Virus alters where people open their wallets, hinting at halting recovery

Strict lockdowns ended weeks ago, but many people across the country are still avoiding malls, restaurants and other businesses. The shift in behavior points to a reshaping of U.S. commerce, fueling questions about the strength and speed of the economic recovery as the coronavirus continues to spread.

Through Aug. 15, daily visits to businesses were down 24% from last year, according to a New York Times analysis of foot traffic data from the smartphones of more than 15 million people. After an initial plunge in the spring, consumer habits have been slow to recover, the data shows.

As state and local officials have moved to reopen businesses, people have reacted differently depending on how they view the threat of the virus. Shopping behavior has varied widely by the type of business in question, how prevalent the outbreak is nearby and even voting patterns in the region.

Visits to businesses have, for example, rebounded more in Alabama, a largely conservative state, than in the more liberal Vermont. But in comparison with last year, people in Vermont have been shopping again more than people in California, where the virus remains a greater threat. Everywhere, trips to pharmacies and hospitals have fallen, while those to gas stations and convenience stores have held steady or even increased.

How people spend will determine which companies survive and who ultimately keep their jobs. Continued weakness at brick-and-mortar stores has enormous implications for an economy that has had years of gains wiped away in the months since the pandemic hit. The disparities in how people shop hint at a prolonged, uncertain and uneven recovery.

The smartphone data, which was provided by the location analysis company Cuebiq, showed that while business activity throughout the United States began to plunge in March as the virus spread, the slowdowns began even before governments ordered people to stay home.

Over the next four months, foot traffic to commercial locations increased when regions reopened their economies. As the virus showed no signs of disappearing, activity remained sluggish.

“It’s Econ 101. People are weighing the costs and benefits of leaving their homes and exposing themselves to risk,” said Christopher Cronin, an economics professor at Notre Dame who studied people’s behavior early in the pandemic.

People have been less likely to visit businesses if they live in a state with a significant COVID-19 outbreak, major urban population centers or a higher percentage of Democratic voters, the data shows. New York and Massachusetts, which match those descriptions, have seen some of the lowest foot traffic throughout the pandemic. At the other end of the spectrum, Mississippi, Alabama and Oklahoma have consistently been among the states with near-normal shopping habits.

States that saw early outbreaks were more likely to impose longer, more severe restrictions, but their residents remained cautious even after those rules were lifted.

Personal and political viewpoints also appear to be influencing behavior, several studies have found. Republican pundits and lawmakers have been more likely throughout the pandemic to emphasize the importance of reopening businesses and to play down worries about the virus.

“If you had a Republican-leaning and a Democratic-leaning area with similar reopening dates, the Republican area was still more likely to have a faster recovery” as measured by the restarting of small businesses, said Zoë Cullen, an economist at Harvard Business School.

Cullen and her colleagues, who have been regularly surveying business owners, found that those who provided essential goods and services, and whose products could not be bought online, thought they would be better able to weather the economic storm.

Earlier this month, federal data showed that retail sales in July rose 1.2% from June, the third straight month of growth. But the increase, which was largely helped by unemployment benefits that have since expired, masked major shifts across various industries.

Regardless of region, bars are emptier than they were

As they emerged as hot spots for transmission, bars have been among the hardest hit, with few signs that they’ll be able to recover anytime soon. Even in states such as Mississippi, where many people were shopping and going out to eat, bars fared poorly in the data reviewed by the Times.

Despite fewer visits to bars, Americans kept drinking. Companies that offer alcohol delivery, such as Drizly and Minibar, represent a small proportion of overall alcohol sales but had spending in July shoot up more than 500% from last year, according to Earnest Research, which tracks credit and debit card purchases. Molson Coors Beverage said that closing bars and restaurants eliminated all demand for kegs in the second quarter. But demand for 12-ounce cans “went through the roof.”

Limits on indoor dining are still punishing sit-down restaurants

Restaurants in many states still face restrictions on indoor seating. In Mississippi, several restaurateurs said customers seemed eager to return this summer, but businesses earned less even then.

“We would have blown out our June numbers from last year if we had been allowed the seating to do it,” said Richard Shapley, owner of Ely’s Restaurant and Bar, an upscale steak restaurant north of Jackson that has followed the state’s guidelines to cut its capacity in half. “I understand why we couldn’t do that, and that’s fine, but from a business standpoint, it was still difficult.”

Across the country, spending at casual dining chains, including Applebee’s and the Olive Garden, remained about 30% below last year for the week ending Aug. 5, according to Earnest.

Fast-food outlets, however, have done better, the movement data shows, in part because their models were already built for takeout and drive-thru service.

As retail chains go bankrupt, essential businesses find ways to grow

Even as big shopping malls started reopening in May, foot traffic at many retailers has remained well below last year’s levels in most states, reflecting in part unease about indoor spaces where the risk of transmission is higher. The plunge in demand for work and dressy apparel and accessories during lockdowns has not helped.

And e-commerce revenue hasn’t fully offset the hit to store sales for retailers, prompting a slew of chains like J.C. Penney and J. Crew to file for bankruptcy.

But many people, recently housebound, quickly turned to home improvement stores like Home Depot and Lowe’s, especially as the weather warmed up. Visits to the stores jumped in May and June from a year earlier.

The pandemic has supercharged online spending, which could have lasting effects on the future of retailing. For the week ending July 29, online spending was up 20% from a year earlier, while in-store spending was down 11%, according to Earnest data. Many chains that were able to stay open, especially Walmart and Target, have gained a new edge in e-commerce as they started local delivery and options for customers to buy online for in-store or curbside pickup.

Target said Wednesday that it generated nearly $1.7 billion in profit last quarter, a roughly 80% increase from a year ago. Online sales nearly tripled.

After panic-buying, grocery stores change their model

The scenes of panic-buying at packed grocery stores in March have slipped into memory, and now visits are down 11% compared with last year. The stores were deemed essential and stayed open during the entirety of the pandemic, but the virus has nevertheless changed the way the business works.

Since early April, online spending on groceries — which includes pickup and delivery — has more than doubled compared with last year, while in-store spending has increased but only by single-digit percentage points, according to Earnest. Analysts at Cowen, an investment bank, recently estimated that the online share of grocery sales in the United States could reach 20% by 2025 from about 5% last year.

Kroger, which has stores in 35 states, is one of the grocers benefiting from the move to e-commerce. Its chief executive said in June that while he expected online sales to decline from initial pandemic-fueled spikes, they would be “higher than where it started before COVID-19 and then grow from there.”

What the future holds

In late June, as coronavirus cases began to surge in new areas of the country, commercial foot traffic in many states began to slide, the data shows. This was especially true in states that began opening up earlier; business owners in Mississippi, for example, said the drop in traffic was noticeable. New York and Massachusetts, on the other hand, have been steadily improving for months but are still at depressed levels.

Even in states with major outbreaks, the reduction in business traffic this summer was not as severe as the decline in the spring. And although it dipped in many areas, activity only stayed down in states with large confirmed spikes in virus transmission, such as Arizona and Florida.

The trends suggest that even as the virus continues to spread, people are less likely to stay home. But any return to a semblance of normalcy will be dictated by the whims of the virus and the country’s response to it, forcing companies and their customers to learn to adapt to new conditions on practically a weekly basis.

Economists and small-business owners alike said they anticipated the uncertainty to last at least through the fall. Ultimately, even enterprises that make it through the pandemic may face long-term changes in how people spend their money.

“For many businesses, there’s going to be a fight to survive,” said Cronin, the Notre Dame professor. “Your choice is to shut down or to do something dramatically different.”