Covid-19’s Impact on the Retail Industry and Consumer Shopping Patterns.
Has Covid-19 changed the way we shop?
A s the Corona virus began to spread rapidly across the world in early 2020, countries started imposing nationwide lockdowns in an effort to curb it’s disastrous effects. March 12th marked the beginning of such measures being brought into Ireland as pubs and nightclubs were asked to close and large gatherings and travel was restricted. Less than two weeks later, a full national lockdown was imposed in which all non-essential retailers were to close their doors and any non-essential travel was banned.
Nine months and various levels of lockdown restrictions later, many retailers are still struggling. Some businesses who have had to close their doors have been unable to re-open. As the pandemic is still on-going, it is hard to grasp the overall impact and damage that Covid-19 has had on both the retail and hospitality industries but the data collected so far is providing some interesting insights.
The Retail Sales Index (RSI) is the official short-term indicator of changes in the level of consumer spending on retail goods in Ireland. The Index measures the changes in the volume and value of retail good sales.
Comparing the RSI for 2019 to the figures we have so far for 2020 in the graph above, we can clearly identify the massive drop in sales towards the end of March when retailers had to close, until the end of May when some of them were allowed to re-open. On average for the first ten months of 2020, the value of sales has dropped 5% for the same period in 2019 and the volume of sales has dropped 3%. The data shows that the impact of the nationwide lockdown on retail, is slightly offset by an increase in sales in the months directly after the lockdown is lifted.
Throughout the pandemic, some retailers have been hit harder than others. Bars, especially those that do not serve food, were first to close when the Corona virus pandemic hit and have been last to re-open. They have also been hit with some of the hardest restrictions. The total value and volume of retail sales for bars in first ten months of 2020 is 56% lower than the same period in 2019 with the months of April and May producing a 91% to 92% decrease.
Retailers in textiles, clothes and footwear report a similarly damaging year with their value and volume of retail sales down an average of 26% and 25% respectively compared to last year. The national lockdown had a similarly devastating effect on these business with losses of between 78% and 82% on sales from April and May 2019.
However, not all retail has suffered in the face of Covid-19. The value and volume of the sale of food has increased 11% and 12% respectively so far this year, with the lockdown months of April and May seeing increases of 16–17%. In addition to this, online retail saw an average increase of 3% in purchases from January 2020 before the pandemic, to March 2020, when most shops had to close their doors. Some sectors such as food and drink saw the biggest rise.
The online purchases of food and drink rose from 6% in January to 13% in March when the first lockdown was put in place, according to data released by the Central Statistics Office earlier this year. As the Corona virus began to spread across the world, people were fearful of national lockdowns and unsure of what was going to happen. This caused a global ‘panic buying’ problem in which people were stocking up on various essential food and household items in supermarkets, causing stock shortages. In the overall online purchases data collected for 2020 so far, there is an 89% increase in online purchases of food and drink when compared to the percentage of food and groceries purchased online in 2019.
There was also a rise in the number of purchases relating to health and fitness applications with the closure of many gyms happening on March 12th also.
Interestingly, together the clothes and sports goods retail sector saw an initial 24% decrease in online sales between January and March but these combined categories have indicated a 71% increase in overall online purchases in 2020 when compared to data from 2019. This may be in part, to people choosing to be active and exercise during the periods of Covid-19 restrictions. Exercise was one of the few reasons that people were allowed to leave their homes and with all team sport, especially at non-elite level, being cancelled or highly restricted for many months, people looked for other ways to remain fit.
The contrast between the January to March figures and the overall figures also serves as a reminder that it is likely we will not see the true impact that Covid-19 has had on the retail sector until 2021, after all of the relevant data has been collected and analysed and retailers begin to operate in circumstances similar to those pre-Covid-19.
One retail sector which seems to have avoided the Covid crunch is the pharmaceutical, medical and cosmetics sector. This sector has seen an average increase in the value of retail sales of 2% and volume of sales of 3% so far in 2020 compared to the same period in 2019. Online purchases of medicine and cosmetics increased 67% and 40% respectively between January and March this year and overall online purchases for medicine and dietary supplements is at 9% for 2020 compared to 4% in 2019. Pharmacies and health retailers are considered an essential service throughout the pandemic and have been permitted to stay open, which means they have not been hit as hard as other businesses. Additionally, with an increased demand for goods such as hand sanitizer and face masks and with less immediate access to G.P’s and hospitals, people may be buying more from pharmaceutical and health retailers, online or in-person, than usual.
Throughout the next few months, data will tell us the hidden impacts that the spread of the Corona virus has had on our society. Which sectors of the economy and which sectors of retail have been the worst hit is yet to be fully seen but it is already clear that the pandemic has made an impact. Additionally, we cannot know if the increase in online purchases will remain once traditional retail is able to return to its normal activities until this is can happen. With a vaccine likely to begin distribution in Ireland in early 2021, hopefully the retail sector can begin to recover from an incredibly challenging year.
