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Retail amid the pandemic: ‘A case study in randomness for business survival’

The Tesla dealership in Salt Lake City is pictured on Tuesday, July 21, 2020. A new report from Wells Fargo shows U.S. retail volumes are nearly back to pre-pandemic levels, even though the list of “winners” and “losers” has changed dramatically due to fallout from COVID-19.
The Tesla dealership in Salt Lake City is pictured on Tuesday, July 21, 2020. A new report from Wells Fargo shows U.S. retail volumes are nearly back to pre-pandemic levels, even though the list of “winners” and “losers” has changed dramatically due to fallout from COVID-19.
Scott G Winterton, Deseret News

SALT LAKE CITY — In a year described as “without question the most chaotic in living memory for retailers” in a new report, U.S. sellers have gone from a sales abyss brought on by widespread COVID-19 lockdowns in March to a recovery that puts overall levels right now to within 1% of pre-pandemic levels.

The months between have been notable for meteoric gains and declines depending on store type, and new data for Utah shows the state is doing better than most in its own recovery efforts. The most recent tallies from the Utah State Tax Commission up to the end of May reflect overall retail volumes up almost 8% over the same time last year and still trending upward.

A Wells Fargo analysis released Tuesday, “A World Turned Upside Down for Retailers,” noted the gains made following the reopening of the U.S. economy were not across the board and may not be sustainable as infection rates for the novel coronavirus are again on the rise.

“It is a case study in randomness for business survival as storied American franchises have filed for bankruptcy and well-known retailers have closed their doors for good, while others are jubilant and cannot keep items in stock,” the report reads. “This has all occurred against the backdrop of the fight against COVID-19, which after a promising start has given way to the long-feared second wave which threatens to shake things up again before all this is over.”

The Tesla dealership in Salt Lake City is pictured on Tuesday, July 21, 2020. A new report from Wells Fargo shows U.S. retail volumes are nearly back to pre-pandemic levels, even though the list of “winners” and “losers” has changed dramatically due to fallout from COVID-19.
The Tesla dealership in Salt Lake City is pictured on Tuesday, July 21, 2020. A new report from Wells Fargo shows U.S. retail volumes are nearly back to pre-pandemic levels, even though the list of “winners” and “losers” has changed dramatically due to fallout from COVID-19.
Scott G Winterton, Deseret News

What separates jubilant businesses from those scrambling simply to survive appears to be mostly a function of how the public health crisis has played out in terms of physical limitations. Sheltering in place not only contributed to record rates of personal savings in April, but also kept shoppers out of stores and contributed to an increase in unresolved demand.

In Utah, automobile sales exploded in May, with volumes up nearly 25% over last year. The numbers were even more notable in light of dealerships having remained open throughout the crisis as one of the state-designated essential business types.

Utah State Tax Commission senior economist Eric Cropper said the volumes are likely a reflection of potential buyers who chose to stay close to home in the midst of lockdown restriction but then emerged, following the easing of rules in early May, with an urge to buy and fresh funds to help make those big purchases happen.

“The uptick in motor vehicle sales in my mind is a function of pent up demand,” Cropper said. “People who were going to buy cars in March and April held off ... and when restrictions eased there were a bunch of people ready to buy who also had received federal government stimulus checks.”

Other bright spots on Utah’s retail landscape include building supply businesses, which include big-box home improvement stores as well as retail grocers, which continue to operate well above historic levels.

Wells Fargo economist Shannon Seery said even as the U.S. saw some of the biggest, and fastest, employment declines on record, individual incomes were subsidized via both direct checks and unemployment benefit stipends. That financial backstop, she noted, helped fuel retail spending as states variously lifted pandemic-related restrictions.

“Even as personal income from employment plummeted, as we lost over 20 million jobs, money coming in from unemployment and direct checks caused savings to raise to 30% in April, an all-time high,” Seery said. “Consumers were sitting in this forced savings effect, itching to get out of their homes but ... literally unable to go out and spend money.

The list of well-established consumer brands seeking bankruptcy protections amid the COVID-19 crisis continues to grow, and it’s one in which luxury names are rubbing shoulders with some more down-home favorites. Dean & Deluca, Brooks Brothers and Neiman Marcus are on the list of businesses that have filed for bankruptcy in 2020, but so are Chuck E. Cheese, J.C. Penney and Borden Dairy.

The biggest winners, Seery noted, are so-called nonstore retailers. That’s economist speak for companies that ply their wares on the web, and when it comes to online consumer business, sales have continued a trend in play well before the pandemic set in. Upwards.

The Wells Fargo report notes the shelter-in-place orders under which most Americans found themselves this spring was the perfect setting to provide a further boost to online shopping volumes.

“Online sales got a lift as many people turned to virtual options while confined to their homes,” the report reads. “The monthly gains in online sales from March through May rivaled its largest monthly increase of sales on record set back in January 2019. The shift to online, in many ways, was an extension of a preexisting trend, as online sales have been outpacing more traditional forms of retail for many years.”

The trend includes nonstore sales overtaking brick-and-mortar transactions for holiday shopping for the first time in 2019. While those businesses with physical locations may have been poised and anxious for a resurgence in businesses as pandemic restrictions began to ease, Wells Fargo notes the rising infection rates could curtail that hoped-for return. And the new, expanded footprint of digital shoppers may not be receding anytime soon.

“Even if a vaccine were to arrive tomorrow, some of this shift is likely permanent as former holdouts to shopping online discover the convenience and ease of the experience,” Wells Fargo economists wrote. “A smooth reopening for brick-and-mortar commerce might take some of the momentum from online, but the resurgence in COVID-19 cases means a smooth reopening is less likely.

“This is why online consumption is one area we expect will continue to gain market share and even receive a boost in the event mobility restrictions are reinstated.”

Amazon.com, the undisputed king of e-commerce, announced Tuesday it would delay its annual celebration of online shopping, Prime Day, which typically happens in mid-July, to a yet-to-be-determined later date. Last year the company did over $7 billion in sales during the event. Amazon’s first quarter sales this year were up some 26% and, as of the end of regular trading on Tuesday, the company’s stock was trading at just over $3,141 per share for a market capitalization of a mind-boggling $1.59 trillion dollars.

While the national and local data supports the contention that spending on retail goods is on a significant, albeit fragile, recovery path, Seery noted the biggest area of consumer spending, on services, continues to languish.

And Cropper concurred, noting Utah’s services businesses have been the hardest hit by the pandemic and, thus far, the slowest to recover.

“The accommodation industry is still down 66% over last year,” Cropper said. “It’s taken some of the biggest hits in this recession out of all of our industries.”