The impact COVID-19 is having on the retail world is unprecedented. While we are already hearing reports that the malls in China are getting close to 90% of their pre-crisis traffic, we’re still reacting to the shocking shifts in how we do business that local and state governments are putting in place. To that end, we’ve rounded up some research from around the web about the impact of COVID-19 on our global community.
With many states on complete lockdown, there was some hope that e-commerce would mitigate the declines in shopping. Unfortunately, Wedbush and Morgan Stanley analysts both said they don’t think the uptick in online sales will do enough.
While the average American consumer is scaling back, many have rallied around the idea of supporting local businesses with various campaigns. Wells Fargo’s economists Tim Quinlan and Shannon Seery noted that while many categories of spending are resilient, lower gas prices could also free up household finances to spend on other purchases.
Long-Term Impact of the Crisis
Most analysts agree that COVID-19’s impact on sales and profits “will prove transitory and will not tip the economy into recession” (Wedbush). The same report noted that “pent-up demand could partially offset” the pressures in Q1-Q2 2020. Even so, many people are holding off on new purchases of homes and major renovations, which will have an impact on real estate and companies in the home improvement market like Home Depot, Lowe’s and Ace Hardware.
2020: Already Expected To Sink To A Four-Year Low With COVID-19
Kantar research suggests that its 2020 US retail outlook calls for growth to drop to the lowest level in four years. Even so, retail forecasts are going to be adjusted as medical and governmental policy information becomes more concrete over the next three months. There simply isn’t a precedent for the impact on retail businesses in the US and COVID-19 is expected to impact the retail forecast in several capacities.
As the virus spread, US shoppers started stocking up on nonperishables and cleaning products. When shopper fears subside (most analysts suggest the second half of 2020), the current purchases will get used up, affecting demand in Q3-Q4 2020.
What about the just-ended Trade War?
A key change for the 2020 retail outlook is the cancellation of the tariffs slated to go into effect in mid-December 2019. Most retail analysts forecast that these tariffs would trigger a price increase in 2020 and severely dampen demand. Any upside to this cancellation are expected to be overwhelmed by the negative effect COVID-19 has had on global trade. With the tariff cancellation and the recent fall in commodity prices, aggregate retail prices are expected to decline in 2020. Inflation-adjusted demand growth was raised, although it will still be the weakest since 2013.
With Q1 2020 almost gone and the lack of certainty from COVID19, the key takeaways from various reports are:
- Online and omnichannel wins regardless of the depth of the crisis. Any retailer scaling back investment in these areas can expect a pronounced negative effect on short- and long-term growth.
- Luxury and big-ticket home goods spending face continued headwinds. Retailers operating in these fields must manage inventories conservatively.
- If shoppers maintain confidence, the holistic value that supermarkets and some big-box mass retailers offer with click-and-collect, no-touch experiences, will resonate with them. Even with a struggling economy, these retailers can compete better with dollar channel operators and discounters than in 2008. The omnichannel shift has altered the playing field.