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As more businesses begin to open around the world, the focus of debate is shifting from the COVID-19 pandemic’s damaging effects on commerce to how global economies will recover from nearly universal devastation across the full industry spectrum. Experts who are experienced and accustomed to predicting economic recoveries are challenged to put forth a coherent and believable prediction of what the recovery will look like. That isn’t a criticism of expertise or capabilities, it’s just an unavoidable fact. None of us have really been here before, so there is little experience to draw upon to prognosticate a viable path forward. The mandated closure of much of the world’s economies was swift, unforgiving, unprecedented and occurred, literally, overnight.
Perhaps the most evasive element of the formula for recovery lies with the segment of the economy that is responsible for 70 percent of spending: the consumer. For those who have built careers around consumerism, the unpredictability and motivations of consumers can often baffle even the most experienced marketers. Some factors that determine how buyers in the economy act is often subliminal and defy the best projections based on statistical analysis and models alone. Consumers can often be counted on to not do what they are expected. So, what should we expect in the months ahead?
A recent finding by J.P. Morgan found that consumer spending “rebounded significantly” in the month of May as business lockdowns eased across the country. Any uptick in consumer spending should have been easy to predict due to the fact that the forced business closures caused a 40 percent drop in consumer spending. There just isn’t much in the way of down to go. Longer term, sustained, increased consumer spending will depend upon more than just unlocking businesses’ doors. Typically consumers can easily be encouraged to open wallets with offers and incentives for a vast list of wants, but most are currently having to scrutinize spending, focusing more on basic, life-sustaining items.
Unemployment appears to be the most determinate factor on sustainable, increased consumer spending. Two-thirds of respondents in a May survey indicated that consumers were avoiding nonessential spending on items like clothing, accessories and shoes. Another 53 percent were planning to eliminate spending on beauty and personal care. Few if any consumers would admit to planning extended travel of unnecessary vacations for the near term. Clearly the vast majority of spenders expect the recovery to take a bit longer than some predict.
By the beginning of June, retail sales jumped a record 17.7 percent, more than double the anticipated rate. “Consumers raced out of their homes in May after being locked down in the prior month,” BMO Capital Markets chief economist Douglas Porter said. “First place they headed? The shops.” A Commerce Department’s report showed that retail sales retraced some of the record-setting month-to-month plunges of March and April, but the collective damage to retail sales remains severe, with purchases still down 6.1% from a year ago. Full recovery will demand that the sequestered public regain confidence that the worst of the virus is diminishing and that they feel comfortable venturing safely out from confinements. “Our wants and our needs have changed permanently until we find a health fix,” said Stacy Widlitz, president of SW Retail Advisors. “Shoppers are focusing on comfort, home and well-being.” Unfortunately, for tens of thousands of small to mid-sized retailers, the prediction of demise has not yet been overstated.
The transition back to something that appears to be normal for most retailers will not be instantaneous but rather a measured reigniting of a much-changed marketplace. Consumers accustomed to online purchasing, working and entertaining at home are still concerned about stepping back into a world where threats to health and well-being are expected. It is likely that a continued focus on organic marketing will be important for some extended period of time. Listening to customers to learn how and what is important to them should continue to be at the forefront of efforts to create messages that resonate and motivate consumers and continue to build the brand identity and reputation.
The process toward recovery will require agility and creativity to survive in the new market reality. To learn more on how the experienced professionals at Junction Creative Solutions (Junction) can help you navigate the recovery, call 678-686-1125 today.