Discretionary spending cuts made in light of the novel coronavirus could continue into the critical holiday shopping period, according to a new survey from Coresight Research.
In a survey conducted on April 8, the research and advisory firm found that 70% of respondents expect their normal purchasing habits to resume in three months or less. But nearly one-fifth of respondents (18.5%) expect their spending won’t return to normal levels until six months or more from now, which would carry over to the holiday season.
According to the National Retail Federation, retail sales during the 2019 holiday shopping period (excluding automobile dealers, gasoline stations and restaurants) rose 4.1% to $730.2 billion. This was on the higher end of the NRF’s forecast in October of a 3.8% to 4.2% increase. However, several big-name retailers — including Kohl’s, Target and JCPenney — reported sluggish sales during the season, which includes three of the year’s biggest shopping days: Black Friday, Cyber Monday and Super Saturday (the last Saturday before Christmas).
The 2019 holiday season was impacted by concerns regarding issues such as trade and interest rates, as well as by a truncated schedule with fewer days between Thanksgiving and Christmas. Economic uncertainty has spiked in recent weeks due to the coronavirus, which has caused widespread store closures and mass furloughs and layoffs, leading over 16 million Americans to file unemployment claims over a three-week period.
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Amid the pandemic, shoppers have upped their spending in essential categories, such as grocery, personal care and health products — but discretionary spending has faded into the background. In the apparel and footwear sector, nearly two-fifths of consumers surveyed (39.8%) said that they have cut back on spending, up from 32% a week earlier. Meanwhile, only 7.1% of respondents have increased their purchases in the category.
At the same time, shoppers have begun to purchase more online. Nearly three-fifths (59.1%) of those surveyed have increased their e-commerce shopping, an increase of about 11% from a week earlier. Further, 35.9% of respondents said they plan to shop more online, less in stores after the crisis abates.
Among younger adults age 18 to 29, 26% have increased their online purchases of footwear and apparel, but this drops off as the age of respondents increases: 20.5% of those 30 to 44 years old have increased their spending in the categories, 14% for those 45 to 60 years old and just 12% for those 60 and older. Overall, though, Coresight notes that there have been “low levels of sales transfer from stores to e-commerce” in the apparel and shoe space since only one-fifth of consumers who are spending more online have increased their internet purchases in the category.
During the coronavirus outbreak, retailers such as Macy’s, Nordstrom and Dick’s Sporting Goods have furloughed store workers and implemented executive pay cuts as store closures extend with no certain reopening date in sight. While e-commerce is operational, many retailers have tapped into credit lines to maintain cash flow as brick-and-mortar revenues remain at zero.
On April 8, Coresight surveyed 450 U.S.-based online respondents about the impact of the coronavirus on their retail behavior, with a 5% margin of error and a 95% confidence interval. The full report is available at Coresight.com.
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