“It’s a shift away from vacations, it’s a shift away from dining out. It’s a shift away from apparel purchases. It’s those dollars that you may have invested in those things that now you’re spending on your home and in some cases out of necessity like trying to create a more functional environment,” he said in an interview.
The government’s retail sales data underscore this adjustment. Sales at non-store retailers, building materials outlets and auto dealers account for greater shares of total retail purchases than they did in February, before the pandemic, while restaurants and clothing merchants represent less.
Shifting Retail Dynamics
Ellison’s even changing how he views his own home space. His daughter is an incoming college freshman, whose first few weeks of college will consist of remote learning, so Ellison had to set up a makeshift classroom so she can work productively.
“Are we also seeing discretionary spend? Sure. We are also seeing people get new furniture, upgraded appliances and we’re seeing other things like new kitchens, new bathrooms,” he said. “What was catching everyone by surprise was that all of us were spending more time at home than we ever have in our lives. We’re simply finding more things to do to make our homes more functional.”
Another potential sign that consumer spending fared better than most feared: Even small businesses have been surprisingly resilient so far, avoiding the surge in permanent closings that many expected at the start of the Covid-19 crisis.
Industry Losers
Those retailers who haven’t fared as well are the ones closely linked to the American shopping mall, especially department stores and retailers focused on apparel. TJX Cos., the owner of the T.J. Maxx and Marshalls chains, fell the most in more than four months Wednesday after predicting that sales at opened stores will drop as much as 20% in the current quarter, while Kohl’s Corp. on Tuesday plummeted as it became clear the business struggled to regain sales as shoppers stay home or flock to e-commerce.
The question is whether these elevated sales last after federal stimulus checks come to an end. A consumer survey from analysts at Stifel found that three out of four Americans have already spent a chunk of their stimulus checks, and Walmart warned this week the effect was already apparent. Target CEO Brian Cornell said he hopes there is a second round of federal stimulus to put more money in consumers’ pockets.
“The ending of enhanced benefits is undoubtedly a negative as it will deprive many households of the extra cash they were spending on the home,” Neil Saunders, Managing Director of GlobalData Retail, said in an email. “However, from our data it is still clear that home remains a big priority for most consumers and spending cuts are more likely to be focused on categories such as apparel. It is also true that by spending less on things like travel, gasoline, and eating out,” households have more money banked for other outlays, like improving their homes.
“Analysis of the pandemic usually involves talking about retail casualties,” he added. “However, as these results show, the crisis has created success as well as failures.”
--With assistance from Nic Querolo, Drew Hutchinson, Matt Townsend and Michael Sasso.
This article was provided by Bloomberg News.