As Retail Sales Rebound, Small Businesses Still Feel the Brunt of 2020's Unprecedented Events

By Mariliana Fotopoulou Wednesday, July 8, 2020

Walmart, BJ’s Wholesale Club, Lowe’s, and Home Depot are among the large companies that can claim to have felt the increase of 17.7% in retail sales in May compared to the figures of April. This has surpassed the 8% that had been forecast by many experts. 

However, according to a government report, the increase in retail sales may be higher than those in April 2020, but total sales are 6.1% lower than those of the same month in 2019.

Unfortunately, the list of retailers filing for bankruptcy continues to grow and included even seasoned companies like J.C. Penney, Neiman Marcus, and J. Crew joining the list. 

The sharpest one-month increases ever recorded have been observed across the board, and include online purchases, physical stores, restaurants, bars, and retailers. The previous high was 6.7% in October 2001, the month after 9/11.

The Winners and the Losers

If one excludes food services, which have seen a record 29.1% rebound, retail sales are also only down by 1.4% when compared to the figures from last year. These figures are high when considering that most businesses offering non-essential goods were closed for most of May.

The biggest percentage gain was reported by clothing and accessories stores at 188%, while those selling books, sporting goods, hobby items, and musical instruments reported a rise of 88.2%. These figures indicate that people have started moving away from only purchasing groceries and medical essentials purchases of other non-essential items, including furniture. However, electronic and auto sales are both still slow. 

Home improvement retailers had a thriving May as many people used the time available to them to focus on home and garden improvements. 

Those businesses that could do so quickly adapted their businesses to online sales, but many had no choice but to remain closed. Online sales saw an increase of 31% compared to last year. Unfortunately, consumer habits are hard to predict because many are currently furloughed, unemployed, or have had to take pay cuts for now. 

One thing is certain: as the lockdown eases, consumers have a backlog of things that they were not able to purchase. Also, money from the government stimulus checks and unemployment benefits paid out during the previous month largely remained unspent, and this will steadily find its way into the retail market. 

Even as sales increase, many stores are observing that consumers purchase selectively and reluctantly. This indicates that they are holding back for now. Many retailers are resorting to clearance discounting so that they can lower their inventory. 

The essential retailers and pharmacies that didn’t close during the lockdown are the clear winners, and that is why the rebound figures are uneven. Regrettably, it will take longer for owners of independent small and mid-size businesses to start rejoicing. 

Even as the number of infections continues to increase in some of the states, people cannot remain in lockdown forever. The wheels of the economy need to start turning again as businesses reopen and as employees are asked to return to work.

Looking Forward

Small businesses now can make up for their losses by taking advantage of the lessons learned from the retailers who stayed open during the worst of the lockdown. The precautions taken by these essential services during this time proved that it is not unsafe for a business to stay open. However, experts do warn that many smaller businesses were already struggling before the pandemic and may not be able to recover. 

Even as these monthly gains are breaking records, the economy has a lot of lost ground to cover. 

Everyone with the best interest of businesses and the economy at heart learned during the last few months that keeping the economy open is the best relief measure for small businesses. 

As the summer months' activities begin across the US, there is hope that small businesses can recoup their losses and make a strong comeback. That is, if the jobs lost to the economy are not lost forever.

About the Author

Headshot of author Mariliana Fotopoulou

Mariliana has an MSC in consumer analytics and business strategy. She has a special interest in fast-moving industries and big data.

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