Call it the retail gap that eCommerce can only partly fill.
Earlier this month, a record number of Americans — 3.3 million — filed for unemployment benefits.
Consumer sentiment, as reported last week, dipped to a three-and-a half-year nadir, brought down by lingering fears over COVID-19, the disease caused by the coronavirus, and the increasingly “new normal” of social distancing.
The latest reading came in at 89.1, the lowest showing since October 2016, according to CNBC. To get a sense of the magnitude of the drop, the reading in February was 101. And consumer expectations slipped to 79.2 in March, down from 92.1 in February.
Consumer spending was up a mild 20 basis points in February, the third straight monthly gain of 10 basis points. That gain, of course, reflects calm before the storm, so to speak, before the unemployment filings, the mass closures, the stimulus efforts and stock market roller coasters.
The seismic shift is underway, and where we go from here no one knows. But at least one thing is for certain: eCommerce now is becoming not just a preferred way to shop — it’s the only way many can shop. But eCommerce can only go part way, not the whole distance, in offsetting a devastating hit to retail as we have known it.
With storefronts shuttered, work from home/online classes for students becoming the norm, and grocers staggering foot traffic to combat hoarding and health risks, sales done on laptops and smartphones can help restore at least some top line across any number of merchant verticals, for the time being.
But as quoted by CNBC, Chris Rupkey, chief economist at MUFG, said, “Even if sales made from consumers’ smartphones are ringing off the hook, it won’t offset for the closure of the shops and malls across much of America done to fight the spread of this deadly disease.”
As we noted in the latest "Navigating The COVID-19 Pandemic" study, eCommerce is helping fill a gap — just a little — in enabling people to get (some of) what they need or want (stockouts and delivery delays are a headwind, of course).
The report surveyed more than 1,900 U.S.-based consumers on March 17 as mandatory restrictions on travel and social interactions set parameters on the most basic activities. It found that more than 93 percent of consumers were at least “slightly concerned” about COVID-19. Breaking down that data a bit, 57 percent of respondents were “very” or “extremely” concerned, up 54 percent from the previous survey, just 11 days prior.
Drop In Propensity To Spend
Overall there’s been a sharp drop in the propensity to shop in brick-and-mortar settings. As many as 75.4 percent of respondents said they shop in-person at stores less than they did before the pandemic. That makes sense, of course, as at a minimum, 47,000 chain stores across the U.S. have temporarily shut their doors, and more than 90 “non-essential” nationwide retailers have temporarily gone dark.
But only 25.4 percent of consumers surveyed said they were shopping online, and 16.3 percent were doing so on mobile more than they were before the coronavirus made its presence felt on these shores. That’s only a slight uptick from the 22.1 percent and 16.7 percent, respectively, who reported similar sentiment in the survey at the beginning of March.
And in another data point, perhaps signaling turbulent times for restaurants and some top-line traction for grocers, 28 percent of respondents said they were using eCommerce to “stock up” on food, while only 16.1 percent said they were eating in restaurants less often because they were ordering in more.
It’s well known that consumer spending is the engine behind roughly two-thirds of U.S. GDP. Whether or not the $2 trillion stimulus bill, with its attendant checks, will spur more spending is unknown. In one study by UBS earlier in the month, 24 percent of employers planned to downsize in the event the coronavirus gets much worse.
There are rough times ahead, and buy buttons can help only just a bit.