people were stuck indoors without anywhere to go – no social gatherings or going to work, there was no need for buying new clothes or accessories and hence the degrowth.

Due to similar reasons, food services and drinking outlets were also badly impacted where the consumer spending decreased by 20.1%. Departmental stores and electronics and appliances stores too witnessed a drop of over 15% in consumer spending as such spending largely shifted to online channels. The below chart clearly demonstrates how the divergent consumer spending has affected retailers differently.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of ET Edge Insights, its management, or its members

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