Proof Points Fast Take
Consumer spending is slowing, but still positive as we head into the holiday season.
Curbside pick-up appears to be only a temporary need for consumers until the pandemic ends.
Online shopping and ordering are here to stay.
Restaurants can capitalize on Thanksgiving take-out and curbside orders.
Election season has passed, and now consumers are focusing on the upcoming holiday season. The latest October retail sales data from the U.S. Department of Commerce, Census Bureau, indicates that some key retail areas experienced a decline while online retail rose slightly from the prior month. While two large pharmaceutical companies have just announced promising COVID-19 vaccines, consumers are still bracing for a virus surge during the holiday season which means greater online sales and less foot traffic to brick-and-mortar outlets.
As further evidence that consumers are cautious and are anticipating a slowdown, the latest University of Michigan’s Index of Consumer Sentiment fell from 81.8 in October to 77 for the first half of November. Moreover, Morning Consult, a leader in global data intelligence, analyzed their daily index of consumer sentiment and it too showed a drop in confidence, falling 1.4 points to 90.6 from November 10th.
Here is a breakdown from the Census Bureau for a few key retail categories:
Nonstore Retailers:
As our previous post had mentioned, consumers are continuing their trend to online shopping. October saw a 3.1% increase from September in online shopping, which has been increasing most of the year.
The latest survey from McKinsey shows that 20-50% of consumers are now saying that they plan to continue their online shopping post-COVID, compared to 15-30% who responded earlier in the summer.
General Merchandise Stores:
While consumers had briefly returned to General Merchandise Stores in September, they slightly pulled back in October, going from a 1.7% change in September to -1.1% in October.
The modest decline could be a reflection of consumers shifting their purchases to online stores rather than the traditional venues.
Retail Trade:
Buoyed by online sales, the overall retail category showed a small gain from September, going from a 1.5% month-to-month change, to a 0.3% change for October.
84% of the consumers that McKinsey surveyed said that they were going to maintain or reduce holiday spending. If the past few months are an indication, the overall retail category will show only modest gains for November and December.
42% of the McKinsey respondents said they were optimistic about the recovery after COVID, which is a slight improvement from September, where only 39% were feeling optimistic.
Department Stores:
Following a September that had one of the best month-to-month improvements, malls and department stores saw their sales change from 9.4% to -4.6%. With the start of another surge and lockdowns looming, this negative trend could continue through the end of the year.
20 – 40% of consumer net intent in the McKinsey survey is for higher-ticket items. This is potentially a good sign for luxury department stores.
Grocery Stores:
Grocery stores have seen a slight decline since their March 28.6% change high, when consumers were stocking up for the unexpected. October saw a decline from September’s 0.2% to -0.4% change.
Per the McKinsey survey, consumers indicated that grocery delivery and curbside pickup are services that “Work for Now” rather than being “Potentially Here to Stay”.
Searches on Google for “hello fresh thanksgiving 2020” jumped by over 5,000% in the last 90 days.
Food Services and Drinking Places:
Consumers are starting to slow down on their demand for restaurants. Most of the summer, restaurants enjoyed increased month-to-month sales, likely due to outdoor dining options. In October though, sales growth essentially plateaued at -0.1%.
Restaurant industry insider, Revenue Management Solutions, surveyed QSR clients who shared that their sales are looking more positive on a year-over-year basis for October at 1% growth.
The McKinsey survey highlighted that for the activities that consumers are most eager to return to, restaurants/bars finished in the top three for 37% of respondents, which is a positive sign for the future.
According to Google, search for the phrase “thanksgiving dinners to go” was up over 5,000% in the past 90 days, suggesting that restaurants may need to be prepared for strong demand for the holiday, even if their dine-in capacity is restricted.
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Sources:
U.S. Department of Commerce, Census Bureau Advanced Monthly Retail Trade Report 11/17/2020;
McKinsey & Company, US consumer sentiment during the coronavirus crisis, 11/13/2020;
Google Trends;
Revenue Management Solutions, Impact Report, November 2020
Morning Consult, Morning Consult Economic Intelligence