As mandatory business closures and “shelter-in-place” orders gripped the nation in March in the wake of the COVID-19 pandemic, the US retail industry saw a devastating 8.7% in sales. This figure represents purchases both in-store and online as well as shopping at bars and restaurants. This decline was by far the largest in the three decades of tracking this data. Despite a surge in activity for online retailers such as Amazon as well as local supermarkets and pharmacies, overall consumer spending plummeted. Worse yet many states did not shut down nonessential businesses until late March or early April, which is not reflected in this data.
Consumer spending accounts for more than two-thirds of U.S. economic activity. Furthermore, the retail sector accounts for more than one in 10 US jobs, second to health care. Its stores generate billions of dollars in rent for commercial landlords, ad sales for local media outlets, and sales-tax receipts for state and local governments.
So, how quickly will spending bounce back once the economy reopens, and how many businesses will survive until then? Speaking to the New York Times, Ellen Zentner, chief U.S. economist for Morgan Stanley said: “pent-up demand is what drives recoveries, and the good news there is we will come out of this with some degree of pent-up demand”.
People who remain unemployed will certainly be reluctant to spend above the absolute necessities. Moreover, many consumers will be skittish about patronizing businesses where face to face contact is required, so malls, movie theaters, and nightlife face an uncertain road ahead.
The COVID-19 economic recovery also looks to expedite trends that were ongoing, such as big-box stores squeezing out small, specialized businesses as well as the e-commerce shift. Though e-commerce has been on the rise for some time, changing the logistics industry, there has been a drastic shift from business to business deliveries to business to consumer deliveries. It is likely that the consumer will continue to utilize this model after the pandemic has subsided. Of course, the great unknown remains how long the economy must be shutdown. The results of 2-3 months of closures are drastically different than 4-6 months of closures.
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