There is no arguing that the past few months have been a living hell for the brick-and-mortar retail sector. Shoppers were sheltering in place and state and local governments were ordering lockdowns of all “non-essential” business.
Recent weeks have seen an easing of the self-imposed and government imposed lockdowns. Businesses started opening again and some semblance of normalcy returned to the economy. Granted, people are still being asked to social distance and wear masks, but at least they were going out and spending money.
As an article in the New Your Times, Consumers Came Back in June, but for How Long? points out:
The American consumer came back last month, with retail sales increasing 7.5 percent from May as stores reopened in warm weather, shoppers shook off lockdown fatigue and the federal government pumped trillions of dollars of stimulus into the economy.
Unfortunately, this good news is offset by the resurgence of the pandemic in some of the most populous states in the union. States like Texas, Florida, California and Arizona are seeing new cases of COVID at alarmingly high levels. As these states start to cope with their outbreaks, they will see an erosion of some of the recent retail growth numbers—but it is too early to tell to what extent.
Furthermore, the stimulus money and the enhanced unemployment payouts are also starting to dry up. Consumers have already spent that money which likely had a significant part to play in the 7.5% increase in retail spending.
To make matters even worse, the increase in sales we’re seeing is disproportionate to what we would have seen pre-pandemic. As the article points out, there are certain retail sectors that have missed out on the rebound.
But the pandemic has altered which businesses are receiving that money, and the monthly sales report doesn’t fully reflect the huge shifts in how and where Americans have been shopping since the pandemic took hold.
The divide has grown between retailers considered “essential” and those deemed “nonessential,” and temporary closures delivered a severe blow to many large apparel chains, department stores and malls. High-profile bankruptcies since the beginning of May have included J.Crew, J. C. Penney, Brooks Brothers and GNC, and many retailers like Macy’s and Levi’s have cut corporate jobs in addition to furloughing or laying off store workers. Shifts to online shopping and pickup-only operations led to job reductions at retailers and restaurants.
The short-term future of retail is facing some serious headwinds as all the aforementioned issues come into play. At least we have e-commerce and restaurant takeout to keep us spending. Traditionally, consumer spending has lead the comeback from economic downturns. This recovery may take a little longer than we previously thought.
Overview by Peter Reville, Director, Primary Research Services at Mercator Advisory Group