Business

5 Retail Insights from a Covid Christmas

Holiday consumer spending offers insights into the retail industry, including ecommerce’s continued growth, consumer spending, and customer relationships.

2020 has been extraordinary — the pandemic, natural disasters, and a divisive U.S. election.

Despite this, U.S. retail spending is up. The National Retail Federation recently reported that total U.S. retail sales (excluding automobiles, gasoline sales, and restaurants) for the first 10 months of 2020 increased 6.4 percent from the same 2019 period. And that includes the stunningly poor retail sales in April 2020 when so many stores and businesses were closed.

This isn’t to say that everything is hunky-dory in the retail industry. Just ask Pier 1, Sur La Table, Motherhood Maternity, J.C. Penney, Neiman Marcus, or any of the other dozens of merchants that filed for bankruptcy during the year.

So what does it all mean? What follows are five insights from the 2020 Christmas season.

1. Ecommerce Is Booming

From early October through Christmas Eve, online retail spending rose an amazing 49.0 percent, according to Mastercard SpendingPulse.

“At the onset of the pandemic, overall retail sales were down. But there was a major shift occurring, and it was by far the largest move toward ecommerce that we have ever seen,” said Joe McCarthy, director of performance marketing for Klaviyo, an email and SMS marketing platform. “Essentially, in 2020 we saw multiple years of ecommerce growth.”

This trend toward ecommerce may continue. For example, Aisha Al-Muslim, a reporter for The Wall Street Journal, noted that several bankrupt brick-and-mortar retailers — such as Lord & Taylor, Stein Mart, and the aforementioned Pier 1 — have been acquired in the hope that they could still sell online.

2. Money Will Be Spent

Americans spent money despite the pandemic, the election, the fire season, and the weather.

Statista confirms the overall data trends of the NRF and Mastercard SpendingPulse, noting that American retail sales in October 2020 alone grew by 8.5 percent over the same 2019 period.

If they have money, shoppers tend to spend it. There is likely always an opportunity if a retailer can find it.

3. Keeping Customers Is Vital

Shopping habits changed in 2020. When physical stores closed in March and April, shoppers had to find alternative channels and brands.

“Many people [shopped with an online retailer for the first time] out of need,” said Klaviyo’s McCarthy. “They couldn’t find a product from a traditional brand that they had purchased from, so they discovered new options.”

If a business acquired new customers, particularly during the Covid Christmas season, its continued success might depend on how well it retains those shoppers. Put another way, businesses that acquired customers because of the pandemic will need to find ways to keep shoppers loyal long term when it ends.

4. Not Everyone Can Win

Despite the increase in sales, not every retail ecommerce merchant can or will make money. The future could be treacherous.

Total year-over-year apparel sales (physical and online), for example, plummeted 19.1 percent from October 11 to December 24, 2020, compared to the prior year, according to Mastercard SpendingPulse. Clearly, apparel retailers were losing. But furniture and furnishings sales leaped 16.2 percent overall and 31 percent online for that same period compared to 2019.

5. Local Suppliers

Before the pandemic, sourcing foreign-made products made economic sense for many brands and retailers. But when those long supply chains failed, having a local option made a significant difference for many companies.

“The coronavirus pandemic snarled the world’s sprawling supply chains for months, shutting factories, disrupting shipping and making it difficult for companies to get products from factories to consumers,” wrote Mike Cherney in The Wall Street Journal.

“Now, many companies are considering changing the model to avoid future product shortages and transportation delays, even if it might increase costs. Some are looking at moving production closer to home. Others are considering spreading small factories around the world instead of putting all their manufacturing in one place.”

Armando Roggio
Armando Roggio
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