COVID-19: Categories of Brick and Mortar Retail Stores Most likely to Rebound
Non-essential retail categories expected to rebound -or already seeing a rebound- are the fashion and cosmetics category, the car sales category, luxury retail, and consumer electronics.
Fashion & Cosmetics
- A report by the management consultancy Bain looked into the trends observed in retail during past crises such as the SARS and the MERS epidemics, and the Fukushima disaster.
- They observed that non-essential sectors such as clothes and cosmetics showed an initial dip followed by a strong rebound after the crisis had passed.
- Furthermore, the report specified how this behavior includes sectors such as apparel, personal care, among others. The rebound is mainly fueled by the fact that purchases in these sectors often decrease during the crisis, leading to a pent-up in the demand for these products.
- Kantar World Panel is a global consultancy company. Its general manager, Jason Yu stated that there are "opportunities in affordable luxuries…especially beauty”, showing trust in the recovery of these specific sectors.
- By the beginning of April, the majority of retail stores in China had restarted activities. According to Yuan Liwei, who is the general manager at the Chinese division of Elizabeth Arden, "We can't underestimate the demand of Chinese consumers, especially women. We maintain confidence in the Chinese market."
- Car sales in China had been decreasing since 2018, reaching an all-time low in 2020. However, in April of this year, after lockdown measures were eased in the country, an increase in sales was registered for the first time in two years.
- According to Volkswagen speakers, this might be fueled by fear of exposure to COVID-19 if public transportation is used.
- Even in Wuhan, which was the Chinese region where COVID-19 first became an epidemic, this sector has seen staggering growth in this sector.
- According to the China Automobile Dealers Association, 99% of car showrooms were open to the public by the end of March, and foot traffic had risen to 66% of the usual traffic.
- Pieter Nota, the head of sales at BMW has stated that "In China, we are seeing the first signs of recovery with a strong order intake." According to this same company, this increase in demand seen in March is "pointing to a sustainable recovery."
- This increase in car sales seems to apply in the United States as well. The president of J.D. Power, a data analytics company, stated that "we are now firmly in a period where we see sales of new vehicles start to recover."
- There seems to be a strong appetite for luxury items in regions in which restrictions have been lifted, with increased sales in luxury items that go from high-end car brands to iconic designer stores.
- Examples of this have been seen in China, where the high-end fashion store, Hermès sold $2.7 million in one day after reopening in Guangzhou.
- LVMH is one of the largest luxury groups in the world, and in April 2020 it reported that sales of brands such as Louis Vuitton, Sephora, and Dior had dramatically increased in China, reaching even 50% growth.
- This behavior has been seen in past crises, when luxury brands have withstood economic instability.
- According to Luca Solca, an analyst at the consultancy firm Bernstein "the good news is that investors agree that the long-term prospects for the luxury sector remain strong, and that the current predicament — as serious as it is — will be temporary."
- Amrita Banta works as the management director at Agility Research, and she has stated that "China seems to have turned the corner and bigger cities are showing cautious optimism."
- Furthermore, Banta believes this spending is largely fueled by "revenge spending", which refers to spending behavior led by canceled plans and purchases. Banta has also stated that "We see a slow but definite bounce back."
- Sales of consumer electronics are expected to increase as people want to update their home electronics, which also applies to telecommunication devices for both households and businesses.
- In Brazil, where Via Varejo stores reopened throughout the country, sales have been increasing. These stores are dedicated to home electronics and appliances. Via Varejo is considered the biggest retailer in the country.
- Similarly, sales of smartphones are expected to increase during May. Xiaomi, a local Chinese brand, stated that their sales were back to 80% of usual volumes after the lockdown restrictions were lifted.
- Samsung has reported increased online sales of electronics such as laptops as more people work from home. While this corresponds to e-commerce, it is expected that this trend will also take place in brick-and-mortar stores.
- Furthermore, Apple stores in China reopened in March, and it has started opening stores in South Korea.
- According to Tim Cook, the CEO at Apple, sales in China are "headed in the right direction." Similarly, the CEO of the company, Roberto Fulcherberguer has stated that they are optimistic, and even planning to continue their expansion plans, despite the pandemic.
- In addition, the Chief Financial Officer at Xiaomi has stated that "the (Chinese) market has entered a full recovery stage, and... has already recovered to 80 to 90% of the normal level."
There are different definitions regarding what is considered "essential" and "non-essential" according to governments around the world. We used the definition provided by the government of Prince Edward Island, which states that "Non-essential services do not provide food supplies, health, financial support or utilities and when not offered to the public will not impact life, health or personal safety." We have chosen this definition as is one of the most straightforward and complete out of the definitions issued by different local, regional, and national governments worldwide. In addition, we looked for reputable news sources, industry insights, and forecasts that provided information regarding retail rebound in countries in which brick-and-mortar stores are opening once again, with an emphasis in China. As this country has been one of the first to recover, trends observed in retail sales could apply to the rest of the world. This is a common consensus among different retail sectors, which are looking to China for an estimated forecast on what to expect.