The performance of U.S. ecommerce and other nonstore sales was a rare bright spot in the dismal retail landscape reflected in the new U.S. Department of Commerce data showing the repercussions of the coronavirus’ stay-at-home orders.
Consumer spending in nonstore channels jumped 20.5% year over year in April—the second-highest growth rate ever recorded for the month, according to a Digital Commerce 360 analysis of the Commerce Department’s advance monthly figures released Friday. Numbers exclude estimated fuel sales. April’s nonstore surge was also higher than the revised 18.8% year-over-year growth in March and marked only the second time in the last two decades that a month’s nonstore growth surpassed 20.0%.
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 data.
April nonstore figures align with ecommerce trends spotted and predictions made by industry experts.
Online sales continue to jump during pandemic
Online sales for consumer packaged goods were up 45.0% year over year for the 4-week period ending May 2, according to U.S. ecommerce data from research and polling firm Nielsen and Rakuten Intelligence, which tracks online sales through shoppers’ email receipts. But spending in this category, which includes items typically sold in grocery stores, dipped 5.9% when compared with the prior 4-week period ending April 4, signifying a slowdown in the frenzied stockpiling of essential household items as the pandemic stretches into another month.
The longer the pandemic persists, the more ecommerce will grow, according to Eric Roth, managing director at investment firm MidOcean Partners.
“If there is no vaccine or medical mitigant by the fall or into 2021, there will be temporary shutdowns in various segments of the economy as a second wave of some magnitude likely happens,” Roth said. “This means that online overall will continue to take share.”
Total retail sales see horrendous April showing
In April, the first full month of widespread temporary store closures, total retail sales through all channels for Digital Commerce 360-defined segments plunged 9.0% year over year, excluding estimated fuel sales, according to Commerce Department figures. This was the largest year-over-year decline for any recorded month for which Commerce Department retail data is available.
The numbers indicate that most of the economy was “on lockdown” and aren’t a surprise since April was the first full month of nonessential business closures, according to Jack Kleinhenz, chief economist at the National Retail Federation.
“As predicted, retail sales were bad in April and lower than in March,” he said. “Now that we’re in mid-May, many businesses are already starting to reopen. Relief payments and pent-up demand should provide some degree of post-shutdown rebound, but spending will be far from normal and may be choppy going forward.”
Digital Commerce 360’s calculation of retail sales—which excludes sales in segments that don’t typically sell online such as restaurants, bars, automobile dealers, gas stations and fuel dealers—differs from overall Commerce Department data as many omitted categories were among those hardest hit.
Dining establishments are largely closed or relying on take-out orders through curbside pickup or home delivery. Gas stations have taken a hit with far fewer drivers on the road, and auto purchasing has been put on hold as consumers face growing unemployment and an uncertain economic future. Without eliminating these sectors, total retail sales dropped 21.2% year over year in April, a horrendous showing.
Kleinhenz also cautioned that the reliability of April’s numbers may be questionable with many retailers that closed businesses unlikely to respond to the Commerce Department’s monthly survey. The agency addressed concerns on the U.S. Census Bureau’s website, where retail reports are published: “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.”
Spending in all categories other than grocery, hardware and nonstore drop
Analysts and economists have noted that the pandemic has hit the retail industry unevenly, with some essential merchandise categories experiencing massive upticks while other nonessential retailers bear the brunt of the economic shockwaves of a global health crisis.
Grocery stores and other food and beverage retailers had a record-breaking performance in March, with total sales ballooning a revised 27.0% year over year—the highest March growth in at least 25 years and more than four times the next largest registered growth, according to Commerce Department data. In April, food and beverage sales increases decelerated to 13.3%—still the highest recorded growth for the month in at least 25 years and still nearly double the next-highest year.
But total sales for apparel retailers took an 89.3% nosedive in April. In at least the last 25 years, the apparel category has never experienced a double-digit decline. Aside from the food and beverage sector, hardware and home improvement stores—which were relatively flat—and nonstore sales, all other merchandise categories saw spending decline year over year last month, leading to some depressing retail figures.
Looking forward
Even as the economy begins to reopen, consumer behavior may take a long time to adjust, Kleinhenz warned in April. Roth also anticipates continued declines for nonessential items.
Matthew Shay, NRF’s president and CEO, agrees but is still optimistic: “We are in the midst of historic unemployment, and when it comes to personal finances, discretionary spending takes a back seat to essentials. [Retail] is a resilient industry serving a smart consumer, and despite today’s report, we know it will be leading our nation’s economic recovery as this crisis recedes.”
The Commerce Department is scheduled to release pure ecommerce spending data for the first quarter of 2020 on Tuesday, when COVID-19’s impact on online sales will come more into focus.
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