In the first full month of the coronavirus impact, shoppers stayed away from physical stores and purchased on the web in larger numbers, new U.S. Department of Commerce data shows.
Nonstore sales increased 12.1% year over year in March
Nonstore retail sales grew at a higher year-over-year rate in March than the prior year, according to a Digital Commerce 360 analysis of the Commerce Department’s advance monthly figures released Wednesday. Spending in the nonstore segment increased 12.1% year over year in March, up from 8.6% for the same month in 2019. That also marks the highest monthly growth rate so far this year, as January registered an 8.0% uptick and February gains hit 10.3%. Growth in the nonstore channel accounted for more than half–51%–of all retail gains in March.
The Commerce Department’s nonstore sales–which are mainly online but include other sales such as orders through call centers, catalogs, door-to-door visits and vending machines–don’t align perfectly with spending captured in the pure ecommerce figures that the agency releases quarterly. But the data is an early indicator of trends in the online sector. Digital Commerce 360 analyzes non-seasonally adjusted Commerce Department numbers.
March nonstore figures align with ecommerce trends spotted by other industry experts.
Online spending up 40%
Ecommerce spending is up more than 40% year-over-year since President Donald Trump declared a state of national emergency on March 13 through March 24, according to an analysis of spending trends at 850 retail sites by digital marketing vendor Listrak. According to Adobe Analytics, the data insights arm of software firm Adobe Inc., average daily ecommerce sales in the United States were up 38.0% for the March 12-31 period compared to the March 1-11 period.
CommerceHub, an ecommerce software provider, also reported a year-over-year surge in order volume for its retail clients, including merchants selling essential items like food, beverages and household cleaning products. According to CEO Frank Poore, retailers specializing in home and office products performed well with so many workers setting up home offices for the first time in March. Online sales of lawn and garden items, games and crafting supplies such as paint and wood-working tools also jumped last month as consumers settled in for a prolonged quarantine period, according to CommerceHub. Conversely, fashion sites didn’t see an influx since people aren’t leaving their homes.
Additionally, electronics retail chain Best Buy Co. Inc. announced Wednesday that domestic online sales were up more than 250%, with about half of those sales coming through buy online, pick up in store or curbside pickup programs. The company says it has retained about 70% of sales for the 9-week period ending April 4 as compared to last year despite all U.S. stores being closed to customer traffic since March 22 and attributes that to reliance on its omnichannel capabilities. Best Buy is No. 13 in the 2019 Digital Commerce 360 Top 1000, which ranks the largest online retailers in North America.
Total retail sales in March are better than expected
When looking at total retail sales, the first full-month glimpse of how the global health crisis has affected retail in the United States also shows some “essential” categories like grocery are booming and even setting records, helping to offset poor performance in other industries like apparel. In fact, total retail sales grew at a rate that’s about five times the monthly jump in March 2019 despite most of the biggest retail chains temporarily shuttering stores.
Total retail sales through all channels for Digital Commerce 360-defined segments grew 4.4% year over year in March, which is roughly five times faster than the 0.9% rise in spending for the same month in 2019. This is far from the steep drop-off anticipated by some analysts in the wake of COVID-19 restrictions and consumer anxiety, although numbers varied wildly by merchandise category.
Sales data showing a “mixed bag”
Sucharita Kodali, principal analyst at research firm Forrester Research Inc., says the Commerce Department retail numbers were a bit better than expected. Grocery stores and general merchants—i.e. warehouse clubs—fared well, “but not enough to save the retail industry from a contraction,” she says.
“That said, if the Census [Bureau] is correct, this is actually good news,” Kodali adds.
Total retail sales data by category showed a mixed bag.
As consumers raced to stock their fridges and pantries in the last month while staring down indefinite stay-at-home orders, grocery sales soared to record levels. Food and beverage stores saw a massive 25.7% year-over-year surge last month–the highest March growth rate in at least the last 25 years, according to a Digital Commerce 360 analysis of Commerce Department data. During that period, no other March growth even reached double digits, and the median was just 3.3%. This also was up significantly from 8.3% year-over-year growth in February.
Other retailers selling household and personal care items deemed essential increased revenue. Sales in general merchandise stores were up 5.7% year over year in March, which was up from a 0.5% drop in the same month of last year but down slightly from 6.9% growth in February.
What are people shopping for during the coronavirus quarantine?
- Hardware and home improvement retailers also seem to have benefited from the coronavirus fallout as consumers have started to tackle home repairs and renovations while they’re stuck in the house. This group increased March sales by 10.1% over the same month last year, when spending actually dropped 1.0%. Even February saw a more sizable 9.3% uptick.
- Sales for health and personal care merchants grew 5.5% year over year in March, more than double the 2.1% monthly growth in 2019 and up from 2.8% in February.
What have people stopped buying during the coronavirus quarantine?
- Spending with apparel and accessories stores plummeted 52.0% in March when compared with the same month last year—a huge decrease from February’s performance when the category grew 5.2%.
- Sales for home goods and furniture retailers dropped 25.2% year over year in March, compared with an 8.2% increase in February.
- Sporting goods and hobby stores declined 24.4% in March compared with the same month last year. In February, the category grew 5.4%.
- Electronics and appliance sales decreased 16.2% year over year in March after growing 3.0% in February.
What to expect in April
“COVID-19 has hit the retail industry unevenly,” says Jack Kleinhenz, chief economist at the National Retail Federation. “This is a market of haves and have-nots. The haves are the stores that remain open with lines out the doors to buy daily necessities while the have-nots are the stores that have closed and are taking the brunt of the impact of the pandemic.”
Retail data for April and beyond will likely “show a worsening situation,” according to Kleinhenz, since many stores were still open at the beginning of March but have since closed. Even if the economy begins to reopen in May, consumer behavior may take a long time to adjust, he warns.
“The road to recovery could be long and slow,” Kleinhenz adds.
It’s important to note that Digital Commerce 360’s analysis excludes sales in segments that don’t typically sell online such as restaurants, bars, automobile dealers, gas stations and fuel dealers—and these groups have been the hardest hit with stay-at-home orders and have seen spending plummet. Dining establishments and service industry staples like hair salons are largely closed and struggling to stay afloat without the same opportunities for a contactless delivery system and online revenue stream as ecommerce players. Gas stations have taken a hit as people remain at home for weeks, and auto purchasing has been put on hold as consumers face growing unemployment and an uncertain economic future.
Earlier this week, the Harvard Business School reported that 65% of small retailers say they’ll likely be forced to permanently close by the end of the year if the COVID-19 pandemic lasts four months. Harvard researchers paired up with other prominent business school researchers and an online business networking platform called Alignable to survey nearly 6,000 small-business owners for the study.
Commerce Department addresses data reliability as fewer retailers report sales
The federal government shutdown from late December 2018 through late January 2019 resulted in the Commerce Department delaying the publication of retail sales data. When figures eventually were released, a number of industry experts questioned the accuracy of the reports, suggesting data integrity may have suffered for the period because of skeletal staff or rushed analysis.
Amid the most recent kink in its operations, the Commerce Department addressed potential data reliability concerns.
“Due to recent events surrounding COVID-19, many businesses are operating on a limited capacity or have ceased operations completely. The Census Bureau has monitored response and data quality and determined estimates in this release meet publication standards,” the agency notified visitors to the U.S. Census Bureau website, where users can download retail reports.
The message links to a frequently asked questions page related to COVID-19’s effect on data collection, where the department acknowledges that some retailers’ ability to submit accurate and timely information to the Commerce Department is hampered right now. The agency did alter its data collection procedures for the month by focusing on email and online reporting rather than offering all reporting channels like mail and fax for employee safety reasons. But the Commerce Department says its response rate fell within normal ranges for the survey.
The agency’s disclaimer that some retailers have gone dark is a reminder of the stark reality facing many companies who have shuttered stores during shelter-in-place mandates and voluntarily halted business for the safety of employees and customers. Without revenue flowing in, some retailers will be casualties of the health crisis, and more are at risk of folding the longer the state of emergency lasts.