Spending, CPI, demographics of overall market

Retail Channel Monthly $ Update – June Final & July Advance

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Time for our monthly update on U.S. retail sales by channel. The current COVID-19 crisis has caused turmoil in the Retail Marketplace. Consumer spending behavior has changed and continues to evolve. In this report we will track the changes and migration between channels. We will do that with data from two reports provided by the U.S. Census Bureau.

The Reports are the Monthly Retail Sales Report and the Advance Retail Sales Report. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – approximately 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

This means to get the full picture in our monthly channel update we need to look at the latest release of both reports. We will begin with the Final Retail Report from June and then move to the Advance Retail Report for July. This will also allow us to better track the consumers’ evolving spending behavior in terms of channel migration.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports and we fill focus on Pet Relevant Channels

The information will be presented in detailed charts to facilitate visual comparison between groups/channels of:

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2019
  • Current YTD change – % & $ vs 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

We’ll start with the June Final report. The retail market hit bottom in April then began a slow recovery which continued in June. First, we will look at some major retail groups. (Note: The Data in all graphs is Actual, Not Seasonally Adjusted)

The final total is $6B more than the Advance report projected a month ago. Relevant Retail and Restaurants were both $2.5B more than expected and the Auto segment was $1B better. Gas Stations’ $ were the same. $ales were up vs May across the board. Driven by Relevant Retail and Auto, Total monthly sales were also up vs 2019.

The Spring Lift is usually winding down in June but the COVID crisis has pushed the Spring timing back. Things began to open up in May and this continued in June. However, all but Relevant Retail were down YTD vs 2019.

Now, let’s see how some Key Pet Relevant channels were doing in June.

  • Overall – While sales in 6 of 11 groups were down vs May, 9 of 11 showed increases vs June 2019.
  • Building Material Stores – This group usually has their biggest annual lift in Spring. This is unchanged and even amplified. While Farm Stores sales were down vs May, they have spectacular increases vs 2019. Although Sporting Goods stores are not included in this group, they have a similar Spring lift pattern. Their sales took off in May and continued to grow spectacularly in June, turning positive for YTD vs 2019.
  • Food & Drug – Supermarket sales are down slightly from May but show strong growth vs 2019. After 2 months of slowed sales Drug Stores came back strong in June and are again positive across the board.
  • General Merchandise Stores – Sales in $ Stores and Clubs/SuperCtrs slowed down vs May but are still strong vs 2019. $ Stores are showing exceptional strength. Discount Department store sales were generally slowing before the pandemic. This trend has continued and accelerated slightly.
  • Office, Gift and Souvenir Stores – In May and June they began to slowly re-open, but this group was hit hard.
  • Internet/Mail Order – The pandemic has accelerated this channel’s growth vs 2019. This will likely continue as the crisis has introduced many new consumers to online shopping and the behavior is likely to become habitual.
  • A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores. Pet Stores account for 22 to 24% of total sales. Pet Stores were usually deemed essential, but most stores were not. The others began reopening in May and the number grew in June which produced an increase vs 2019. Strong early year sales and this rebound pushed YTD sales up 7.9%.

May was the beginning of a slow recovery which continued in June as even more businesses began to re-open. The Relevant Retail Segment turned positive in all measurements in May and stayed that way in June. Although many segments are now contributing, the Internet, Supermarkets, SuperCtrs/Clubs/$ Stores and Hdwe/Farm are the key drivers. Let’s see how the situation is progressing. Here are the Advance numbers for July.

April and May were the 2 biggest spending drops in history. In June, monthly sales turned positive for the first time since February as Total Retail was up $18B vs 2019. In July the recovery continued, +$20B but we’re still down -$74B YTD.

Total Retail – Total Retail spending increased $20.4B, +3.8% vs 2019, slightly more than the +3.4% in June. It’s hard to remember, but in February 2020 sales were up $60B, +6.6% YTD versus 2019. Then came COVID-19. Hopefully, we hit bottom at -$112B in May. We’re moving in the right direction but are still down -$74B YTD and -$134B from February.

Restaurants – Due to the reimplementation of closures in some areas, the Spending increase slowed to +$3.5B over June and sales were down $11.5B vs 2019. In February sales were up $9B. Then came the forced closures. Re-openings began in May but ran into problems in July.  Delivery/Pickup can’t make up the difference as spending is down $95B YTD.

Automobile & Gas Stations – When you are staying home your car becomes less of a focus in your life. Auto Dealers, both new and used, began combating this attitude with some fantastic deals and a lot of advertising. They started winning this battle in June as monthly sales turned positive versus 2019. Although sales are down $31B YTD, they are up $18B vs 2019 in the last 2 months. Gas Station sales increased in May, June and July over the previous month, but they are still down -$49B YTD. People are still not driving as much, whether for commuting or road trips.

Relevant Retail – Less Auto, Gas and Restaurants – Many non-essential businesses began to shutter their doors in March but there was also a rash of binge/panic buying for “necessities” and a big lift in groceries as consumers focused on home cooking which drove spending up $19B. April brought a full month of closures and an end in binge buying, spending dropped $34B from March. In May, the overall market began to reopen so spending began to move in the right direction. In June and now July the growth continued. Although openings became more widespread in June and July the primary drivers have been Nonstore, Grocery and SuperCenters/Clubs & $ Stores along with an enhanced spring lift from the Hardware/Farm and Sporting Goods channels. As a result, the Relevant Retail group now has posted positive numbers versus last month, last year and year to date for 3 consecutive months and is up $100B YTD vs 2019.

Now let’s look at what is happening in the individual retail channels across America. In July, consumer spending in the relevant retail market grew even more positive versus 2019. Let’s see where the $ came from. These groups are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

The increases were widespread – 11 of 13 channels beat June $ and 10 of 13 channels beat July 2019. However, in YTD numbers, only 7 are showing an increase. The YTD decreases are coming from channels of nonessential businesses.

Observations

 After a full month of stay at home and widespread closures there was a surge in May. Things have truly opened up in June and July and sales continue to increase. However, the essential channels are responsible for the lift vs 2019.

  • Nonstore Retailers – Even more consumers are online shopping.
  • Food & Beverage, especially Grocery– Restaurant $ are still down so consumers continue to eat & drink at home.
  • Sporting Gds/Hobby/Books – Stores re-opened and consumers began to return to outside recreational activities.
  • Bldg Materials/Garden/Farm – A bigger than usual Spring lift continues as consumers focus “on their home”.
  • SuperCtrs/Club/Value/$ Strs – Sales slowed in April but came back in May and continue to grow. This group turned the whole Gen Mdse channel positive. It clearly shows that value is still a consumer priority.

Regarding the Individual Large Channels

General Merchandise Stores – Regular Department stores are reopening which has cut the losses for total Department Stores as Discount Department stores continue to slowly fade. Club/SuperCtr/$ stores provided the big positive force. In April consumers dialed back their panic buying and spending on discretionary items was also down significantly. Since May we have seen consumer spending return to a more normal pattern in the big and small stores that promise value.

Food and Beverage, plus Health & Personal Care Stores – The Grocery segment is still driven by increased Food sales due to a slow restart by restaurants, up 12.3%, +$7.2B. Sales in the Health, Personal Care group are up vs June and vs July 2019 but remain down YTD. The situation is improving with more reopenings and Drug Store sales growing again.

Clothing and Accessories; Electronic & Appliances; Home Furnishings – As reopening became even more widespread in July, sales grew for the third consecutive month. Home Furnishing even registered a slight increase vs July 2019. However, all 3 channels are down double digit percentages in YTD sales. Clothing Stores are by far the worst performers as sales were down 20% vs July 2019 and 36% YTD.

Building Material, Farm & Garden & Hardware – Sales fell slightly from June, -6.5%. However, this channel continues to benefit from consumers turning their focus to their home needs, including house and yard repair and improvements. This has accelerated and extended their Spring lift. Sales were up 16% vs July 2019 and up +25.5B (+11.3%) YTD.

Sporting Goods, Hobby and Book Stores – Book and Hobby stores are open and sales in Sporting Goods stores have taken off as Consumers again sought outdoor recreation. Although sales fell slightly from June, -3.9% they were up 19% vs July 2019. YTD sales were down $3.4B in April. In July this deficit had been cut to -$0.9B. If current trends continue through the summer, their YTD numbers could turn positive by September or maybe even August.

All Miscellaneous Stores – This group is mostly small to medium specialty stores – both chains and independents. Pet Stores are essential but most other stores are not, so closures hit this group particularly hard. Sales began to rebound in May and continued to grow through July when they finally beat the monthly sales for 2019. In February they were up $2.6B YTD. Through July,  they are down -$3.1B. They are moving in the right direction but still have a long road ahead.

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV businesses. The COVID-19 crisis has only accelerated the ongoing movement to online retail. In February NonStore was up 8.6% YTD. In July, they are up 19.8%, +$85.5B. Their increase is 85% of the total $ increase for all Relevant Retail Channels. They are the undisputed leader and their performance far exceeds their 12.9% annual increase in 2019. Since much of their annual increase comes from holiday sales, 2020 is on track to be a banner year for NonStore Retailers.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded along with their store sales in their regular channel. Whether they are up or down, their online sales are included in the totals.

Recap – April and May saw the 2 biggest year over year monthly sales declines in history. Restaurants, Auto and Gas Stations increased sales from May through July. The Auto segment is showing positive monthly numbers vs 2019 but Restaurants and Gas Stations are still struggling. The Relevant Retail segment has provided the only true positive as sales are up in all measurements for 3 consecutive months. However, for many segments in this group there is still a long way to go. In July Total Retail was positive for the second consecutive month and Relevant Retail appeared to be moving towards a more routine pattern – a new normal. We have recently seen a resurgence of the virus and retail restrictions are being reimposed in many areas. The impact on retail in July was negligible but this is going to be a long battle with no end in sight. We will continue to monitor the data and provide you with regular updates as the situation evolves.

 

 

 

 

Pet Products Spending by Generation: Mid-Year 2019 Update

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Pet Products spending totaled $46.61B for the 12-month period ending 6/30/19. This was a decrease of $4.56B (-8.9%). Total U.S. spending for the period totaled $8.23 Trillion, up $280B (+3.5%). Big decreases in Food, due to the FDA grain free warning and Supplies, due to tariffs sent Pet Products Spending in the opposite direction from Total U.S. spending.

In this report we will update Pet Products Spending for arguably the most popular demographic measurement – by Generation. Baby Boomers built the Pet Industry and they still have the biggest share of Total Pet and Pet Products $. However, in 2018 Gen Xers took the lead in pet spending per household, but the group that gets the most “press” is the Millennials. They are the future. Are they stepping up in life and in spending?

We also have some special news this year – both good and bad. The good news is that Gen Z, born 1997 and later, now have enough CUs for a reliable sample. We will start reporting their CU characteristics and spending separately from Millennials in this report. We won’t be able to compare any data to track their movement for another year. When appropriate, we will consolidate the numbers from all CUs born in 1981 or after so we can compare it to last year. The bad news is that the Greatest Generation, born before 1928, is now too small to accurately measure. Their spending will now be included with the Silent Generation. The new group will be everyone born before 1946. Now, let’s get started. As always, the numbers come from or are calculated from data in the US BLS Consumer Expenditure Survey.

First, let’s define each generation and look side by side at their share of Consumer Units (H/H’s) and Total Spending.

Generations Defined

Gen Z: Born 1997 and after

In 2019 age 18 to 22

Millennials: Born 1981 to 1996

In 2019 age 23 to 38

Gen X: Born 1965 to 1980

In 2019 age 39 to 54

Boomers: Born 1946 to 1964

In 2019 age 55 to 73

Silent/Greatest: Born  <1946

In 2019 age over 73

  • Boomers are still the largest group with 43.3M CUs (32.8%) and the biggest spenders – $2.8T. They are losing ground in both areas. However, their spending performance in relation to their share of CUs is still 102%.
  • Gen X is ranked second in size and spending and both are growing. Their spending performance is 123%, by far the best of any group. They are likely to take the lead in total spending by the end of 2019.
  • Millennials are the largest generation in sheer numbers, but third in CUs. More are developing financial independence and their spending reached $1.87T – 3rd place. However, their spending performance is only 93%.
  • The oldest Silent/Greatest generations are losing CUs and their overall spending was down $25B.
  • Gen Z is the newest generation, so their low numbers are to be expected. Avg CU age is just 19.7 yrs.

Age certainly affects behavior but there are other CU characteristics, like income, family situation and home ownership that make a difference both in Total Spending and in Pet Spending. Let’s look at some of these key differences.

  • Singles had a big year, but 2+ people CUs account for 77.7% of all Pet Products Spending. (down from 84.8% in 2018)
  • The size of the CU and number of children is all about Family responsibility and all the financial pressures that this generates. The CU size overall is unchanged from Mid-2018 and still peaks with the Gen Xers. However, the Boomers decreased by 0.1 person. Perhaps, their Millennial kids are finally moving out?
  • Married couples with children under 18 are an important group with 22.6% of all CUs. They more than earn their share with 27.7% of all Pet Products spending and 29.2% of Supplies Spending. However, as the number of children grows, the increased financial responsibility can slow Pet Spending.
  • Boomers still average 2+ people in the CU. However, they are much less likely to have children <18 at home. As their human children leave home, they turn their attention and spending to their Pet Children who are still with them.
  • Pet Products spending is also tied to the number of earners in a CU. 2+ Earner CUs account for 41% of the total but they spend 51% of Pet Products $. Most “earning” is being done by Gen Xers, Millennials and Boomers, with Gen Xers at the top, as to be expected. Boomers are down 0.1 as more move into retirement, but Gen Z is stepping in.
  • Homeownership – Owning and controlling your own space has always been a key to increased Pet Ownership and spending. Homeowners currently account for 78.1% of all Pet Products Spending, which was driven down from 80.2% largely by the performance of Homeowners w/o Mtges. Renters spent slightly more overall, +0.6% but all groups spent less on Pet Products in the 1st half of 2019.
    • Nationally, Homeownership moved up slightly to 63.47%. Gen Xers moved up from 62% to 65%, beating the national average for the first time. As you can see Homeownership increases regularly with age.
    • The Millennials are now up to 41% but they are still 15% below the rate for the older generations when they were the same age.
    • Boomers dropped from 78% to 76% and Gen Z got started with 10% of CUs owning a home.

Next, we’ll compare the Generations to the National Avg. :

In Income, Spending, Pet Products Spending and Pet Products Share of Total $pending

CU Avg Income – $81.220; Total Spending – $62.438; Pet Products Spending – $353.94; Pet Products Share – 0.57%

  • Income – The 39>54-year-old Gen Xers are the leaders. The Boomers earn over 20% less and their income will continue to fall as they age. Millennials income is still 10% less than the Boomers and only 70% of the Gen Xers. The big drops are at both ends of the age range with the retired Silent/Greatest and the “just getting started” Gen Zers.
  • Total Spending – The Gen Xers make the most and spend the most, but their spending is not out of line with their income. Boomers also spend more than the average, but their income can still support it. The Millennials’ spending is also very much in line with their income as they approach the national average in both areas. Spending doesn’t fall as fast as income with the older generations. In fact, they are actually deficit spending in relation to their after tax income. Gen Z is in an even worse deficit situation as they spend 25% more than they make.
  • Avg CU Pet Products Spending – Gen X briefly took over the top spot at the end of 2018 but lost it to the Boomers because of a big drop in Supplies spending in the 1st half of 2019. Only Boomers and Gen X spend more than the national average. The Millennials are closing the gap but still trail the Gen Xers and Boomers by over 20%. The oldest CUs spend about half as much per CU on Pet Products as the top 2. The Gen Zers are just getting started with Pet Parenting so they spend only about ¼ of the national average.
  • Pet Products Share of Total Spending – One measure of the level of commitment to their Pets.
    • The Pet Products share of total spending fell to 0.57% as Pet Products CU spending fell 9.7% while total spending was up 2.7%. Only Boomers exceed the National Average but everyone over 23 years of age is at least 81% of the national average.
    • All groups decreased their pet products spending in terms of its share of their overall spending. However, the biggest drops came from the older groups, especially the Boomers.
    • Millennials are in 3rd place in both income and total spending but moved up to 2nd place in Pet Products Spending share. They are committed to their pet children.
    • Much of the drop for the Oldest Americans came as a result of bundling the Greatest with the Silent Generation. The 74 to 91-year-old Silents still have a strong commitment to their pet companions.

Now let’s look at Pet Products $ spent by Generation and their share of the total.

  • In terms of 2019 Mid-Yr Performance, the older groups were down, and the younger groups were up, especially <39.
  • Boomers still have the largest share, but Millennial/Gen Z gained the most, moving up to 23.1% from 19.4% in 2018.
  • Overall – Ave CU spent $353.94 (-$37.96); 2019 Mid-Yr Pet Products spending = $46.61B, Down $4.56B (-8.9%)
    • There were big drops in both halves. July>Dec 18, Down $2.52B; Jan>Jun 2019, Down $2.04B
  • Boomers – Ave CU spent $416.00 (-$86.14); 2019 Mid-Yr Pet Products spending = $18.03B, Down $4.44B (-19.8%)
    • Huge drop in 2018 and continued down in 2019. – Jul>Dec 18, Down $3.82B; Jan>Jun 19, Down $0.62B.
  • Gen X – Ave CU spent $406.63 (-$4.41); 2019 Mid-Yr Pet Products Spending = $14.40B, Up $0.01B (+0.07%)
    • Up in 2018, down in 2019. Only 2.6% more CUs “saved” them.– Jul>Dec 18, Up $0.75B; Jan>Jun 19, Down $0.74B
  • Millennial/Gen Z– Ave CU spent $295.22 (-$3.15); 2019 Mid-Yr Pet Products Spending = $10.77B, ↑$0.82B (+8.3%)
    • Due to 6.5% more CUs, they had an increase in both halves. – Jul>Dec 18, Up $0.77B; Jan>Jun 19, Up $1.23B.
      • Millennials Only – Ave CU spent $319.56; 2019 Mid-Yr Pet Products Spending = $10.44B
      • Gen Z Only – Ave CU spent $49.08; 2019 Mid-Yr Pet Products Spending = $0.33B
  • Silent/Greatest – Ave CU spent $207.36 (-$42.99); 2019 Mid-Yr Pet Products Spending = $3.42B, ↓$0.95B (-21.8%)
    • Down in both halves but the big drop came in 2019. Jul>Dec 18, Down $0.13B; Jan>Jun 19, Down $0.82B.

All Generations spent less per CU. The biggest drops came from the oldest groups who spent much less and decreased in numbers. The increase from younger groups was due to more CUs. Let’s look at individual segments. First, Pet Food

  • The impact of the FDA grain free warning hit the Boomers…hard. The response in the oldest group was delayed.
  • The younger groups grew in both halves – Gen X won the 2nd half of 2018 – Millennials/GenZ won the 1st half of 2019
  • Overall – Ave Cu spent $219.54 (-$20.90); 2019 Mid-Yr Food spending = $28.71B, Down $2.46B (-7.8%)
    • After a big drop in the 2nd half of 2018, spending turned up… barely. Jul>Dec 18 (-$2.51B); Jan>Jun 19 (+$0.05B)
  • Boomers – Ave CU spent $274.51 (-$58.79); 2019 Mid-Yr Food spending = $11.91B, Down $3.05B (-20.4%)
    • July>Dec 18 (-3.18B) – In reaction to FDA warning. Then things calm down. Jan>Jun 2019 (+$0.13B)
  • Gen X – Ave CU spent $237.87 (+$15.42); 2019 Mid-Yr Food spending = $8.38B, Up $0.55B (+7.0%)
    • Another reaction to the FDA warning – buy even more costly food. Jul>Dec 18 (+$0.49B); In Jan>Jun 19 (+0.06B)
  • Millennial/Gen Z – Ave CU spent $177.13 (-$0.03); 2019 Mid-Yr Food Spending = $6.52B, Up $0.67B (+11.4%)
    • Jul>Dec 18 (+$0.19B); Jan>Jun 19 (+$0.48B). More CUs generate more $pending.
      • Millennial Only – Ave CU spent $192.35; 2019 Mid-Yr Pet Food Spending = $6.33B
      • Gen Z Only – Ave CU spent $49.08; 2019 Mid-Yr Pet Food Spending = $0.19B
  • Silent/Greatest – Ave CU spent $128.95 (-28.46); 2018 Mid-Yr Food spending = $2.09B, Down $0.62B (-22.9%)
    • It appears that they reacted to the FDA warning, but not until 2019. Jul>Dec 18 (-0.01B); Jan>Jun 19 (-$0.61B)

Only Gen X CUs spent more on food. The Boomers and oldest group were negatively impacted by the FDA warning. The younger groups increased spending, but the Millennial/Gen Z group did it because of more CUs.  Now, Supplies.

  • Boomers still have the largest share but Supplies spending skews younger – Gen X, Millennials & Gen Z control 58%.
  • The spending drop skews older and is widespread, including all groups older than Millennials.
  • Overall – Ave CU spent $134.40 (-$17.06); 2019 Mid-Yr Supplies spending = $17.71B, Down $2.10B (-10.6%)
    • Supplies spending grew for 24 months. That ended with new tariffs. Jul>Dec 18 (-$0.01B); Jan>Jun 19 (-$2.09B)
  • Baby Boomers – Ave CU spent $141.49 (-$16.60); 2019 Mid-Yr Supplies spending = $6.12B, Down $1.38B (-18.4%)
    • The drop was strong and consistent over both halves. Jul>Dec 18 (-$0.64B); Jan>Jun 19 (-$0.74B)
  • Gen X – Ave CU spent $168.76 (-$19.83); 2019 Mid-Yr Supplies spending = $6.56B, Down $0.54B (-8.2%)
    • Increased “tariff” prices affects even the wealthiest group. Jul>Dec 2018 (+$0.26B); Jan>Jun 19 (-$0.80B)
  • Millennials/Gen Z – Ave CU spent $118.09 (-$3.12); 2019 Mid-Yr Supplies spending = $4.25B, Up $0.16B (+3.9%)
    • Overall lift from more CUs. Tariffs “hit home” in the 1st half of 2019. Jul>Dec 18 (+$0.48B); Jan>Jun 19 (-$0.32B)
      • Millennials Only – Ave CU spent $127.21; 2019 Mid-Yr Supplies spending = $4.11B
      • Gen Z Only – Ave CU spent $37.94; 2019 Mid-Yr Supplies spending = $0.14B
  • Silent/Greatest – Ave CU spent $78.41 (-14.53); 2019 Mid-Yr Supplies spending = $1.32B, Down $0.34B (-20.0%)
    • The drop began in the 2nd half of 2018 then accelerated in 2019. Jul>Dec 18 (-$0.12B); Jan>Jun 19 (-$0.22B).

In the 2nd half of 2016, Supplies began 24 months of growth which resulted in a $5B (33%) spending increase. Gen X and Boomers fueled 73% of the growth but the Millennials also stepped up in the last 12 months with a $0.94B increase. A big factor in this lift was pricing. Prices deflated for 22 months so Supplies were a great value for everyone. That changed in 2018 as new tariffs were added, effective in September. In anticipation, prices began moving up in the Spring. Supplies spending flattened in the 2nd half of 2018 then plummeted $2B in the 1st half of 2019. The price increase affected all generations as CU spending on Supplies fell for every group.

In the final chart we will compare each generation’s share of spending on Total Products, Pet Food and Pet Supplies to their share of CU’s and see “Who is earning their share?” Then we will review their actual performance numbers.

Performance = Share of Spending/Share of CU’s;    100+% indicates you are “earning your share”

If a share of market is outlined, then performance exceeds 100%.    

  • Silent/Greatest Generation Performance – Pet Products: 57.1%; Pet Food:56.4%;Pet Supplies:58.3%
    • This group is all over 73 yrs old. Pet ownership is more difficult after age 75 and this is reflected in the low share of Pet Products spending. However, the desire and the commitment are still there. Their performance is very consistent between Food and Supplies, but both will drop as they age.
  • Baby Boomers Performance – Pet Products: 117.8%;Pet Food: 125.5%; Pet Supplies: 105.3%
    • The Boomers truly led the way in building the pet industry and they are still at it. They are earning their share and are the spending leader in both Food and Supplies. With the FDA warning and the Supplies Tariffs, their overall performance is down sharp[y from last year. Ultimately this will fade even more as they age. They will undoubtedly lead in Food for a number of years, but Gen X may outperform them in Supplies by year end.
  • Gen X Performance – Pet Products: 114.0%; Pet Food:117.1%; Pet Supplies: 125.6%
    • The Gen Xers are next in line and next in performance to the Boomers. They significantly outperform the Boomers on supplies and their Food performance is again above 100%. Gen Xers range in age from 39 to 54. They already make and spend the most money. As they grow older, their children will start to move away from home and their focus will increasingly turn to their Pet Children. Expect their overall performance to continue above the 110% level and to surpass the Boomers in the not too distant future.
  • Millennials Performance – Pet Products: 91.4%; Pet Food: 89.4%; Pet Supplies: 94.6%
    • The Millennials are widely touted as the future of the industry. This is ultimately true, but the future is still a ways off. The Millennials are currently 23 to 38 years old. They have a lot of pets, but their responsibilities are growing, and they are still a little short on income. There is no doubt that are deeply committed to their pets as they took over the #2 spot in Pet Products spending as a share of total spending. They now only trail the Boomers. They are 16 years away from occupying the highest income age group. Plus, they are having children later so the spending lift from children leaving will also undoubtedly be delayed. With all things considered, they may be 15 years away from Pet Spending dominance.
  • Gen Z Performance – Pet Products: 25.5%; Pet Food: 23.8%; Pet Supplies:28.2% They’re Just getting started!

A Final Word – In the 2018 mid-year update, Pet Products Spending was up $5.3B. The increase was driven by the Boomers (48%) and Millennials (38%). Millennials were the most consistent with spending lifts in both halves for Food and Supplies. Mid-Yr 2019 was quite different. The 2018 FDA grain free warning drove Food spending down $2.46B while added tariffs on Supplies raised prices, resulting in a $2.1B drop in spending. The Boomers owned the biggest share of both decreases but the oldest group also contributed -$1B. On the plus side, in Food the younger groups were both up – a total of $1.2B. In Supplies all groups but Millennial/Gen Z spent less. One thing didn’t change from 2018. The Millennials were the most consistently positive. They were the only group to spend more on both Food and Supplies.

 

 

 

 

 

 

 

 

Retail Channel Monthly $ Update – May Final & June Advance

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Time for our monthly update on U.S. retail sales by channel. The current COVID-19 crisis has caused turmoil in the Retail Marketplace. Consumer spending behavior has changed and continues to evolve. In this report we will track the changes and migration between channels. We will do that with data from two reports provided by the U.S. Census Bureau.

The Reports are the Monthly Retail Sales Report and the Advance Retail Sales Report. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – approximately 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

This means to get the full picture in our monthly channel update we need to look at the latest release of both reports. We will begin with the Final Retail Report from May and then move to the Advance Retail Report for June. This will also allow us to better track the consumers’ evolving spending behavior in terms of channel migration.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports and we fill focus on Pet Relevant Channels

The information will be presented in detailed charts to facilitate visual comparison between groups/channels of:

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2019
  • Current YTD change – % & $ vs 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

We’ll start with the May Final report. The Retail Market was beginning to recover after hitting bottom in April. First, we will look at some major retail groups. (Note: The Data in all graphs is Actual, Not Seasonally Adjusted)

The final total is $2B more than the Advance report projected a month ago. Although Relevant Retail was $2B less than expected, the Auto segment was $3B better. Restaurants also were $1B more than the early numbers but Gas Stations’ $ were the same. $ales were up vs April across the board but down for all but the Relevant Retail group vs 2019 and YTD.

The Spring Lift usually begins in late March and peaks in May as consumers focus on the outdoors. Closures and “staying at home” pushed that back. Things began to open up in May, but except for Relevant Retail, $ were down vs 2019.

Now, let’s see how some Key Pet Relevant channels were doing in May.

  • Overall – Strong recovery from April as all channels, but Drug Stores had increases, 7 of 11 with double digit %.
  • Building Material Stores – This group typically has their biggest annual lift in Spring. This is unchanged and even amplified. Farm Stores are doing especially well with spectacular increases vs 2019. Although Sporting Goods stores are not included in this group, they have a similar Spring lift pattern. You can see that consumers really opened up to sports/recreation activities in May.
  • Food & Drug – Supermarket sales continue with strong growth. Drug Stores also had a March sales rush on essentials that ended in April and the decline continued into May as sales for both months were down vs 2019.
  • General Merchandise Stores – Sales in $ Stores and Clubs/SuperCtrs show continued strength with $ Stores showing the most growth. Some Discount Department stores were closed and shopping in others was often limited to essentials. You can see that they began to recover in May but are still down vs 2019.
  • Office, Gift and Souvenir Stores – Most of these stores were closed. In May they began to slowly open up.
  • Internet/Mail Order – “Stay at home” has further accelerated this channel’s growth. This will likely continue as the crisis has introduced many new consumers to online shopping and the behavior is likely to become habitual.
  • A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores. Pet Stores account for 22 to 24% of this group’s total sales. Pet Stores were generally deemed essential, but most stores were not. The others began reopening in May so there was a big lift from April. They were up 21% through February which is why they still have 4.9% YTD increase.

After a disastrous April, May saw the beginning of a slow recovery. As businesses began to re-open the numbers started to move in the right direction. Driven by the Internet, Supermarkets, SuperCtrs/Clubs/$ Stores and Hdwe/Farm the Relevant Retail Segment turned positive in all measurements. June brought even more widespread re-openings. Let’s see how the situation is progressing. Here are the Advance numbers for June.

April was the biggest spending drop in history. May was $97B better but still the second worst decrease in history, -$40B from 2019. In June, monthly sales turned positive for the first time since February as Total Retail was up $12B vs 2019.

Total Retail – Total Retail spending increased $12B, +2.3% vs 2019. It was the smallest increase since June 2019 but more importantly, the first since February. Sales through February 2020 were up $60B, +6.6% versus 2019. Then came COVID-19. Hopefully, we bottomed out at -$113B in May. We are still down -$100B YTD and -$170B from February.

Restaurants – Spending increased $6B over April but was still down $18B vs 2019. The year started out good, up $9B (+8.1%) through February. Then mandates forced many restaurants to close. Delivery and curbside pickup couldn’t make up the difference. Even the gradual re-opening in May and June was not enough as spending is now down $86B YTD.

Automobile & Gas Stations – If you can’t go out, except for necessities, then your car becomes less of a focus in your life. Buying a car was definitely less of a priority. Auto Dealers, both new and used, have been combating this with some fantastic deals and a lot of advertising. In June they turned the corner as sales were up $10B versus 2019. In terms of Gas Stations, May is traditionally the beginning of the vacation travel season but not in 2020. Although sales increased in May and June, they are still down -$42B YTD. People are still not driving as much, whether for commuting or road trips.

Relevant Retail – Less Auto, Gas and Restaurants – Many non-essential businesses began to shutter their doors in March but there was also a rash of binge/panic buying for “necessities” and a big lift in groceries as consumers focused on home cooking which drove spending up $19B. Then came April. With a full month of closures and an end in binge buying, spending dropped $34B from March. In May, the overall market began a slow reopening so spending began to move in the right direction. Nonstore, Grocery and SuperCenters/Clubs & $ Stores continued their growth. The spring lift in the Hardware/Farm channel got even stronger and Sporting Goods stores got on  board. In June, these big drivers couldn’t quite match their May numbers, but the openings became more widespread and the Relevant Retail group now has posted positive numbers versus last month, last year and year to date for 2 consecutive months.

Now let’s look at what is happening in the individual retail channels across America. In June, consumer spending in the relevant retail market grew even more positive versus 2019. Let’s see where the $ came from. These groups are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

 

The increase over May was driven by re-openings. The increase vs 2019 and YTD came from essential businesses.

Observations

After a full month of stay at home and widespread closures there was surge in May. Things truly opened up in June which fueled an increase over May. However, the essential channels are responsible for the lift vs 2019.

  • Nonstore Retailers – Even more consumers are online shopping.
  • Food & Beverage, especially Grocery– Restaurant $ are still down so consumers continue to eat & drink at home.
  • Sporting Gds/Hobby/Books – Stores re-opened and consumers began to return to outside recreational activities.
  • Bldg Materials/Garden/Farm – A bigger than usual Spring lift continues as consumers focus “on their home”.
  • SuperCtrs/Club/Value/$ Strs – Sales slowed in April, but they came back strong in May and it continued in June. This group turned the whole Gen Mdse channel positive. It clearly shows that value is still a consumer priority.

Regarding the Individual Large Channels

General Merchandise Stores – Regular Department stores began reopening and Discount Department stores held their ground, so this cut the losses for Department Stores. Club/SuperCtr/$ stores provided the big positive force. In April consumers dialed back their panic buying and spending on discretionary items was also down significantly. In May and now June we saw consumer spending return to a more normal pattern in the big and small stores that promise value.

Food and Beverage, plus Health & Personal Care Stores – The Grocery segment is still driven by increased Food sales due to a slow restart by restaurants, up 10.5%, +$6B. Sales in the Health, Personal Care group are up slightly from May but remain down overall. Many Personal Care stores are now slowly reopening but Drug Stores sales are essentially flat.

Clothing and Accessories; Electronic & Appliances; Home Furnishings – More and stores are reopening, producing a spectacular increase in sales over May. However, June $ were still down from 2019. They all had the same pattern, with Clothing Stores being the most extreme. Their sales were up 84% from May but still down 24% vs 2019 and 39% YTD. These channels have a long way to go to recover.

Building Material, Farm & Garden & Hardware – This channel has its biggest spending lift in the Spring. The shelter in place rules caused many consumers to turn their focus to their needs at home, including house and yard repair and improvement. This has accelerated and extended their Spring lift. Sales are up across the board, including +9.9% YTD.

Sporting Goods, Hobby and Book Stores – Book and Hobby stores which had been closed are now open. Sporting Goods stores had generally been open but organized sports were on hold, parks closed, and non-essential travel was discouraged. In May things began to open up and this expanded in June. Consumers again sought outdoor recreation. Sales doubled from April to May and grew 31% in June. June $ even beat 2019 by 22%, but YTD they are still down 6%.

All Miscellaneous Stores – This group is mostly small to medium specialty stores – both chains and independents. While Pet Stores are essential, most other stores in this group are not. The closures hit this group particularly hard. May sales were up 27% from April as the reopening began and grew 12% in June. However, they were still down 5% vs June 2019 and are down 7% YTD. In February they were up $2.6B, +14.1% YTD. Now they are down -$4.7B – a big turnaround.

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV businesses. The COVID-19 crisis has only accelerated the ongoing movement to online retail. Compared to 2019, NonStore was up 16.3% in March, 22.5% in April, 25.3% in May and 30.3% in June. Since April they have been the leader in all sales measurements either in $ or % increase. As you can see, their lead is growing. Also, their YTD sales are up 18.4%, exceeding their 12.9% annual increase in 2019. This early year lift bodes well for 2020 as much of their annual increase is usually driven by Christmas.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded along with their store sales in their regular channel. Whether they are up or down, their online sales are included in the totals.

Recap – After a record drop in spending in April, the situation improved slightly in May, but it still was the 2nd biggest year over year monthly retail sales decline in history. Restaurants, Auto and Gas Stations all had big sales increases in May and now June, but they are still struggling. The Relevant Retail segment has provided the only true positive as sales are up in all measurements for 2 consecutive months. However, for many segments in this group there is still a long way to go. In June Total Retail turned positive for the first time since February and Relevant Retail appeared to be moving towards a more routine pattern – a new normal. However, we are now seeing a resurgence of the virus and retail restrictions are being re-implemented in many areas and are likely to become more widespread. This is going to be a long battle with no end in sight. We will continue to monitor the data and provide you with regular updates as the situation evolves.

 

 

The Impact of COVID-19 on Small Businesses – 6/27 Update

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Small Businesses are at the core of our nation’s economy and the challenges they face are important to everyone. To better understand the impact of COVID -19 on these businesses and aid decision makers in serving their urgent needs, the U.S. Census Bureau directly reached out to small businesses. For the Survey, the Census Bureau defined a small business as a single location business with employment between 1 and 499 and receipts of at least $1,000.

Consisting of 16 questions, this 5-minute survey reached close to 1 million businesses split across a 9-week rotation to reduce burden and lessen survey fatigue. The survey included small businesses in every area of the U.S. Economy. This initial survey began in the week ending 5/2/20 and was completed in the week ending 6/27/20 so we are able to track the evolution of the COVID-19 impact over 8 full weeks.

The results are first categorized by major, 2 digit NAICS code classification. Slightly more specific data (by 3 digit NAICS code) also became available so that we are able to more closely track elements which are relevant to the Pet Industry. Here are the 14 “pet relevant” groups for which we have compiled data:

  • National Avg: Covers All Major Areas with a few Exceptions like Agricultural Production and Religious Organizations
  • Product Related Groups:
    • 31-33: Manufacturers – All manufacturers
      • 311 – Food Manufacturers (Both Human & Animal)
    • 42: Wholesalers/Distributors – Wholesalers/Distributors of any type products
      • 424 – Distributors of Nondurable Goods (Includes food and nondurable supplies)
    • 44-45: Retail Trade – This includes everything from gas stations to Pet Stores (#453910). No restaurants
      • 444 – Building Materials/Hardware/Farm
      • 445 – Food & Beverage Stores
      • 452 – General Merchandise Stores
      • 453 – Miscellaneous Retailers (includes Pet Stores)
      • 454 – Nonstore Retailers
  • Services Related Groups:
    • 54: Professional, Scientific and Technical Services – Legal, Advertising Agencies, etc… and Vet Clinics (#541940)
    • 81: Other Services – Funeral Homes, Barber Shops, Auto Repair, etc … and Pet Care Services (#812910)
      • 812 – Laundry & Personal Care (includes Pet Care Services)

The data from each group has been bundled into 3 charts showing the group’s responses to 8 particularly relevant questions about the impact of COVID-19.

Here are the charts and the questions that will be answered on each:

Chart #1: Impact of Covid-19 on Your Business

  1. Overall, how has this business been affected by the COVID-19 pandemic?

Chart #2: Key Business Elements – Weekly Changes

  1. In the last week, did this business have a change in operating revenues?
  2. In the last week, did this business have disruptions in its supply chain?
  3. In the last week, did this business temporarily close any of its locations for at least one day?
  4. In the last week, did this business have a change in the number of paid employees?

Chart #3: Government Assistance & Your Outlook For The Future

  1. Since 3/13, has this business requested/received financial assistance from Paycheck Protection Program (PPP)?
  2. Since 3/13, has this business received any financial assistance from any Federal Program?
  3. In your opinion, how much time will pass before this business returns to its usual level of operations?

We are not going to review each group in this report. We will take a closer look at the Overall Retail Trade (NAICS 44-45) and 3 retail subchannels – Miscellaneous Retailers (includes Pet Stores), Nonstore Retailers and Hardware/Farm Stores. We also will review Personal Care Services which includes Pet Care. At the conclusion of the report we will make the data for all 14 groups available for you to download. You can then pick the ones that are most relevant to your particular business.

A word of caution: Remember, this data is only for the small businesses in any particular classification. It doesn’t include the big chains, which could be impacted differently because of their size, capabilities or resources.

Let’s get started with the Retail Trade

  • There is a big negative impact on the retail trade,76.0%. However, it is still faring better than the overall market which stands at 82.7% negative as of 6/27.
  • The negativity has moderated but the readings for all response groups have basically plateaued since 6/13.

  • Every measurement on this chart began moving in the right direction but most have plateaued since 6/13. In terms of revenue, 40% still showed a decrease which is still better than the national average, 42.6%. Retail outlets are also doing better than the Nation overall at generating increased $ – 29.1% to 19.7%.
  • Supply chain problems are high but stable. Much of the country was opened up in June so temporary closures only affected 15.3% of businesses – a big drop from 43.7% eight weeks earlier.
  • The employment situation has improved, especially in terms of businesses decreasing the number of employees. However, that situation has also become static, with the same number adding as cutting and 80% maintaining the status quo.

  • 97% of retail trade businesses that applied for PPP funds have received payment. In fact, 79% of all small retail businesses have received some form of government assistance.
  • In terms of outlook, although the number of businesses now expecting little or no effect by COVID-19 has grown significantly from 5.1% to 13.3%, this is a small segment. The most popular forecast (40.8%) is over 6 months for a return to normal. When you combine that with the 10.3% who believe that things will never be normal again you get over half, 51.3% who think that recovery will take considerable time. However. This is better than the overall national average of 53.6%

Now let’s drill a little deeper – Miscellaneous Stores, which includes Pet Stores

  • While Pet Stores were generally deemed “essential”, most stores in this group, like gift shops, art dealers and used furniture stores were not, which explains the high initial negative impact. It did moderate slightly in May but turned sour in mid-June.
  • After peaking at 16.7% on 6/6, the number of businesses reporting a positive or little no effect on their business fell to 13.2% by 6/27.

  • The change in revenue started in the right direction but has basically plateaued. Although businesses reporting decreased revenue have actually increased since 6/13.
  • Supply chain problems remain a big factor and they too have gotten worse since 6/13.
  • Closures have been cut in half but still affect almost 1/3 of the group (31.8%)
  • The employment situation has gotten significantly better but there are still twice as many businesses losing employees (14.9%) as those adding employees (7.4%).

  • The PPP funds have been distributed. 96% of businesses who applied have received funds. In fact, 81.5% of this group have received some form of federal aid.
  • This group’s projected recovery time has gotten worse since mid-June. Now 49.1% say that it will be over 6 months until a return to normal and 14.6% say normal will never return. That is 63.7% of these businesses.

Next, let’s look at Nonstore Retailers

  • Although the negative view is less than at the beginning, it is trending up. However, so is the positive view, The biggest decrease occurred in little/no effect which fell from 14.2% to 8.7% in the week of 6/27.

  • The revenue situation improved in May but has plateaued in June. 22-24% are posting increases. 35-37% report no change and about 40% are seeing decreased revenue.
  • Supply chain problems increased in mid-June but improved by 6/27, Closures improved in June but were up and down on a weekly basis.
  • The employment situation generally became more stable in June as hiring and layoffs both slowed. Although there was a little more turmoil in the week of  6/27.

  • 98% of businesses that requested PPP have received funds and 72% of the businesses in this group have received some form of government assistance.
  • Their overall projection for recovery grew worse in June. By 6/27 43.3% said it would take over 6 months and 9.7% said normal would never return. That’s 53% which is about equal to the National Average (53.6%) but worse than Total Retail (51.3%), which is somewhat surprising for a nonstore group.

Our final Retail Trade group is Hardware/Farm Stores

  • Except for an uptick in negativity during the week ending 6/6, their impression of the impact of COVID-19 on their business has steadily improved. By 6/27 their negativity score (55.6%) was the lowest of any retail group that we measured, including Food & Beverage Stores at 59.4%.

  • Their revenue began moving in the right direction and by 6/13 the number with increases exceeded the number with decreases. It has become relatively stable – about 33% up, 30% down and 37% with no change.
  • Supply chain problems are stable, but high at 56+%. Closures are down dramatically and were only 6.7% as of 6/27.
  • Hiring has slowed, after peaking during the week of 6/6 but still exceeds layoffs. 81.4% are now showing no change in the number of employees.

  • 99% of businesses that have applied for PPP have received their money and 75.4% of the group has received some form of federal assistance.
  • This group projects a speedier recovery than any other retail group. 38.3% expect a return to normal in 6 months or less but 26.6% say that there has been little or no effect on their business. That totals 64.9% which is much better than the National Average of 46.4% and 48.9% for Total Retail.

Finally, let’s look at the Personal Care Services Channel, which includes Pet Care Services

  • This segment was hugely impacted by closures but even opening up has not much improved their assessment of the situation. The negativity is still extraordinarily high at 91.5%. Although it has moderated slightly, almost 2/3 of the businesses, 65.2% still see the situation as extremely negative.

  • The revenue situation has gradually improved but 50.6% of businesses are still reporting a decrease in $ as of 6/27.
  • Supply chain disruptions are improving and are lower than many other channels. Closures have decreased by 54% since May 2nd but still affect 3 in 10 businesses (30.8%).
  • The employment situation is still negative – 7.8% hiring; 19.5% laying off, but it has reached its highest level of stability as 72.7% maintained the status quo in the week of 6/27.

  • 94% of businesses that applied for PPP have received funds and 84.4% of the group has received some form of federal assistance, which is better than the National Average, 77.0% and the Total Retail Trade, 78.7%.
  • Their outlook is rather bleak and almost the exact opposite of Hardware/Farm stores. 47.9% project over 6 months for a return to normal while 19.0% say normal will never return. That totals 66.9%, two thirds of all personal care outlets.

As you can see from our examples, the specifics can vary widely by business category. As the economy began re-opening the situation was generally improving. However, we have seen a resurgence in the virus. This is leading to reimplementation of some business restrictions and has produced an overall feeling of uncertainty among consumers. Until we have a stability in health, a return to normalcy in business will be greatly slowed. COVID-19 has had an especially negative impact on U.S. Small Businesses. Even small businesses in channels that are showing overall growth during the crisis, like Hardware/Farm and Nonstore, are having serious problems. The overall national growth in these channels is being driven by the “big guys”, like Home Depot and Amazon. The overall projection for a return to normal for small businesses is increasingly over 6 months, which would put it in 2021.

That concludes our analysis of this initial survey. As you can see the situation is far from over. Hopefully the Census bureau will conduct periodic future surveys so that we can fully monitor the progress of small businesses through this crisis.

Finally, as we said, more data is available for you. Files with the specific data/charts for all 14 business categories that we identified as relevant to the Pet Industry (including those used in this report) are available for download. Each file is a 1 page word document with 3 COVID-19 impact charts for a specific business category. There is no commentary – just data. Pick the ones that are most relevant for your business and share them with your associates. STAY SAFE!

National Average & Major Business Categories

National Avg Manufacturers Whlsrs/Distribs Retail Trade Science/Tech Other Services

More Defined Supply Chain Categories

Food Mfg Distrib Nondurables

Drilling Down into the Retail Trade

Bldg/Hdwe/Farm Food & Bvg Gen Mdse Strs Misc Stores Nonstore Retailers

Finally, Personal Care Services (includes Pet Care)

Personal Care

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Pet Services Spending (Non-Vet) $8.81B (↑$0.95B): 2019 Mid-Year Update

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The US BLS just released their Mid-Year Update of the Consumer Expenditure Survey covering the period 7/1/2018 to 6/30/2019. In our analysis of Pet Supplies Spending we saw a 24 month lift come to an end. Tariffs drove prices up and Spending turned sharply down across virtually every demographic segment in the 1st half of 2019 . Pet Food Spending also turned down, but in the 2nd half of 2018, in reaction to an FDA warning on grain free dog food. Now we turn our attention to Pet Services. The Mid-year numbers show that spending in this segment was $8.81B, up $0.945B (+12.0%) from the previous year. This segment is known for consistent, albeit small increments of growth. In 2018 that changed. The 1st half saw a $1.1B increase followed with an additional $0.85 lift in the 2nd half. This annual $1.95B increase was by far  the biggest $ increase in history. In the 1st half of 2019, Services spending plateaued, but at this unprecedented, elevated level. This deserves a closer look. First, we’ll review recent Services spending history since 2013.

Here are the 2019 Mid-Year Specifics:

Mid-Year 2019: $8.81B; ↑$0.945B (+12.0%) vs Mid-Yr 2018

Jul > Dec 2018: ↑$0.85B

Jan > Jun 2019: ↑$0.09B

Pet Services is by far the smallest industry segment. However, except for 2010 and 2011, the period immediately following the Great Recession, it had consistent annual growth from 2000 through 2016. Spending in Food and Supplies have been on a roller coaster ride during that period. Services Spending more than tripled from 2000 to 2016, with an average annual growth rate of 7.6%. Spending in the Services Segment is the most discretionary in the industry and is more strongly skewed towards higher income households. Prior to the great recession, the inflation rate averaged 3.9% with no negative impact. The recession affected every industry segment, including Services. Consumers became more value conscious, especially in terms of discretionary spending. Services saw a slight drop in spending in both 2010 and 2011, but then the inflation rate fell to the 2+% range and the segment returned to more “normal” spending behavior. In mid-2016 inflation dropped below 2% and continued down to 1.1% by the end of 2017. This was primarily due to increased competition from free standing businesses but also an increase in the number of Pet Stores and Veterinary Clinics offering pet services. While prices still went up slightly, there were deals to be had and consumers shopped for the best price. There was no decrease in purchase frequency. Consumers just paid less so spending fell slightly. In the 2nd half of 2017 spending turned up again. More Consumers began to take advantage of the value and convenience of the increased number of outlets offering Services. This deeper market penetration caused Services Spending to take off in 2018, up $1.95B, by far the biggest annual increase in history. Prices turned up again in the first half of 2019, increasing  2.8% from 2018. However, Services essentially “held their ground” as  spending inched up $0.09B. With an annual growth rate of 8.2% since 2000, Services have become more prominent in the Industry.

Let’s take a closer look at some spending demographics – Age and Income.

In the graphs that follow we will compare spending for the Mid-year 12 months ending 6/30/19 to the previous period ending 6/30/18. In our graphs we will also include the 2018 yearend $pending. This will also allow you to see the spending changes in the 2nd half of 2018 and the 1st half of 2019.

The first graph is for Income, the single most important factor in increased Pet Spending, especially in Services.

Here’s how you get the change for each half using the Over $70K group as an example:

Mid-yr Total Spending Change: $6.43B – $5.62B = Up $0.81B (Note green outline = increase; red outline = decrease)

  • 2nd half of 2018: Subtract Mid-18 ($5.62B) from Total 2018 ($6.31B) = Spending was up $0.69B in 2nd half of 2018.
  • 1st half of 2019: Subtract Total 2018 ($6.31B) from Mid-19 ($6.43B) = Spending was up $0.12B in 1st half of 2019.

  • Both the Over and Under $70K groups had a 12-month spending increase. However, Over $70K was responsible for 86% of the $0.94B national lift. The Under $70K group decreased spending in the 1st half of 2019 so their overall increase was produced solely by a lift in the 2nd half of 2018.
  • The individual groups over $70K all showed growth in both halves, but it was minimal in the 1st half of 2019. The Over $100K groups were responsible for 81% of the total Services increase.
  • The lower income, $30>50K group had a spending pattern similar to the highest income groups but their percentage increase was more. Spending was up 47%. The lift in this group was driven by Retirees (Avg Income: $42K) as they chose to fulfill their real need for Pet Services. This group is the only reason Under $70K registered an increase.
  • Spending in the Under $30K group was essentially flat. The lower middle income, $50>70K group had the biggest decrease and it came from a big drop in the 1st half of 2019, following a small lift at the end of 2018.
  • Income is the biggest factor in choosing the discretionary convenience of Pet Services. However, we can’t ignore “need” as was demonstrated by the retiree driven performance of the $30>50K group.

Now, Services’ Spending by Age Group.

  • The spending lift in both halves by the 65+ yr olds and the highest income 45>54 age group mirrors what see saw in the income category. Plus, their major lifts came in different halves.
  • The 55>64 yr old Boomers had the only overall decrease. It was minor and spending was flat in the 1st half of 2019.
  • All groups under 45 had the same pattern with a spending lift in the last half of 2018, followed by a drop in the first half of 2019. The size of the drop grew with age and spending. The 25>34 yr olds were flat. The others spent more.
  • It’s obvious that the biggest positive movement in Services Spending in the 1st half of 2019 came from oldest groups.

Now let’s look at what is happening in Pet Services spending at the start of 2019 across the whole range of demographics. In our final chart we will list the biggest $ moves, up and down by individual segments in 11 demographic categories. Remember, the lift in the 1st half of 2019 was $0.09B, much less than the $0.85B in the 2nd half of 2018.

The first thing that is readily apparent is that the $ changes from winners and losers in each category tend to cancel each other out. This is similar to a pattern that we saw in Food, which also had a minor increase in spending during the 1st half of 2019. The $0.09B increase in Pet Services came from 46 of 80 demographic segments (58%) spending more, just 2 more than the 44 in Pet Food.

The positive impact on Services spending in the 1st half of 2019 by older Americans is obvious from theses 6 winners:

  • 65+ Yrs
  • $30>49K
  • Retired
  • No Earner, Single
  • Homeowner w/o Mtge
  • Silent/Greatest Generations

Like the Food and Supplies segments, Single CUs also had a good start to 2019 in Services spending, winning in 3 demographic categories. However, for Services, the “driver” was No Earner, Singles.

It wasn’t all older groups as 3 “usual” winners came to the top – White, Not Hispanic, BA/BS Degree and Suburban.

On the “losing” side we see evidence of the slight downturn in spending by the younger groups in the performance of these segments:

  • 35>44 Yrs
  • Gen X
  • 3 People
  • Married, Oldest Child <6
  • Renter
  • Central City

We should also note that Gen X (-$0.06B) barely beat out Millennial/Gen Z (-0.057B) for the “losing” spot so the decline was basically universal in the youngest groups. 2 Earner CUs are also more common in these groups.

In 2018 the Services segment reached a new level of prominence in the Pet Industry. However, in 2019 growth seems to be slowing. How did we get here and what comes next?

We have noted that by 2017 the number of outlets offering Pet Services had radically increased. This created a highly competitive market and the inflation rate dropped to near record lows. Value conscious consumers saw that deals were available, and they took advantage of the situation. However, they didn’t increase the frequency of purchase. They just paid less. This drove overall Pet Services spending down in the 1st half of 2017. The segment started to recover in the 2nd half but not enough to prevent the first annual decrease in Pet Services spending since 2011. However, it was a start. In 2018, more consumers started to recognize the convenience offered by more outlets. The latest big food upgrade was also winding down. The result was that Services started a deeper penetration into the market, especially in the younger groups. The <45 groups spent $1.47B more on Services in 2018, 74% of the total $1.95B increase in the segment. As such, a slight downturn in 2019 is not unexpected. They may just have been value shopping. However, the oldest groups did seize the opportunity. They have a real need for Pet Services. Now they are convenient and more affordable.

Will this continue? What can we expect in the 2nd half of 2019? We can’t say for sure, but inflation could be a factor. In the 1st half of 2019 Services prices were up 2.9% vs 2018. This also may have contributed to the reduced spending by some segments. However, the rate slowed to +2.2% in the 2nd half. This is historically a more typical inflation rate for this segment. It probably signals a return to slow, consistent growth for Services. We’ll see when the full year spending data for 2019 is released in September.

 

 

 

 

Retail Channel Monthly $ Update – April Final & May Advance

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Time for our monthly update on U.S. retail sales by channel. The current COVID-19 crisis has caused turmoil in the Retail Marketplace. Consumer spending behavior has changed and continues to evolve. In this report we will track the changes and migration between channels. We will do that with data from two reports provided by the U.S. Census Bureau.

The Reports are the Monthly Retail Sales Report and the Advance Retail Sales Report. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – approximately 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

This means to get the full picture in our monthly channel update we need to look at the latest release of both reports. We will begin with the Final Retail Report from April and then move to the Advance Retail Report for May. This will also allow us to better track the consumers’ evolving spending behavior in terms of channel migration.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports and we fill focus on Pet Relevant Channels

The information will be presented in detailed charts to facilitate visual comparison between groups/channels of:

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2019
  • Current YTD change – % & $ vs 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

We’ll start with the April Final report. This was the depth of the crisis (hopefully). The impact is very visible. First, we will look at some major retail groups. (Note: The Data in all graphs is Actual, Not Seasonally Adjusted)

It is slightly better ($8B) than the Advance report projected a month ago. Although Restaurant $ales were $2B less than expected, the “Relevant Retail” segment was $10B better. Gas Stations also were $1B more than the early numbers but The Auto Segment was “spot on”. However, It was still by far the worst year over year monthly performance in history.

In a “normal” April we are generally into the Spring Lift as consumers begin to turn to outside activities. However, the widespread closures and “stay at home” guidelines generally ended that behavior.

Now, let’s see how some Key Pet Relevant channels were doing in April.

  • Overall – Any binge spending ended in April as only Internet and Hardware/Farm had a March to April increase.
  • Building Material Stores – This group typically has their biggest annual lift in Spring. It appears that this is unchanged. Farm Stores did especially well with spectacular increases in all measurements. Although Sporting Goods stores are not included in this group, they have a similar Spring lift pattern. However, the results are totally different. You truly see the impact of the sports/recreation “shut down”.
  • Food & Drug – Although the March binge buying is over, Supermarket sales continue with strong growth. Drug Stores also had a March sales rush on essentials, but that clearly ended in April as sales are below April of 2019.
  • General Merchandise Stores – Although the March binge buying is over, sales in $ Stores, Clubs/SuperCtrs are both up, with $ Stores showing the most growth. Most traditional Department stores were closed and shopping in many Discount Department stores was often limited to essentials. The result is that sales were down -44.5% vs April 2019.
  • Office, Gift and Souvenir Stores – Most of these stores are deemed non-essential. You see the result.
  • Internet/Mail Order – “Stay at home” has further accelerated this channel’s growth. This will likely continue as the crisis has introduced many new consumers to online shopping.
  • A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores. Pet Stores generally account for 22 to 24% of this group’s total sales. Although Pet Stores were generally deemed essential most stores were not. The group was up 21% YTD in February which is the only reason that they are still “hanging on” to a YTD increase.

April was certainly a terrible month for retail spending, the biggest Total Retail $ drop in history. The March binge/panic buying ended in April and we saw the huge negative impact of a full month of non-essential business closures. In May, a very slow reopening of the economy began. Let’s see how it is progressing. Here are the Advance numbers for May.

April was the biggest spending drop in history. May was $95B better but still $42B (-7.7%) below May of 2019. That  gives us an idea of how serious the current situation is and how long the recovery may take.

Total Retail – Total Retail spending fell $42B, -7.7% vs 2019, edging out March for the 2nd biggest drop in history. Remember, 2020 started off strong. Spending through February was up $60B, +6.6% versus 2019. Then came the COVID-19 crisis and now it is down -$116B – a $176B turnaround in just 3 months.

Restaurants – Spending increased $11B over April but was still down $26B vs 2019. The year started out good, up $9B (+8.1%) through February. Then social distancing began, and many restaurants closed. Delivery and curbside pickup couldn’t make up the difference as spending fell $78B in 3 months so this group is now down $69B YTD.

Automobile & Gas Stations – If you can’t go out, except for necessities, then your car becomes less of a focus in your life. Buying a car was definitely less of a priority. Auto Dealers, both new and used, tried to combat this with some fantastic deals and a lot of advertising. It appears to be helping but sales were still down $7B versus 2019. In terms of Gas Stations, May is traditionally the beginning of the vacation travel season but not in 2020. Prices are still down but people are still not driving as much as they used to, whether for commuting or road trips.

Relevant Retail – Less Auto, Gas and Restaurants – Many non-essential businesses began to shutter their doors in March but there was also a rash of binge/panic buying for “necessities” and a big lift in groceries as consumers focused on home cooking which drove spending up $19B. Then came April. With a full month of closures and an end in binge buying, spending dropped $34B, -10.7% from March and 16B, -5.2% vs April 2019. In May, the overall market began a slow reopening so spending began to move in the right direction. Nonstore and Grocery, along with SuperCenters/Clubs & $ Stores continued their growth. The spring lift in the Hardware/Farm channel got even stronger and the group which includes Sporting Goods, Hobby & Book Stores bounced back to beat their May 2019 numbers. The Relevant Retail group now has positive numbers in all measurements – vs last month, last year and year to date.

Now let’s look at what is happening in the individual retail channels across America. In May, consumer spending in the relevant retail market returned to positive numbers. Let’s see where the $ came from. These groups are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

Every group had a May sales increase over April, but performance was mixed when it came to vs 2019 and YTD. 

Observations

April was a full month of stay at home, widespread closures and reduced discretionary spending so it was an easy number to beat. However, only 7 of 13 groups had positive numbers for May 2020 vs 2019:

  • Nonstore Retailers – Even more consumers are online shopping.
  • Food & Beverage, especially Grocery– Restaurant $ are still down so consumers continue to eat & drink at home.
  • Sporting Gds/Hobby/Books – Stores reopened and consumers started to return to outside recreational activities.
  • Bldg Materials/Garden/Farm – A big Spring lift as consumers focus “on their home” even more than usual.
  • SuperCtrs/Club/Value/$ Strs – Sales slowed in April, but they came back strong in May and it was enough to turn the whole Gen Mdse channel positive. This group of stores offers great value which is still a consumer priority.

Regarding the Individual Large Channels

General Merchandise Stores – Some Regular Department stores began reopening and Discount Department stores held their ground, so this cut the losses for Department Stores. Club/SuperCtr/$ stores provided the big positive force. In April consumers dialed back their panic buying and spending on discretionary items was also down significantly. In May we saw consumer spending return to a more normal pattern in the big and small stores that promise value shopping.

Food and Beverage, plus Health & Personal Care Stores – The Grocery segment is still being driven by increased Food sales due to restaurant closures, up 14.3%, +$8B. Sales in the Health, Personal Care group are up minimally from April but remain down overall. Many Personal Care stores are slow to reopen and Drug Stores sales are essentially flat.

Clothing and Accessories; Electronic & Appliances; Home Furnishings – As stores reopen there was a spectacular increase in sales over April. However, May $ were still down big time from 2019. They all had the same pattern, with Clothing Stores being the most extreme. Their sales were up 209% from April but still down 63% vs 2019 and 43% YTD. These channels have a long way to go to recover.

Building Material, Farm & Garden & Hardware – This channel has its biggest spending lift in the Spring. The shelter in place rules caused many consumers to turn their focus to their needs at home, including house and yard repair and improvement. This has further accelerated the usual Spring lift. Sales are up across the board, including +6.7% YTD.

Sporting Goods, Hobby and Book Stores – Book and Hobby stores which had been closed started to reopen. Sporting Goods stores had generally been open but organized sports were on hold, parks closed, and non-essential travel was discouraged. In May things began to open up and consumers once again sought outdoor recreation. Sales literally doubled from April. The May Sales even beat 2019 by 6%. However, YTD they were still down 10%.

All Miscellaneous Stores – This group is mostly small to medium specialty stores – both chains and independents. While Pet Stores are essential, most other stores in this group are not. The closures hit this group particularly hard. May sales were up 27.3% from April as the reopening began but they are still down 24.3% vs May of 2019. In February they were up $2.6B, +14.3% YTD. In 3 months, this changed to down -$4.3B, -8.3%. That’s quite a negative turnaround.

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV businesses. The COVID-19 crisis has only accelerated the ongoing movement to online retail. Compared to 2019, NonStore was up 16.3% in March, 22.5% in April and 25.3% in May. Since April they have been the leader in all sales measurements regardless if it is in $ or % increase. Also, their YTD sales are up 16.6%, exceeding their 12.9% annual increase in 2019. This early year lift bodes well for 2020 as much of their annual increase is usually driven by Christmas Holiday spending, which is still to come.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded along with their store sales in their regular channel. Whether they are up or down, their online sales are included in the totals.

Recap – Hopefully, April was the “bottom” in the COVID-19  impact on the American way of life and consumer spending. Although the situation began to improve slightly in May, it still beat out March to register the 2nd biggest year over year monthly retail sales decline in history. Restaurants, Auto and Gas Stations all had big sales increases over April, but they are still struggling. The Relevant Retail segment provided the only true positive as sales were up in all measurements. However, for many segments in this group there is still a long way to go. As the situation evolves, spending will no doubt move back to a more routine pattern – a new normal. No one knows how long that this will take and what long term impact the COVID-19 crisis will have on U.S. consumers’ spending behavior. We will continue to monitor the data and provide you with regular updates as the situation evolves.

 

 

 

 

The Impact of COVID-19 on Small Businesses – May Monthly Update

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Small Businesses are at the core of our nation’s economy and the challenges they face are important to everyone. To better understand the impact of COVID -19 on these businesses, the U.S. Census Bureau began reaching out to small businesses in order to aid decision-makers in serving their urgent needs. For the Survey, the Census Bureau defined a small business as a single location business with employment between 1 and 499 and receipts of at least $1,000.

Consisting of 16 questions, this 5-minute survey reaches close to 1 million businesses split across a 9-week rotation to reduce burden and lessen survey fatigue. The survey is reaching out to small businesses in every area of the U.S. Economy. The first survey was conducted between 4/26/20 and 5/2/20. The most recent results are from the week ending 5/30/20 so we can now track the evolution of the COVID-19 impact across the whole month of May.

The results are first categorized by major, 2 digit NAICS code classification. Slightly more specific data (by 3 digit NAICS code) is now available so we are able to more closely track elements which are relevant to the Pet Industry. Here are the 14 “pet relevant” groups for which we have compiled data:

  • National Avg: Covers All Major Areas with a few Exceptions like Agricultural Production and Religious Organizations
  • Product Related Groups:
    • 31-33: Manufacturers – All manufacturers
      • 311 – Food Manufacturers (Both Human & Animal)
    • 42: Wholesalers/Distributors – Wholesalers/Distributors of any type products
      • 424 – Distributors of Nondurable Goods (Includes food and nondurable supplies)
    • 44-45: Retail Trade – This includes everything from gas stations to Pet Stores (#453910). No restaurants
      • 444 – Building Materials/Hardware/Farm
      • 445 – Food & Beverage Stores
      • 452 – General Merchandise Stores
      • 453 – Miscellaneous Retailers (includes Pet Stores)
      • 454 – Nonstore Retailers
    • Services Related Groups:
      • 54: Professional, Scientific and Technical Services – Legal, Advertising Agencies, etc… and Vet Clinics (#541940)
      • 81: Other Services – Funeral Homes, Barber Shops, Auto Repair, etc … and Pet Care Services (#812910)
        • 812 – Laundry & Personal Care (includes Pet Care Services)

The data from each group has been bundled into 3 charts showing the group’s responses to 8 particularly relevant questions about the impact of COVID-19.

Here are the charts and the questions that will be answered on each:

Chart #1: Impact of Covid-19 on Your Business

  1. Overall, how has this business been affected by the COVID-19 pandemic?

Chart #2: Key Business Elements – Weekly Changes

  1. In the last week, did this business have a change in operating revenues?
  2. In the last week, did this business have disruptions in its supply chain?
  3. In the last week, did this business temporarily close any of its locations for at least one day?
  4. In the last week, did this business have a change in the number of paid employees?

Chart #3: Government Assistance & Your Outlook For The Future

  1. Since 3/13, has this business requested/received financial assistance from Paycheck Protection Program (PPP)?
  2. Since 3/13, has this business received any financial assistance from any Federal Program?
  3. In your opinion, how much time will pass before this business returns to its usual level of operations?

We are not going to review each group in this report. We are going to take a closer look at the National Averages, Miscellaneous Retailers (includes Pet Stores) and Nonstore Retailers. At the conclusion of the report we will make the data for all 14 groups available for you to download. You can then pick the ones that are most relevant to your particular business.

A word of caution: Remember, this data is only for the small businesses in any particular classification. It doesn’t include the big chains, which could be impacted differently because of their size, capabilities or resources.

Let’s get started with the National Averages.

  • The perception of a negative impact remains high, 85+%, but it has become more moderate.
  • Not too many folks are seeing any positives, but the percentage seeing little or no effect has grown to 11.4%.

  • Every measurement on this chart is moving in the right direction. However, in terms of revenue businesses still have a very long way to go.
  • By the end of the month, more areas were reducing “lock downs” so the closures decreased, but still impacted over 1 in every 4 small business.
  • The employment situation also showed significant improvement. The gap between businesses adding and decreasing employees has narrowed.

  • Perhaps the most significant change is in the number of businesses receiving PPP funds. On May 2nd, 51% of businesses who had applied for PPP had received funds. By May 30th, this number had grown to 95%.
  • The other big change is that the projected time for recovery has increased, with 41.2% now saying a return to normal will take 6 months or more. Plus, 1 in every 10 businesses say that they will never return to “normal”.

Now, let’s look at MISCELLANEOUS STORES

  • While Pet Stores were generally deemed “essential”, most stores in this group, like gift shops, art dealers and used furniture stores were not, which explains the high initial negative impact. It did moderate slightly over the month.
  • The numbers are still very small, but the percentage of businesses expecting a positive outcome (5.7%) or little/no effect (7.4%) on their business are both increasing.

  • The change in revenue started in the right direction but plateaued at mid-month. In the last week it appears to be moving back on track.
  • Supply chain problems remain a big factor. While closures are down significantly, they still impact almost 4 in 10 businesses.
  • The number of businesses with a decreasing number of employees has been cut in half. However, it is still twice the number of companies adding employees.

  • The PPP funds really rolled out in May to this group. On May 2nd, only 41% had received any $. By May 30th, that number had grown to 93%. In fact, 78% of all these businesses received some type of federal aid.
  • This group also sees a longer recovery time, with 44.5% saying that it will be 6 months or more until a return to normal. This is actually a little more optimistic than their feelings on May 23rd when a full 62.5% thought that a return to normal would take 6 months or more (46.1%) or actually never happen (16.4%).

Finally, let’s look at NONSTORE RETAILERS

  • Although the percentage dropped sharply in the last week of May, a large majority of businesses still see COVID-19 as a negative impact on their business. 12.1% said that the effect would be positive.

  • The revenue situation is improving rapidly. Almost 1 in 4 businesses saw an increase in revenue, but 42.5% are still reporting declining $ales.
  • Supply chain problems and closures are improving but 23.8% with closures is still high for businesses with no retail outlets.
  • The employment situation totally turned around in May. As of May 30, more companies are adding employees (9.0%) than are losing them (6.9%).

  • The PPP was delivered in May. By 5/30, 96% of the businesses who applied for funds had received payment.
  • Their overall projection for recovery is a little better than average. 6 months or longer still has the largest number (31.8%) but 60% of this group say that there was no impact on their business by COVID-19 or that recovery will occur within 6 months.

As you can see from our examples, while the specifics may vary by business category and the situation is generally improving, COVID-19 has had a broad negative impact across the full spectrum of U.S. Small Businesses. Even small businesses in channels that are showing overall growth during the crisis, like Grocery, Hardware and Nonstore, are having serious problems. The overall national growth in these channels is being driven by the “big guys”, like Kroger, Home Depot and Amazon. The overall projection for a return to normal for small businesses is 6 or more months, which would put it in December 2020 or later.

That concludes our May update, but as we said, more data is available for you. Files with the specific data/charts for all 14 business categories that we identified as relevant to the Pet Industry (including those used in this report) are available for download. Each file is a 1 page word document with 3 COVID-19 impact charts for a specific business category. There is no commentary – just data. Pick the ones that are most relevant for your business and share them with your associates. STAY SAFE!

National Average & Major Business Categories

National Avg Manufacturers Whlsrs/Distribs Retail Trade Science/Tech Other Services

More Defined Supply Chain Categories

Food Mfg Distrib Nondurables

Drilling Down into the Retail Trade

Bldg/Hdwe/Farm Food & Bvg Gen Mdse Strs Misc Stores Nonstore Retailers

Finally, Personal Care Services (includes Pet Care)

Personal Care

 

 

 

 

 

 

 

U.S. PET SUPPLIES SPENDING $17.71B (↓$2.10B): MID-YR 2019 UPDATE

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In our mid-year analysis of Pet Food spending, we saw that the spending plummeted in the 2nd half of 2018 then flattened out at the beginning of 2019. Pet Supplies spending took the exact opposite path. Mid-Year 2019 Pet Supplies spending was $17.71B, down $2.1B (-10.6%). The first half spending drop in 2019 effectively puts spending in this segment back to the level of 2 years ago in Mid-Yr 2017. The following chart should put the recent spending history of this segment into better perspective.

Here are this year’s specifics:

  • Mid Yr 2019: $17.71B; ↓$2.10B (-10.6%) from Mid Yr 2018. The -$2.10B came from:
    • Jul > Dec 2018: ↓$0.01B
    • Jan > Jun 2019: ↓$2.09B

Like Pet Food, Pet Supplies spending has been on a roller coaster ride. However, the driving force is much different. Pet Food is “need” spending and has been powered by a succession of “must have” trends. Pet Supplies spending is largely discretionary, so it has been impacted by 2 primary factors. The first is spending in other major segments. When consumers ramp up their spending in Pet Food, like upgrading to Super Premium, they often cut back on Supplies. However, it can go both ways. When they value shop for Premium Pet Food, they take some of the saved money and spend it on Supplies. The other factor is price. Pet Supplies prices reached their peak in September of 2009. Then they began generally deflating and in March 2018 were down -6.7% from 2009. Although it is not a hard and fast rule, Price inflation in this largely discretionary segment can retard sales, usually by reducing the frequency of purchase. On the other hand, price deflation generally drives Supplies spending up. Innovation can “trump” both of these influencers. If a new “must have” product is created, something that significantly improves the pet parenting experience, then consumers will spend their money. The perfect example of this is the successive waves of new food trends. Unfortunately, we haven’t seen much significant innovation in the Supplies segment recently.

Recent history gives a perfect example of the Supplies roller coaster. In 2014 Supplies prices dropped sharply, while the movement to Super Premium Food was barely getting started – Supplies spending went up $2B. In 2015, consumers spent $5.4B more on Pet Food. At the same time, Pet Supplies prices went up 0.5%. This was a “killer” combination as Supplies spending fell $2.1B. In 2016 consumers value shopped for Food, saving $2.99B. Supplies spending stabilized by mid-year then increased by $1B in the second half when prices fell sharply. Consumers spent some of their “saved” money on Supplies. Supplies prices continued to deflate throughout 2017. Food spending increased $4.61B in 2017 but this came from a limited group, generally older CUs, less focused on Supplies. The result was a $2.74B increase in Supplies spending. This appeared to be somewhat of a break with the overall pattern of trading $ between segments.

In the first half of 2018 Pet Food spending slowed to +$0.25B. Supplies’ prices switched from deflation to inflation but were only up 0.1% versus the first half of 2017. During this period Supplies Spending increased by $1.23B. With new Tariffs scheduled to start in September, prices began to climb in the second half of 2018. They were up 1.7% in the second half and with implementation of the tariffs, grew an additional 1.7% in the first half of 2019. Halfway through 2019 Supplies prices were a full 3.4% higher than they were a year earlier. The impact of the tariffs on the Supplies segment is very clear. Spending became flat in the second half of 2018, then took a nosedive in the 1st half of 2019 – down -$2.1B. In one 6 month period Supplies gave back 40% of the $5B it had gained from July 2016 to June 2018.

Let’s take a closer look at the data, starting with the two most popular demographic measures – age and income. In the graphs that follow we will compare spending for the Mid-year 12 months ending 6/30/19 to the previous period ending 6/30/18. In our graphs we will also include the 2018 yearend $pending. This will also allow you to see the spending changes in the 2nd half of 2018 and the 1st half of 2019.

The first graph is for Income, which has been shown to be the single most important factor in increased Pet Spending, especially in Pet Supplies and both of the Service segments.

Here’s how you get the change for each half using the $50>70K group as an example:

Mid-yr Total Spending Change: $2.43B – $2.47B = Down $0.04B (Note: green outline = increase; red outline = decrease)

  • 2nd half of 2018: Subtract Mid-18 ($2.47B) from Total 2018 ($2.61B) = Spending was up $0.14B in 2nd half of 2018.
  • 1st half of 2019: Subtract Total 2018 ($2.61B) from Mid-19 ($2.43) = Spending was down $0.18B in 1st half of 2019.

  • In an exact reversal of the Mid-yr 2018 pattern, the decrease in Supplies Spending was widespread across income groups. The only yearly increase came from the $70>100K group. They were up in both halves. They did have a $2B decrease in Food spending during this time so they may have spent a small amount of those $ on Supplies.
  • In another reversal, the biggest decrease came from the over $150K group. Their $1.02B drop accounted for 49% of the segment’s total decrease while they only have 13.1% of the CU’s. They gave back most of last year’s $1.5B gain but the drop was mitigated because this group is gaining members faster than any other income segment, +11.4%.
  • The pattern of the under $50K groups matches the $150K+ segment with drops in both halves. Their combined $1.03B drop also accounted for 49% of the total decrease. However, they account for 46.0% of all CUs and their numbers are shrinking, down 1.6 million, -2.7% in the last year.
  • The upper and lower middle income groups, $50>70K and $100>150K, had their own pattern with a lift in the second half of 2018 and a drop at the start of 2019. The $ changes were larger for the higher income group.
  • Did tariffs have an impact? Income groups totaling 113M CU’s (86%) spent less on Supplies in the 1st half of 2019.

Now let’s look at Pet Supplies spending by Age Group.

  • Every Age group had an overall annual decrease and only the under 25 group had an increase in the 1st half of 2019.
  • The 25>44 year olds were the only ones to spend more in the second half of 2018, +$0.32B. However, they gave it all back and more, down -$0.94B in the 1st half of 2019.
  • The two smallest spending groups, <25 and 75+ had only small decreases, under -5%. However, the Supplies spending in each of the other groups fell at least -9%. Obviously, the inflation from tariffs affected all ages.

Now let’s look at what is happening in Supplies spending at the start of 2019 across the whole range of demographics. In our final chart we will list the biggest $ moves, up and down by individual segments in 11 demographic categories. Remember, the drop in the 1st half of 2019 was -$2.09B, a big change from the -$0.01B decrease in the 2nd half of 2018.

  • The first thing that you notice is that the biggest decreases are radically larger than the biggest increases.
  • The downturn is also very widespread as in 5 of the 11 categories all segments decreased Supplies Spending. This is a radical turnaround from last year when 4 categories had increased supplies spending in all segments. The “flip” from last year is even more evident in the details. In the 1st half of 2018, 89% of all segments spent more on Supplies. In 2019, only 8 segments spent more. That means 90% spent less – a total reversal.
  • The list of losers is a veritable roster of the usual Supplies spending winners – Gen X, White, not Hispanic, Homeowners w/Mtge, $150K+, BA/BS, Suburban, 2 Earners… The answer is that the groups who buy the most Supplies were the groups most impacted by the price increases.
  • There are a couple of minor bright spots. Like the Food segment, Singles were the unexpected winners in 3 categories. This reflects their increasing focus on their pets. It also can be seen beneath the surface in the <25 and 75+ age groups. They had by far the smallest decreases and are also the most likely to be in a 1 person CU.
  • The other positive is that both African Americans and Hispanics increased their spending overall and in both halves.

The 24 month Spending winning streak for Supplies which began in the second half of 2016 came to an end in the second half of 2018. During that time spending on Pet Supplies increased $4.97B (+33.5%). It was also widespread across America. Of 82 separate demographic segments, only 1 spent less on Supplies in that period – the Greatest Generation. This 91+ year old group has now become too small to be accurately measured.

What are the market conditions that affect Supplies spending? We have to first note that the world changed for Supplies because of the great recession. Prices have generally deflated since then and spending in the segment became more sensitive to changes in price. Prices go up…spending drops, usually due to reduced purchase frequency. Prices go down… spending turns up. This situation did not exist prior to the recession.

The other factor is spending in other segments, especially Food. Pet spending comes out of “one bucket”. A big increase in one segment can result in a cut back in others and big savings can generate more spending. The recent upgrade to Super Premium Food was such a big $ commitment that it magnified this effect.

In 2018, something new was added – outside influence. The FDA warning on grain free dog food had an immediate and negative impact on the Food segment. For Supplies, it was the implementation of added tariffs. Although the tariffs were not official until September, prices in the Supplies segment began to turn up in the Spring. In the 2nd half they were 1.9% above 2017 and kept increasing. The 1st half 2019 CPI was 3.4% above the 1st half of 2018. The result was that Supplies spending flattened out then plummeted in the first half of 2019, down -$2.1B. Inflation has now come to the forefront in Supplies Spending. It continued to increase. By the 2nd half of 2019 prices had increased 4.0% in 18 months. Unless consumers adjust their behavior, this does not bode well for the 2nd half of 2019. We’ll get that data in September.

 

 

 

 

U.S. Census Bureau Small Business Pulse Survey – Measuring the Impact of COVID-19

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Small Businesses are at the core of our nation’s economy and the challenges they face are important to everyone. To better understand the impact of COVID -19 on these businesses, the U.S. Census Bureau is reaching out to small businesses in order to aid decision-makers in serving their urgent needs. For the Survey, the Census Bureau defines a small business as a single location business with employment between 1 and 499 and receipts of at least $1,000.

Consisting of 16 questions, this 5-minute survey reaches close to 1 million businesses split across a 9-week rotation to reduce burden and lessen survey fatigue. The survey reaches out to small businesses in every area of the U.S. Economy. The first survey was conducted between 4/26/20 and 5/2/20 and results were released on 5/14. This report includes the data from that initial survey as well as the data from the weeks ending 5/9 and 5/16. It will be presented in charts that will allow you to track the evolution of the responses as we progress through this crisis.

The results are categorized by major NAICS code classification. This report will show the National Average plus results from 5 big groups which are relevant to the pet industry:

  • National Avg: Covers All Major Areas with a few Exceptions like Agricultural Production and Religious Organizations
  • Product Related Groups:
    • 31-33: Manufacturers – All manufacturers
    • 42: Wholesalers/Distributors – Wholesalers/Distributors of any type products
    • 44-45: Retail Trade – This includes everything from gas stations to Pet Stores (#453910). No restaurants
  • Services Related Groups:
    • 54: Professional, Scientific and Technical Services – Legal, Advertising Agencies, etc… and Vet Clinics (#541940)
    • 81: Other Services – Funeral Homes, Barber Shops, Auto Repair, etc … and Pet Care Services (#812910)

Each group will have a separate section in the report which will have 3 charts showing the group’s responses to some particularly relevant questions about the impact of COVID-19.

Here are the charts and the questions that will be answered on each:

Chart #1: Impact of Covid-19 on Your Business

  1. Overall, how has this business been affected by the COVID-19 pandemic?

Chart #2: Key Business Elements – Weekly Changes

  1. In the last week, did this business have a change in operating revenues?
  2. In the last week, did this business have disruptions in its supply chain?
  3. In the last week, did this business temporarily close any of its locations for at least one day?
  4. In the last week, did this business have a change in the number of paid employees?

Chart #3: Government Assistance & Your Outlook For The Future

  1. Since 3/13, has this business requested/received financial assistance from Paycheck Protection Program (PPP)?
  2. Since 3/13, has this business received any financial assistance from any Federal Program?
  3. In your opinion, how much time will pass before this business returns to its usual level of operations?

Advance Observations (Spoiler Alert)

  1. The negative impact is widespread and deep across the U.S. Economy.
  2. Business measurements, like revenue, closures and employment are generally moving in the right direction, but… slowly.
  3. As we come fully to grip with the crisis, it becomes more apparent that recovery will take quite some time.

Now Let’s Look at the Details

We will start with the overall National Small Business Response Averages.

Then, we will move to the Product Related Groups and Wrap it up with Services.

At the conclusion there will be a link to download a PDF copy of the report!

NATIONAL AVERAGE

  • Total Negative is down slightly. The biggest drop is in large negative as both the moderate negative and little/no effect groups move up.

  • All measurements are moving steadily in the right directions. Although it is at an extremely low level, the group with an increase in revenue basically doubled in 2 weeks. Supply chain problems remain an issue and over 1/3 of the businesses still are reporting closures but this is down 20% from May 2nd. Employment is definitely slowly improving.

  • ¾ of all small businesses requested help from the PPP. It is finally coming through as 89% of those that submitted a request have received funds as of 5/16. With help from numerous Government agencies, like the Small Business Association, 72% of the Small Businesses have received financial assistance.
  • In terms of outlook the biggest decrease came in those expecting to return to normal in 2 to 3 months while the biggest increase came in the over 6 months group.
  • Things are turning in the right direction in basically every measurement, but the movement is slow. As businesses became involved in the reality of the situation, it is becoming increasingly obvious that a return to normal will take some time.

MANUFACTURERS

  • Total negative is slightly below the national average, but their evolving pattern is similar – a drop in large negative with increases in moderate negative and little/no effect. However, their Moderate negative share now ranks #1.

  • Their Revenue is moving in the right direction but the gain in the number with an increase was miniscule. While their Supply chain issues are significant, they have the lowest percentage of closures for any group. The employee count is also coming together but like Revenue, the gain in the number adding personnel was small.

  • 4 out 5 Manufacturers have requested PPP assistance and as of 5/16, 87% of those who applied had received funds. 77.8% of Small Manufacturers have received some Federal Financial assistance. This is the highest % of the 5 groups.
  • Although there was a slight increase in those stating that their was little or no impact on their business, the biggest movement in the projections is to over 6 months, which grew from 32.4% to 38%. The 2 to 6 month group fell from 51.9% to 45.1%.
  • The manufacturing segment is ultimately dependent upon retail so slowed business there will ultimately work its way up the distribution chain. This group is generally moving in the right directions but changes, especially increases tend to happen at a slower pace.

WHOLESALERS/DISTRIBUTORS

  • The overall negative impact has remained stable and very high, ranked 2nd of all 5 groups. However, it is moderating slightly. Little impact is up slightly. Overall, positivity is down slightly but is still the 2nd highest, behind Retailers.

  • Revenue is moving in the right direction. However, the percentage with decreased $ is the highest of all groups. Supply Chain problems are over 50% and 2nd highest, while Closures have the 2nd lowest rate. Employment remains very stable and moving towards a return to normal.

  • 70% have applied for PPP assistance and 87% have received funds. However, this group has the highest percentage of businesses receiving no Federal financial assistance of any kind – 34%.
  • Their outlook is also moving towards a longer recovery time. 38.6% of Distributors now believe that it will take over 6 months to return to normal, the highest percentage of any group. The size of the groups who saw little or no impact on their business and those who think they will never return to normal has stayed about equal, unlike any other industry segment.
  • The recovery of Distributors is dependent upon the recovery of their retail customers. The faster the Retail Business returns, the faster the distributors gain $. The key is that they need to be ready and able to handle it.

THE RETAIL TRADE

  • The overall negativity is the lowest of any group and is increasingly seen as moderate. However, the biggest reason the number is low is that 8.7% of Retailers are seeing a positive impact. Online retailers are one example.

  • While the situation is still dire, Retailers are having the best results in terms revenue flow, with 22.2% having increased $. They are doing this despite having a very high rate of Supply Chain problems and Closures, although Closures are down 27% in 2 weeks. Employment is also improving, and they lead the way with 9.7% adding workers.

  • Over ¾ of Retailers have applied for PPP assistance. By 5/16, 87% of those that applied had received funds. In fact, 74.5% of all Small Business retailers have received some type of financial assistance from the federal government.
  • On May 2, 53% of retailers said things would be back to normal in 2 to 6 months. In 2 weeks that number has fallen to 46% and the number that think that recovery will take more than 6 months has risen to almost 35%.
  • Next to the Health Care Segment, the Retail Segment is where we see the biggest visual impact of the COVID-19 pandemic. With stay at home and closures, we are seeing a huge movement to online shopping. However, that is not enough. This segment, without restaurants accounted for $5.4 trillion dollars in consumer sales in 2019. That’s a lot of ground to make up. Plus, the fate of the manufacturing and distributing segments is directly tied to Retail.

PROFESSIONAL, SCIENTIFIC and TECHNICAL SERVICES (INCLUDES VETERINARY CLINICS)

  • Their initial perceived negative impact of COVID-19 was high at 87.5%, but it was still the lowest of the 5 groups. Also, many more, over 50%, believed the impact to be moderate rather than large. They also have the highest percentage saying there will be little or no impact from COVID-19 on their business.

  • In terms of Revenue change they have the most consistency of any group – the highest percentage of no change, 32.9% – the lowest percentage with an increase and the second lowest percentage with a decrease. They also have faced the least amount of Supply problems as well as the lowest percentage of closures of any group dealing directly with consumers. Employment shows the highest percentage of no change while the increases/decreases are headed in the right directions.

  • 71% applied for PPP and by 5/16, 91% had received their funds. In regard to overall Government aid, 69% have received Federal financial assistance. Only Distributors, at 64% had a lower number.
  • Despite their stability in business elements and the fact that 1 in 9 say that COVID-19 has had little or no impact on their business, the outlook on recovery time for most has worsened. The group estimating a 2 to 6 month return to normalcy has fallen from 53% to 48%, under half. Over 1/3 now think it will take 6+ months to recover.

OTHER SERVICES (INCLUDES PET CARE SERVICES)

  • At 92%, COVID-19 had the biggest negative impact on this group. It was also very severe. Although it has moderated slightly, the ratio of businesses with Large Negative over those with Moderate Negative remains at nearly 2 to 1.

  • 80% of businesses reported a change in revenue in the week ending 5/16. The negative number was 65%. This was the highest among those interacting with consumers, but down significantly from the 78% peak. Those reporting increased $ is up to 14.9%, 2nd place behind Retailers. Supply Chain problems remain high and they have the highest percentage of closures. In terms of Employment, they are moving in the right direction – slowly. They are below the national average in additions, lowest of the group of 5 in “no change” and highest in the group for decreases.

  • 80% have applied for PPP and as of 5/16, 86% of received funds. 74% of the group have received some Federal aid $.
  • 32% of this group originally expected a return to normal in 3 month or less. The size of that optimistic group has dialed back to 26%. The mid-range 4 to 6 month group has remained steady at 27%. However, the group that projects 6+ months to recovery now represents 1 in every 3 businesses. We should also note that 1 in 11 businesses say they will never return to normal, the highest number in our group of five.

That wraps it up for the 5/16 update. If you would like a PDF copy of the report, click the button below.

Click to download PDF of report

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail Channel Monthly $ Update – March Final & April Advance

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Time for our monthly update on U.S. retail sales by channel. The current COVID-19 crisis has caused turmoil in the Retail Marketplace. Consumer spending behavior has changed and continues to evolve. In this report we will track the changes and migration between channels. We will do that with data from two reports provided by the U.S. Census Bureau.

The Reports are the Monthly Retail Sales Report and the Advance Retail Sales Report. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – approximately 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

This means to get the full picture in our monthly channel update we need to look at the latest release of both reports. We will begin with the Final Retail Report from March and then move to the Advance Retail Report for April. This will also allow us to better track the consumers’ evolving spending behavior in terms of channel migration.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports and we fill focus on Pet Relevant Channels

The information will be presented in detailed charts to facilitate visual comparison between groups/channels of:

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2019
  • Current YTD change – % & $ vs 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

We’ll start with the March Final report. This was the first month of the crisis. The impact is very visible. First, we will look at some major retail groups. (Note: The Data in all graphs is Actual, Not Seasonally Adjusted)

It looks just like the Advance report projected a month ago. All 3 of the groups that are down in YTD $ were up at least 8% through February. March is the start of the traditional Spring lift, but not in 2020. If you can’t go out, you don’t think about a new car. It also doesn’t matter how cheap gas is if you aren’t driving.

The “Relevant” retail is the only positive and we know that it is being driven up by binge/panic buying of necessities. Food is the biggest driver. If you can’t go out to eat, you cook at home.

Now, let’s see how some Key Pet Relevant channels were doing in March.

Observations – We’ll look at them in groups

  • Building Material Stores – This group typically has their biggest annual lift in Spring. It appears that this is unchanged. In fact, there is a significant increase over last year. Farm Stores are doing especially well with double digit increases over March 2019 and YTD. Although Sporting Goods stores are not included in this group, they have a similar Spring lift pattern. March Sales were up from February, but still down 8% vs 2019.
  • Food & Drug – This is where we see the greatest positive impact from “Stay at Home”. Supermarket sales are skyrocketing – +30% vs 2019. Drug stores are also experiencing a big lift as consumers stock up on necessities.
  • General Merchandise Stores – It’s about Food. Sales in $ Stores, Clubs and SuperCenters are all up 12+% vs 2019. Most traditional Department stores are closed and the shopping in many Discount Department stores is often limited to essentials. This has helped depress sales by -10% vs March 2019.
  • Office, Gift and Souvenir Stores – Most of these stores are deemed non-essential. You see the result.
  • Internet/Mail Order – “Stay at home” has further accelerated this channel’s growth. This will likely continue as the crisis has introduced many new consumers to online shopping.
  • A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores. Pet Stores generally account for 22 to 24% of this group’s total sales. The group was up 21% YTD in February. Although that pace has slowed slightly to +17%. Consumers are still shopping for essentials, like Pet Products in these outlets.

March was certainly a terrible month for retail spending, the biggest Total Retail $ drop in history. Binge/panic buying buoyed up the Relevant Retail sector but that is temporary and non-essential business closures became widespread by the end of the month.  We’ll see what a full month of shuttered doors brings. Here are the Advance numbers for April.

March was terrible, with the biggest spending drop in history. However, it was nothing compared to April. It is obvious that a full month of stay at home and business closing orders had a huge impact across the Retail Marketplace.

Total Retail – Total Retail spending fell $108B, -21.2%. This unprecedented drop is literally 3 times greater than the record decrease set in March. Remember, 2020 started off strong. Spending through February was up $60B, +6.6% versus 2019. Then came the COVID-19 crisis and now it is down -$82B – a $142B turnaround in just 2 months.

Restaurants – Spending was up $9B through February, +8.1%. In March Social Distancing began and many restaurants closed. Spending fell $18B, turning a $9B increase into a $9B decrease. April brought a full month of the restrictions and spending plummeted, down $31B, -49% vs 2019. Many restaurants are offering delivery and curbside pickup, but this can’t replace eating in restaurants. This group is now down $40B YTD.

Automobile & Gas Stations – If you can’t go out, except for necessities, then your car becomes less of a focus in your life. Buying a car is definitely less of a priority. Auto Dealers, both new and used, are trying to combat this with some fantastic deals and a lot of advertising. It doesn’t seem to be working. In terms of Gas Stations, prices are down sharply but as we have said, it doesn’t really matter much how cheap gas is if you’re not driving.

Relevant Retail – Less Auto, Gas and Restaurants – Many non-essential businesses were forced to shutter their doors in March. However, there was also a rash of binge/panic buying as consumers literally battled over toilet paper and sanitary wipes. The closure of restaurants, schools, and businesses, along with many people now working from home caused a big lift in home cooking. This drove up spending at Supermarkets, SuperCenters and Warehouse Clubs. These 2 factors overcame the impact of closures and Relevant Retail Spending in March was up 6.3% and YTD 5.9%, +$49B. Then came April, with a full month of closures. Plus, while grocery spending continued to be strong, the bingeing and hoarding slowed markedly. Spending dropped $43B, -13.4% from March and cut the YTD growth in half. However, the YTD, +2.1% for Relevant Retail is the only positive number in any measurement for any of the big groups on the entire graph.

Now let’s look at what is happening in the individual retail channels across America. In April, spending turned down in Relevant Retail. Let’s see if we can find any positives. These groups are less defined than in the Final Monthly reports and we will look all across the whole market, not just pet relevant outlets.

A full month of stay at home resulted in few “winners” and the impact on the “losers” is even more pronounced.

 Observations

You quickly see that the negative impact from a full month of stay at home, closures and reduced discretionary spending was widespread. Only 3 groups had positive numbers for April:

  • Nonstore Retailers – Stay at home has moved even more consumers to online shopping.
  • Grocery Stores – Stay at home means “eat at home”. Food sales continue to surge.
  • Bldg Materials/Garden/Farm – A near normal Spring lift as “at home” consumers also focus “on their home”.

The panic/binge buying of March ended in April as spending fell in all but 2 groups – Nonstore and Bldg Materials.

Regarding the Individual Large Channels

General Merchandise Stores – April also wiped out the overall YTD gains of GM stores. Regular Department stores are closed, and discount department stores continued their downward sales trend. Club/SuperCtr/$ stores had provided the only positive note. In April consumers dialed back their panic buying and Spending on discretionary items was also down significantly. This combination of factors drove sales down 6.7%, -$3.1B vs April 2019 in this largest GM group.

Food and Beverage, plus Health & Personal Care Stores – The initial March wave of binge/panic buying in March ended in April. The Grocery segment is still being driven by increased Food sales, up 14.5%, +$8B. However, sales in the Health, Personal Care group turned down, essentially wiping out the previous YTD gains. While Drug Stores are essential, many Personal Care stores are shuttered.

Clothing and Accessories; Electronic & Appliances; Home Furnishings – Some Electronic stores are deemed essential but most of the other stores in these groups are not. All saw a huge 60+% drop in sales but Clothing stores took the biggest hit, down 89.3%, -$19.1B from 2019. Even before the crisis, their online sales were growing, but not enough.

Building Material, Farm & Garden & Hardware – This channel has its biggest spending lift in the Spring. With many consumers sheltering in place, their focus has turned to their needs at home, including house and yard repair and improvement. Their spending pattern is the closest to “normal” of any brick ‘n mortar group. The Spring lift is apparently still “on” as their sales are up 7% over March, 2.6% over April 2019 and 5.6% YTD.

Sporting Goods, Hobby and Book Stores – Many Book and Hobby stores have been classified as non-essential, but most Sporting Goods stores are open. They also usually have a big spending lift in the Spring. However, with organized sports on hold, many parks closed, and non-essential travel discouraged, the need for products in the sporting goods arena is greatly diminished. This group was down 24% in March, but the decline increased in April – Down $3B, -48.7% vs 2019.

All Miscellaneous Stores – This group is mostly small to medium specialty stores – both chains and independents. While Pet Stores are essential, most other stores in this group are not. In March, YTD sales for this group were up solely because of a spectacular early year performance by the All Other Subgroup, which includes Pet Stores. In April this was not enough to overcome a full month of closures as Sales for All Miscellaneous Stores were down across the board.

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV businesses. In April, the ongoing movement to online accelerated. They were up 12.1% in March. Their April increase was 21.2%, +$13.1B. They took over the lead from Grocery Stores in all sales measurements regardless if it is in $ or % increase. Two things are significant. Unlike many other channels that had a big lift in March, their $ sales didn’t fall off in April. They were 6.7% higher. Also, their YTD sales are up 13.8%, exceeding their 12.9% annual increase in 2019. This early year lift bodes well for 2020 as much of their annual lift is usually driven by Christmas Holiday spending, which is still to come.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded along with their store sales in their regular channel. Whether they are up or down, their online sales are included in the totals.

Recap – April clearly shows the huge fundamental impact that the COVID-19 pandemic has had on the American way of life and consumer spending. The impact is also evolving as we saw the panic buying in March end in April. As the situation continues, spending will no doubt move back to a more routine pattern – a new normal. No one knows how long the current situation will last and what long term impact it will have on U.S. consumers’ spending behavior. We will continue to monitor the data and provide you with regular updates as the situation evolves.

A Final Note From the Census Bureau: Due to COVID-19 many businesses are operating on a limited capacity or have ceased operations completely. The Census Bureau has monitored response and data quality and determined estimates in the Advance Retail Report for April 2020 and Monthly Retail Report for March 2020 both meet publication standards.