McKee Financial

McKee's Weekly Newsletter 12-7-2020

How COVID-19 Has Changed Consumer Behavior and the Future of Retail


U.S. retail sales suffered in the spring of 2020 due to safety concerns, government-mandated lockdowns, and economic uncertainty wrought by the coronavirus pandemic. Sales — including purchases at stores, restaurants, and online — plunged from $483.95 billion in March to $412.77 billion in April, a record 16.4% drop.1


Fortunately, retail sales rebounded sharply after the economy began to reopen in May, matched pre-pandemic levels in June ($529.96 billion), and continued to rise steadily from July through September. But sales softened in October, ticking up just 0.3% to $553.33 billion.2

The arrival of an effective vaccine could inspire some holiday cheer, though it probably won’t be widely available until next spring.3 Until then, consumers will likely spend more time at home.

U.S. consumer spending accounts for about two-thirds of all economic activity, so it’s good news that many businesses and consumers have adapted quickly to the new normal created by the pandemic.4 Here’s a look at recent changes in consumer behavior, the state of the retail industry, and what these trends could mean for the broader U.S. economy.

Stay-at-Home Spending Shifts

Some workers with stable incomes have been able to save money they would normally spend on transportation, gym memberships, restaurant meals, and expensive “experiences” such as vacations, concerts, sporting events, and other live shows. On the other hand, many households are spending more on home improvements, household goods, fitness equipment, and other lifestyle purchases that make sheltering in place more tolerable.5

For example, huge demand for bicycles resulted in surprising shortages.6 And with offices closed and most special events cancelled or postponed, a preference for casual and comfortable clothing has decimated consumer demand for more formal attire like business suits and dresses.7

A swift expansion of e-commerce was also unleashed. New online habits were created in the first three months of the pandemic, accelerating the adoption of digital technologies that might have taken 10 years to achieve otherwise.8

When lockdowns and social distancing measures were put in place, many consumers were compelled to shop online and use other digital services (e.g., video chat, virtual doctor visits, and online classes) for the first time. Surveys suggest that a vast majority of new users found online services to be useful and convenient; many said they will continue to use them permanently.9

But anxious consumers have also been boosting their savings. The personal saving rate — the percentage of disposable income that people don’t spend — hit a record 33.6% in April before falling to 14.1% in August, far above February’s 8.3% rate.10 When consumers prioritize saving, it may help individual households build financial stability and prepare for retirement, but it can also hold back the nation’s economic growth.

Traditional Retailers on the Ropes

Big-box retailers that sell groceries and other goods in one place and home-improvement stores were deemed “essential” in the spring. Regardless of local virus conditions, these businesses have remained open for a steady flow of customers eager to stock up on food and other necessities. As a result, they have generally been able to book healthy profits.11

Meanwhile, temporary closures, capacity limits, and a drop-off in overall customer traffic have taken a toll on nonessential retailers that couldn’t offer a convenient online shopping experience with home or curbside delivery. The pandemic may land the blow that knocks out some familiar brick-and-mortar retailers, many of which were already buckling under excessive debt and fierce competition from e-commerce giants.

Retail bankruptcies and store closings are on track for a record year in 2020. By mid-August, 29 U.S. retailers had filed for Chapter 11 protection, including several long-standing department-store chains. More than 10,000 permanent store closings have already been announced in 2020, vacating roughly 130 million square feet of physical retail space.12

A Holiday Season Like No Other

Higher unemployment and wage cuts might have had a more severe impact on consumer spending from March to October were it not for the expanded unemployment benefits and stimulus checks delivered to consumers by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. At the time of this writing, Congress had not passed a follow-up stimulus package, and consumers were facing new challenges going into the holiday?season.

More than 11 million U.S. workers were still unemployed in October, before a nationwide surge in virus cases and hospitalizations sparked a new round of business restrictions and closures in mid-November.13–14 CARES Act provisions that offer financial support for affected consumers and small businesses expire by the end of December.

Holiday sales figures are often considered an economic barometer, reflecting consumer confidence and funds for discretionary spending. In 2019, holiday spending in November and December rose 4.1% over 2018, suggesting that economic growth was picking up steam.15 But holiday shoppers were blissfully unaware that a pandemic was on its way.

Black Friday holiday deals are designed to create a frenzy and lure throngs of shoppers into stores. But retailers seemed to agree that a different approach was needed in 2020: Promotions were offered online and earlier; store hours were shortened and capacity was limited; and unlike in past years, most stores stayed closed on Thanksgiving.

The prospects for holiday retail sales in 2020 are murky, but consumers are expected to purchase more gifts online than ever before — and possibly too many for shipments to be delivered on time. To be on the safe side, the National Retail Federation is recommending that consumers get their shopping done early and take advantage of curbside pickup.16

1) The Wall Street Journal, May 15, 2020
2) U.S. Census Bureau, 2020
3) The New York Times, November 17, 2020
4) U.S. Bureau of Economic Analysis, 2020
5) The Wall Street Journal, November 17, 2020
6) The New York Times, June 18, 2020
7) The Wall Street Journal, August 27, 2020
8–9) The Wall Street Journal, November 15, 2020
10) The Wall Street Journal, October 25, 2020
11) The Wall Street Journal, November 18, 2020
12) The Wall Street Journal, September 29, 2020
13) U.S. Bureau of Labor Statistics, 2020
14, 16) Associated Press, November 11 and 17, 2020
15) National Retail Federation, 2020

This information is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek guidance from an independent tax or legal professional. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2020 Broadridge Financial Solutions, Inc.




Interesting Economic Facts


NOT A GREAT RETURN - An American male retiring at age 65 in 2020 who has earned the maximum taxable wage for Social Security taxes every year during his working career ($137,700 in 2020) is projected to have paid $741,000 (stated as a 2020 present value number) in lifetime Social Security taxes but is projected to receive just $533,000 (stated as a 2020 present value number) in lifetime benefits (source: Tax Policy Center).


I NEED MY SPACE - 28% of the households in the United States in 2020 w ere made up of just 1 individual living alone. Another 35% of US households are comprised of just 2 people, of which 65% (of the 35%) are a married couple (source: Census Bureau).


SMALL GUYS/GALS RULE - Small American businesses, defined as having less than 500 employees, are responsible for 44% of US economic activity (source: US Small Business Administration – Office of Advocacy).


NOT GOING TO THE MALL - $1 out of every $6 spent on US retail sales (16.1%) during the 2nd quarter 2020 was transacted online (source: Census Bureau).


SUPPLY AND DEMAND - On 4/09/20, OPEC and Russia agreed to a historic production cut of 10 million barrels a day. The price of West Texas Intermediate (WTI) crude oil had fallen to $22.76 a barrel as of 4/09/20 as the global impact of COVID-19 was crushing the worldwide demand for oil. As of last Friday 12/04/20, WTI crude oil closed at $46.26 a barrel (source: NYMEX).


OVER A YEAR - The number of US operating oil rigs (both on land and offshore) was 323 as of Friday 12/04/20, down 60% from 799 operating oil rigs as of Friday 12/06/19 (source: Baker Hughes).


THEN AND NOW - Following the 2016 presidential election, the USA reported 7.5 million jobless Americans and a 4.7% unemployment rate as of 11/30/16. Following the 2020 presidential election, the United States reported 10.7 million jobless Americans and a 6.7% unemployment rate as of 11/30/20 (source: Department of Labor).


THE FRIENDLIER SKIES – 4,592,989 passengers went through TSA screening at US airports on the Wednesday before Thanksgiving through the Sunday after Thanksgiving, i.e., 11/25/20 through and including 11/29/20. Exactly 8 months earlier, i.e., Wednesday 3/25/20 through Sunday 3/29/20, just 1,006,765 passengers went through TSA screening at US airports (source: TSA).


START SAVING NOW - A child born in 2020 that begins kindergarten in the fall of 2025 would attend college between the years of 2038 and 2042. If that child attended an average public in-state 4-year college and if the annual price increases for public colleges that have occurred over the last 30 years (+5.0% per year) continued into the future, the aggregate 4-year cost of the child’s college education (including tuition, fees, room & board) would be $231,779 or $57,945 per year (source: College Board).


WAS PRIVATE, NOW PUBLIC - The cost of tuition, fees, room and board at an average public 4-year college for the current 2020-2021 school year is $22,180. The cost of tuition, fees, room and board at an average private 4-year college for the 2000-2001 school year, i.e., 20 years ago, was $22,240 (source: College Board).


EVERY DAY - An estimated 10,800 Americans will turn 65 years old each day next year (2021), i.e., 1 every 8 seconds. This group represents the 11th year of 19 years of “Baby Boomers” turning age 65. An estimated 11,500 Americans will turn 65 years old each day in the year 2029 (source: Government Accountability Office).


SIX GUYS BETTER THAN HIM? - LeBron James will be the 7th highest paid player in the NBA for the upcoming 2020-21 season, earning $39.21 million (source: ESPN).

...and for the History Lovers... This Week in History


December 7, 1988

Palestinian leader Yasser Arafat recognizes Israel's right to exist.


December 8, 1980

John Lennon is shot to death outside his Manhattan apartment building.


December 9, 1992

U.S. Marines land in Somalia to ensure food and medicine reaches the deprived areas of that country.


December 10, 1986

The largest Mafia trial in history, with 474 defendants, opens in Palermo, Italy.


December 11, 1816

Indiana is admitted to the Union as the 19th state.


December 12, 2000

The US Supreme Court announces its decision in Bush v. Gore, effectively ending legal changes to the results of that year's Presidential election.


December 13, 1951

After meeting with FBI Director J. Edgar Hoover, President Harry S Truman vows to purge all disloyal government workers.


Notable Dates in December


  • December 6 is Saint Nicholas Day. St. Nicholas, the patron saint of children, inspires traditions around the world from hunts for presents to stockings or shoes filled with sweets. 

  • December 7 is National Pearl Harbor Remembrance Day.

  • December 10 marks the beginning of Hanukkah. The 8-night festival of lights begins at sundown on the 10th and ends at sundown on the 18th.

  • December 13 is St. Lucia’s Day, which has long been associated with festivals of light. Before the Gregorian calendar reform in 1752, her feast day occurred on the shortest day of the year (hence the saying “Lucy light, Lucy light, shortest day and longest night”).

  • December 15 is Bill of Rights Day.

  • December 17 is Wright Brothers Day.

  • December 21 is the Winter Solstice—the astronomical first day of winter in the Northern Hemisphere and first day of summer in the Southern Hemisphere.

  • December 25 is Christmas Day, a Christian holiday commemorating the birth of Jesus Christ. Learn more about American Christmas traditions.

  • December 26 is Boxing Day (Canada, UK) and the first day of Kwanzaa.

  • On the last evening of the year, December 31, kiss the person you hope to keep kissing! Discover New Years traditions from around the world.


“Just for Fun” Holidays

Did you know that December is National Pear Month? Celebrate these fun holidays this month:

  • Dec. 11: International Mountain Day

  • Dec. 13: National Violin Day

  • Dec. 13: National Day of the Horse

  • Dec. 20: Underdog Day

  • Dec. 26: National Candy Cane Day



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