After a gruesome showing in April with U.S. total retail sales plummeting to recession-level numbers, May spending made an unexpected recovery as states allowed more retail stores to reopen. The easing of coronavirus-related business closures and stay-at-home orders gave overall retail a much-needed boost, yet the recent surge in online and other nonstore sales as people were forced to place orders from the safety of their own homes showed no signs of slowing last month, new U.S. Department of Commerce data shows.
Consumer spending through nonstore channels increased 24.6% year over year in May—the highest growth rate ever recorded for the month, according to a Digital Commerce 360 analysis of the Commerce Department’s advance monthly figures released Tuesday. Numbers exclude estimated fuel sales. The jump also represents the second-largest year-over-year uptick of any month in the history of the agency’s available data, falling behind only December 2019, when nonstore sales swelled by 25.7%.
Year-over-year nonstore spending increases have been steadily growing since March, when the global pandemic took hold in the United States and President Donald Trump declared a national state of emergency. May edged out April’s already impressive 24.1% nonstore spending growth.
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.
Retailers, consumers shift to online buying mentality
Industry experts expect the ecommerce market to continue to post solid results as consumers remain cautious about returning to in-store shopping and become increasingly comfortable with ordering groceries online or using curbside pickup.
“There are emerging signs that the industry is responding positively to this ‘new normal,’ adapting their ways to meet the needs of consumers,” said Frank Poore, CEO at CommerceHub, an ecommerce software provider. “Based on our data, the lasting impacts of the pandemic aren’t going away, and it is crucial that retailers continue to make investments to where consumers are spending their money–online.”
Despite an overall dip in retail spending since February, there has been a “massive” climb in ecommerce, he added. CommerceHub’s retail clients reported a more than 100% year-over-year jump in online order volume between April 1 and May 31–a rate “close to peak holiday season demand,” Poore said.
Fulfillment data from Convey, a last-mile technology vendor, also reflected a continued surge in ecommerce. Retailers’ shipment volume was up 49.2% year over year for May, although that was a deceleration from 59.7% growth in April.
Convey’s data is based on tens of millions of packages shipped from more than 500,000 U.S. locations across the company’s client base. Analysis excludes shipments from Amazon.com Inc. The vendor has 130 retail clients in many merchandise categories, including retailers The Home Depot Inc. No. 5 in the 2020 Digital Commerce 360 Top 1000; Neiman Marcus, No. 41; and Eddie Bauer LLC, No. 137.
Total retail sales pick up in May
As physical stores began opening their doors again in May in some states, total retail sales had a welcomed bounceback compared with the dramatic drop in April. But sales were still significantly lower than usual.
Spending through all channels for Digital Commerce 360-defined segments grew 1.4% year over year, excluding estimated fuel sales. That marks the second-lowest year-over-year growth ever recorded for the month of May, falling in second behind the Great Recession’s 6.3% decline in 2009. May’s year-over-year growth also was a notable slowdown from the same period last year–less than half of the 3.3% registered in 2019.
Yet May’s performance was a turnaround from April, when overall spending plunged a revised 5.4%–a year-over-year decline unmatched by any month outside of the Great Recession era.
Digital Commerce 360’s calculation of total 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 were largely closed or relying on take-out orders through curbside pickup or home delivery. Gas stations took 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.
Nearly all nonessential businesses were shut down for the entire month of April. Retailers began reopening in May, and stimulus money, supplemental unemployment checks and pent-up demand from a 2-month shutdown fueled consumer spending, according to Jack Kleinhenz, chief economist at the National Retail Federation.
“The economy kicked off in May, but full recovery is still a long way off,” he said. “Spending has improved considerably, but it’s still far below where it was a year ago. And while the freefall in consumer confidence is over, unemployment remains high and confidence is still at recession levels.”
Although wallets are primed and increased foot traffic at stores has been promising, the road will be bumpy going forward, Kleinhenz said.
“We are likely to remain on a roller coaster for a while,” he said. “What we need to look at is the trajectory of employment and the direction of the virus. There’s hope for a turnaround in the economy in the third quarter, but if the virus has a reawakening, we’re going to see some serious situations for consumers.”
Percentage changes may not align exactly with dollar figures due to rounding.