COVID-19 Consumption Trends: The Downfall of the Retail Sector
By now everyone has been able to feel the effects of the Coronavirus outbreak, as it has had a dramatic impact on our day-to-day lives. Whether it be who we interact with, where we go, how we travel, or how we eat, our daily routine looks very different than it did only a few months ago. This drastic change in everyday behavior has also completely changed our consumption methods. No longer are we dining out, making trips to the mall, or shopping along our city’s streets. Numerator, a specialist in consumer insights, utilizes what they call an omnipanel to gather accurate consumer intel. The omnipanel collects consumer information from various sectors by collecting electronic receipts from a wide range of individuals. Numerator has been able to use this data to find great intel amongst consumers and how their consumption trends are changing due to Coronavirus. To help give a larger picture, almost 90% of individuals have changed their consumption habits due to Coronavirus (Numerator, 2020). Consequently, many large retail and typical brick-and-mortar stores are struggling to survive. The potential fallout of these stores would completely reshape our consumption methods for years to come.
Retail giants such as J-Crew, Neiman Marcus and JCPenney amongst others have all filed for Chapter 11 (a form of bankruptcy that allows them time to restructure their debts) in the past few months (Bhattarai, 2020). These are giant corporations who typically see billions of dollars worth of sales struggling mightily just to keep their doors open. For instance, JCPenney, who made $12.02 billion in sales in 2019, filed for bankruptcy protection on May 15 and recently stated that it would permanently close some of their 850 locations (Bhattarai, 2020). Similarly, Neiman Marcus, who made $4.9 billion in sales in 2018 has temporarily shut down all 43 of its stores (Bhattarai, 2020). This is quite remarkable, as just six years ago retail giants such as JCPenney and Neiman Marcus enjoyed over a 90% market share in comparison to e-commerce sales, who at the time only accounted for about 6% of the market (Hortacsu, 2015). Clearly, the playing field has shifted dramatically in recent times, as of 2019 Amazon alone had a 44% market share (Duggan, 2020). While Coronavirus certainly helped accelerate the downfall of these retailers, it is not necessarily the main culprit of their fallout. The recent emergence of successful online retailers such as Amazon and Shopify has certainly taken a toll on the prominent retailers’ success as well, as this has allowed consumers a very efficient and easy approach in online shopping.
Recent consumer trends have also played a key role in the downfall of these retail stores. According to consumer reports, nearly half of consumers are currently making online purchases in scenarios when they would typically shop in stores (Numerator, 2020). Additionally, nearly 75% of individuals reported that they had placed an online delivery order in the past week, and another 50% of individuals stated they had placed some sort of online order for pickup (Numerator 2020). Obviously, online sales have an enormous advantage right now as in many states individuals are still unable to shop at typical retail stores. However, with Coronavirus worry levels at its lowest percentage since March (only 21% of individuals noting that they are very concerned about the virus) and states beginning to allow more and more businesses to operate, it will be interesting to see how these trends change. Additionally, the number of households going out shopping are down in nearly every industry besides home improvement and liquor sales (Numerator 2020). Mainly because online shopping is a little more difficult in those two sectors. Again these trends are due in large part to Coronavirus but it will be interesting to see if they continue as the comfort and ease of online shopping and purchases becomes the new normal.
Looking forward, it is difficult to imagine retail giants being able to be to have great success without adjusting to the new normal. If companies like J-Crew, Neiman Marcus, and JCPenney can survive this major drop in sales, it will be interesting to see how they are able to adapt to the new normal. I find it difficult to believe that previous consumption centers like shopping malls will ever have great success again. Companies in this industry were already struggling to maintain high revenues and now, due in large part to Coronavirus, it does not seem like this struggle will cease anytime soon, as individuals for the foreseeable future will certainly have concerns about the mass congregations of individuals in the same area. Additionally, this time has opened many eyes to the great ability and efficiency that online shopping provides. For consumers it is fantastic in allowing them to get food, clothes, cleaning supplies and anything else they may need from the comfort of their home. Similarly, for companies transitioning to focus more on e-commerce, it allows them to reduce a variety of costs, such as the costs of maintaining a brick-and-mortar store, and allows for a more efficient business model. While these massive retail stores aren’t quite on their deathbeds yet, the massive growth and success of e-commerce paired with consumer trends due to the pandemic could very well prove to be lethal.
Works Cited:
Bhattarai, A. (2020, May 27). Pandemic bankruptcies: A running list of retailers that have filed for chapter 11. The Washington Post. Retrieved from https://www.washingtonpost.com/business/2020/05/27/retail-bankrupcy-chapter11/
Duggan,Wayne. (2020, Feb 4). Latest E-Commerce market share numbers highlight Amazon’s dominance. Retrieved from https://www.finance.yahoo.com/news/latest-e-commerce-market-share
Hortacsu, A., & Syverson, C. (2015). The ongoing evolution of american retail: A format tug-of-war. The Journal of Economic Perspectives, 29(4), 89-111. Retrieved from JSTOR database.
Intelligence, N. (2020, May 14). 5-14 update: The impact of coronavirus (Covid-19) on consumer behavior [Blog post]. Retrieved from https://www.numerator.com/resources/blog/update-impact-coronavirus-covid-19-consumer-behavior-us-9
Numerator. (2020, May 12). Covid-19 impact: The most complete insights on consumer behavior. Retrieved from https://www.numerator.com/coronavirus
