Even as coronavirus infections continued to spread, in-person school reopening plans were scrapped and unemployment stayed near record highs, Americans kept shopping in July with retail sales rising 1.2% from June, reflecting a rare bright spot in the battered economy.
The jump in sales reported today by the Commerce Department, though far smaller than the increases in the previous two months, showed that the bounce back in spending to pre-pandemic levels was not a fluke. It was instead a sign that consumerism, buoyed by government support, remained resilient even as many other facets of American life were increasingly bleak.
“It shows there is a willingness and a desire to spend,” said Michelle Meyer, chief U.S. economist at Bank of America. “There is no doubt the recovery in consumer spending has been robust.”
Much of that recovery has been helped by the $600 a week in unemployment assistance, which expired at the end of July.
The three consecutive months of sustained retail recovery, which has brought sales above where they were in February, is exactly what policymakers were hoping the stimulus money would accomplish. By spending their benefits on food, clothing and appliances, rather than saving the money, Americans have helped keep many retailers and their employees and suppliers afloat.
The retail rebound is likely to bolster arguments in Congress that a robust form of supplemental unemployment assistance should be extended. Without a large subsidy, economists predict, consumption will stall in August and into the fall, damaging the broader economy.
“It’s very important to the economy that these talks in Washington come to fruition,” said Mickey Chadha, senior credit officer at Moody’s Investors Service.
Sales at electronics and appliance stores jumped 23% in July while spending at clothing and clothing accessories stores rose almost 6%. Still, the electronics and appliance sales were down 3% from a year earlier, while clothing was down 21%. Some areas that saw strong sales in the previous month, like furniture and home furnishings stores and the category of sporting goods, hobby, musical instruments and bookstores, were flat or declined in July.
Many analysts had predicted that retail sales would be dented in July by surging infections in states like Arizona, California and Texas, which forced restaurants and stores to close again.
It didn’t happen, despite some regional dips. Some economists pointed to the substantial shift the country had made to online shopping during the pandemic.
“This year is a complete game-changer in terms of e-commerce,” Chadha said.
But selling goods online is by no means a panacea. For one thing, it can be far more expensive to retailers because of shipping costs. Even as online buying increases during the pandemic, many retailers are seeing profits drop.
“Profitability is not coming back to last year’s levels until 2022,” Chadha said.
Still, the increased emphasis on e-commerce has pushed retailers to embrace change. Companies like Levi Strauss & Co., the denim retailer, have accelerated the introduction of features like curbside pickup and appointment shopping and are testing same-day delivery. The pandemic has supercharged “what may have taken five or 10 years and compressed it into this very short period of time,” said Chip Bergh, Levi’s chief executive.
With malls and department stores struggling, brands like Levi’s have been forced to think about the best way to reach customers. “With hundreds of doors closed by more traditional department stores, we’re remapping the market,” Bergh said. The brand has expanded to about 140 to 150 Target locations in the past 18 months “and as other department stores are going to be closing, we’re working with Target to see if there’s an opportunity for us to do more.” He also said that the brand had a successful value line at Walmart and a longtime partnership with Amazon.
Many retailers with a strong online presence or a product that serves the altered lifestyle and needs of people during the pandemic are flourishing.
Heather Wong, who owns a spice store in Sacramento, California, said she felt “survivors’ guilt” seeing so many other local businesses close, even as her sales increased in July. She said sales at her store, Allspicery, had dropped in early June because much of the area near her store was closed by the protests over the killing of George Floyd by the Minneapolis police. But she’s not sure what caused people to stock up on her high-end spices last month.
She thinks some customers may have started to run out of the oregano and herbes de Provence that they bought at the start of the lockdowns in March, when many more people started eating at home.
“I don’t have an exact answer for why this is happening,” said Wong, who is selling all of her store’s items online or through curbside pickup. “So many of my peers are struggling.”
Many retailers are also grappling with an unusual back-to-school shopping season, which typically drives sales in July and August. This year is different, with many schools and colleges planning to start remotely.
Bed Bath & Beyond recently introduced a “College at Home” section on its website, encouraging parents and students to buy new wares to transform their childhood bedrooms into what it called “dreamy dorm spaces” for remote learning, with youthful themes such as “chill camp vibes,” “low-key bohemian” and “modern glam.”
The pitch is to make the rooms “more effective and more exciting to them even if they can’t be on campus,” said Joe Hartsig, chief merchandising officer at Bed Bath & Beyond. “It’s a real window of change for students to reflect that they’ve moved on from high school and are in college, and want their room to reflect a different room.”
Kohl’s back-to-school offerings are listed online with the tagline, “Heading back or logging in, the new year starts here.” The typical clothing and backpacks are followed by a link to face masks and hand sanitizer. Another section tailored to remote learners offers “everything kids need to redefine the routine.” It includes links to educational toys and virtual learning tools, as well as others titled “Your Kitchen Cafeteria” and “Backyard Recess.”
Troy Carlson has seen online sales pick up significantly at his Disney memorabilia store not far from Wong’s spice shop in Sacramento. He has also managed to draw in a fair amount of foot traffic since reopening in June. Even as infections in California increased last month, he estimates that sales were about 75% of their normal levels.
Carlson, who has owned his business, Stage Nine Entertainment, since 1991, has also been surprised by what some of his customers have chosen to buy, including Disney-themed art for as much as $8,000.
“Nothing we sell is essential,” he said.
But Carlson worries that his success is not sustainable if other businesses around him in the city’s waterfront district are failing and the foot traffic in the area declines.
“Our business motto is to get to 2021,” he said. “We want to get to the other end but we are concerned about what the other end will look like.”