Moving Less, Buying More

November 23, 2020

Here’s a Black Friday offer that has never been seen before: a doorbuster deal on face masks. The peak shopping season in 2020 is going to be different! So how will retailers adapt? Will they once again try to lure customers into stores by promising irresistible bargains on scarce quantities of hyped products, or will the focus switch to on online channels?

Walmart, the nation’s largest retailer, has announced that its Black Friday has been revamped to a multi-day experience, both online and in-store. The strategy aims to spread customer traffic in stores over a longer period to reduce congestion and lengthen the seasonal purchasing window. In a similar move Home Depot has announced plans to extend Black Friday deals throughout November and December, in stores and online.

Census Bureau data show that retail sales have yo-yoed this year. Down 20% year-over-year in April, sales recovered to their prior high in June. By October, sales were up 5.7% compared to a year ago. This growth took place despite higher unemployment and some lingering supply chain disruptions. The overall rebound indicates that consumers are confident and willing to spend, but not all segments of retail have benefited. Sales for building material and garden retailers have boomed and are almost 20% higher than last year. The driver has been the popularity of home improvements and gardening during the lock-down restrictions. I have seen the effect in my neighborhood with the installation of backyard sheds by my two immediate neighbors. Not surprisingly, the lagging retail segments include restaurants, bars, and gas stations, all down about 14% from last October’s levels.

Data published by Google on community mobility shows U.S. retail and recreation traffic still down 19% from a pre-pandemic baseline as of mid-November. Traffic declines vary by location, with retail traffic in the District of Columbia less than 50% of normal while South Dakota is down just 7%. Here in Atlanta, foot traffic data based on information from mobile devices showed early November mall traffic down by 37%-65% from a year ago across our nine major malls.

Sales in non-store retail are up by nearly 30% from last year, and this increase has offset declines in other types of retail. E-commerce now makes up 14% of all sales in the U.S. and has increased 37% since Q3 2019. More time at home and an increased need for safety has led many Americans to opt for online alternatives, accelerating an already strong trend. Cyber Monday, the e-commerce companion to Black Friday, had previously surpassed Black Friday in sales and is anticipated to take the top spot again this shopping season.

Whether the holiday sales season ends up being dominated by garden tools, face masks, or more conventional holiday purchases, it will be interesting to see how American consumers respond to retailers’ offerings this season. In an economy driven 70% by consumption, the holiday shopping season is always an important indicator of economic health, but this one may look a bit different.

Cam Simonds