US retail sales to a record-setting nosedive in March due to the coronavirus pandemic
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US retail and food services sales dropped 8.7% in March 2020 compared to February 2020, when sales dipped just 0.4% from the month prior, per estimates from the US Census Bureau.
This represents the largest month-to-month decline in US retail sales since the government began tracking the data in 1992, according to CNBC. Retail sales in March were also down 6.2% annually, as the coronavirus is taking a toll on the industry by forcing many merchants to close their stores and causing consumers to shop less. And the decrease in spending appears to be impacting the financial services industry too, considering JPMorgan Chase and Wells Fargo reported drops in card transactions in Q1 2020.
While retail's overall performance dropped, damaging several product categories, some segments saw their sales surge due to the pandemic.
A number of product categories saw massive drops in sales, likely creating financial struggles for a variety of sellers that could ultimately change the retail landscape. Furniture and home furnishing stores, clothing and accessory stores, department stores, and a few other categories all saw their retail sales drop more than 20% year-over-year (YoY) in March.
This drop will likely make it difficult for some merchants to pay rent, handle debt, and continue to operate overall. This means the pandemic could lead to a surge in bankruptcies and permanent closures in these categories over time, potentially thinning out retail's competitive landscape in the future.
Meanwhile, e-tailers, grocery stores, and big-box retailers posted positive sales growth during the month. Nonstore retailers, which include e-commerce, food and beverage stores, and general merchandise stores, all saw their annual sales growth accelerate in March compared with the previous month. E-commerce's performance is likely improving because many stores are closed and consumers are avoiding visiting those that are open, while grocery and big-box retailers' sales are up because they sell essentials that consumers need during the pandemic.
US retail likely didn't feel the full impact of the coronavirus pandemic in March, so its blow to the industry will likely be even stronger in April and subsequent months. US states didn't start issuing orders for people to stay home until later in March, state governments are still introducing new restrictions on in-store traffic and sales, and unemployment is climbing, so retail sales will likely drop further in April.
This means that categories like apparel, which have already had their sales slide, will likely see their performances dip further since more stores will be closed or restricted and more consumers may limit their spending. But it remains to be seen if the performances of e-commerce, grocery stores, and big-box retailers will continue to rise, or if consumers will cut down their spending in these categories, too.
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