Retail Channel Monthly $ Update – May Final & June Advance

In May 2020  the Retail market began its recovery after hitting bottom in April. The road back has been long and complex and Consumer spending behavior continues to evolve. In this report we will track the changes, migration between channels and the retail recovery with data from two reports provided by the U.S. Census Bureau.

The Reports are the Monthly Retail Sales Report and the Advance Retail Sales Report. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – about 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

We will begin with the Final Retail Report for May and then move to the Advance Retail Report for June. Remember, the retail impact of the pandemic began in March 2020, peaked in April, then recovery started in May. We will compare 2021 to both 2020 and 2019 to document the progress that the retail market has made towards a full recovery.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports and we fill focus on Pet Relevant Channels

The information will be presented in detailed charts to facilitate visual comparison between groups/channels of:

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2020 and 2019
  • Current YTD change – % & $ vs 2020 and 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

First, the May Final. Retail hit bottom in April 2020 but began recovery, hitting record $ in December. In January & February $ fell but they skyrocketed in March, setting a new all time $ record. In April $ fell a bit but they rebounded in May to yet another record high. Here are the major retail groups. (All Data is Actual, Not Seasonally Adjusted)

The final total is $2.9B less than the Advance report projected a month ago. All groups but Restaurants were down slightly. The specifics were: Relevant Retail: -$2.2B Auto: -$1.1B; Restaurants: +$1.2B; Gas Stations: -$0.8B. Sales vs April were up in all but Auto and Total Retail $ set a new all-time record. Total $ales broke $600B for the 1st time in December and has now done it 4 times. Auto has the strongest recovery and is in fact prospering – annual YTD growth rate since 2019 is +12.9%. Except for the spending dip by Auto vs April, all but Restaurants were positive in all other measurements. Restaurants are still slightly negative vs 2019 but the Retail recovery is strong.

Now, let’s see how some Key Pet Relevant channels were doing in May.

  • Overall– 7 of 11 channels were down vs April but 10 were up vs May 2020 and 10 vs May 2019. In YTD $, 10 were up vs 2020 and 10 vs 2019. 9 were up vs both. May was the 3rd biggest month in history for Relevant Retail.
  • Building Material Stores – Their amazing lift continues. The ongoing surge came as a result of pandemic spending patterns developed in 2020. Consumers began focusing on their homes. Now we’re into the 2021 Spring lift for both Building and Farm stores . Sporting Goods stores are not in this group but have a similar spending pattern. Sales took off in May, hit a record peak in December and continued strong into 2021, peaking in March. May $ fell slightly again but are +30.6% vs 2020 and +49.5% vs 2019. YTD they are still +53% vs 2019.
  • Food & Drug – Supermarkets were +$77.7B in 2020. $ are down vs April and YTD 2020 due to last year’s binge buying. They are still up 14% vs May 2019 and YTD 2019. Drug Stores ended up +$17B (+5.7%) for 2020. Their $ fell in April and May after a setting a record in March. All other measurements are positive and YTD $ are +7.2%.
  • General Merchandise Stores – $ in all channels fell in Jan & Feb then spiked in March. In April, sales in all but $ stores declined but they bounced back in May. Discount Store were having problems before the pandemic, but they have strongly recovered, +8.5% YTD vs 2019. Clubs/SuperCtrs and $ Stores remain strong. These channels promote value. Their success vs both 2020 and 2019 reinforces its importance in Consumer spending decisions.
  • Office, Gift & Souvenir Stores– $ increased slightly from April and were +79% vs May 2020. The pandemic hit them hard. They are still down vs 2019 – monthly and YTD. Recovery is a long way off, but things are improving.
  • Internet/Mail Order – Although $ dropped again in May the pandemic continues to foster this channel’s growth. In May of 2019, their YTD growth rate was +13.0%. In May 2021, it is +20.4% – a 56.4% increase.
  • A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores (22>24% of total $). Pet Stores were usually essential, but most stores were not. In May 2020 they began their recovery. Their 2020 total sales were up +11.6%. Their May $ hit $10B for the 1st time to set a new all-time record. YTD sales are +32.7% vs 2020 and +38.6% vs 2019. Very strong!

The Relevant Retail Segment began recovery in May, reached a record level in December, then $ fell in Jan & Feb. Sales turned up again in March, fell slightly in April then bounced back in May. Almost all channels are showing growth. The key drivers are the Internet, SuperCtrs/Clubs/$ Stores and Hdwe/Farm.

Now, here are the Advance numbers for June.

2020 was a memorable year for both its traumas and triumphs. In April & May we experienced the 2 biggest retail spending drops in history, but the problems actually began in March. Retail sales began to recover in June and in October, YTD Total Retail turned positive for the 1st time since February. In December, Total Retail broke the $600B barrier – a historic first. Sales fell from their December peak in both January and February but still set monthly sales records. Then they took off again in March, setting a new monthly sales record of $633B. April sales were down slightly but they took off again in May to set yet another spending record, $641.5B. June brought another slight dip in this rollercoaster ride but was still the 3rd biggest $ month in history. All but Gas Stations were down vs May, but all the major groups were positive in all other measurements. The big news is that for the 1st time YTD Restaurant $ were positive versus 2019 – just barely, +0.1%. Some other areas of the economy are still suffering, some spending behavior has changed and inflation has become a factor in some increases. However, consumers are back spending money and the overall Retail marketplace has strongly recovered.

Total Retail – In March, Total Retail hit $633.1B, a record for the most spending in any month in any year. In April, $ales dipped to $625.5B but were still $218.3B more than April 2020 – a record increase, which was more than double the size of last year’s record drop. In May, sales set another new record, $641.5B. In June sales dipped slightly to $631.1B, but it was still the 3rd biggest month in history. Moreover, the current YTD average annual sales growth rate since 2019 is 9.0%, the strongest ever in records going back to 1992. Total Retail has not just recovered. It is stronger than ever.

Restaurants – This group finally has no negative measurements vs 2020 or 2019. Last February YTD sales were up 8.1% vs 2019. The Pandemic changed that. Restaurants started to close or cease in person dining in March and sales fell -$33.3B (-52.5%) compared to March 2019. Sales bottomed out in April at $30.1, the lowest April sales since 2003. Sales started to slowly increase in May but never reached a level higher than 88% compared to the previous year. 2021 started off slowly. Through February, YTD sales were down -16.7% from pre-pandemic 2020 and -10.0% from 2019. In March sales took off and grew steadily in April and May. Sales dipped slightly in June but were still strong vs 2019 & 2020. YTD their $ are ahead of 2020 and exceeded 2019 by 0.5B (+0.1%). Their recovery is gaining strength.

Auto (Motor Vehicle & Parts Dealers)   – Staying home causes your car to be less of a focus in your life. Sales began to fall in March and hit bottom in April. Auto Dealers began combating this “stay at home” attitude with fantastic deals and a lot of advertising. It worked. They finished 2020 up 1% vs 2019 and have returned to a strong positive pattern in 2021. The “attitude” grew amazingly positive in March and slowed only slightly in April>June as sales exceeded $137B in all 4 months, by far the 4 biggest months in history. To show how well consumers responded to their campaign you just need to look at the data. This group has exceeded $110B in monthly sales only 12 times in history. 10 of those occurred after the onset of the pandemic.  YTD Avg Annual Growth Since 2019 = +13.2% – the best performance of any big group.

Gas Stations – Gas Station $ales have been a mixed bag. If you drive less, you visit the gas station less often. Sales turned down in March 2020 and reached their low point in April. They moved up but generally stayed about 15% below 2019 levels for the rest of 2020. In February they were still behind 2020 in monthly and YTD $ but ahead of 2019 in both measurements. In March, sales skyrocketed. They increased slightly in April, May and June and were 37.4% above June 2020. They have been positive in all measurements vs both 2019 and 2020 since March. Their comeback continues but there is another factor that must be considered – inflation. Gas prices can be pretty volatile. They dipped in the first 2 months of the pandemic but then returned to more normal levels for the balance of 2020. They began strongly inflating in 2021. In fact, the June 2021 prices were 45% above June 2020. That means that the 37.4% year over year $ lift in June was actually a decrease in the amount of gas sold. YTD Annual Avg Growth Rate Since 2019 = +3.1%

Relevant Retail – Less Auto, Gas and Restaurants – This is what we consider the “core” of U.S. retail and has traditionally accounted for about 60% of Total Retail Spending. When you look at the individual channels in this group, you see a variety of results due to many factors – non-essential closures, binge buying, online shopping and a consumer focus on “home”. However, overall, April 2020 was the only month in which spending in this group was down vs 2019. Monthly $ales exceeded $400B for the first time ever in December ($407B). They finished 2020 up $260B, +7.1%. Their performance was the only reason that Total Retail was able to finish 2020 with positive numbers, +0.5%. Sales fell in January and February but set monthly records. In March they turned sharply up again, then dipped slightly in April but May brought the 3rd highest $ of all time. June saw another slight $ decline but they are still up $40.8B, +12.3% vs June 2020 and  +$298.8B, +16.5% YTD. We should note that that while December 2020 is still #1, March ($374.7B), April ($366.8B), May ($376.7B) and June ($371.5B) of 2021 are four of the six highest monthly totals of all time. It is also important that the Relevant Retail group has posted positive numbers versus last year and YTD for every month since April 2020 and their average YTD growth rate since 2019 now stands at +10.2%. Through June all but one channel have now turned positive in all measurements vs both 2020 and 2019. However, the primary drivers throughout the pandemic were and continue to be Nonstore, Grocery, SuperCenters/Clubs/$ Stores plus a seemingly never ending “spring lift” from Hardware/Farm and Sporting Goods.

Now let’s look at what is happening in the individual retail channels to see where the $ are coming from. June $ were down slightly from May and none of the increases were “off the charts”. However, it was still the 5th largest month in history for Relevant Retail outlets. The groups are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

Sales in 7 of 13 channels were down vs May but all were up vs June 2020, vs June 2019 and YTD vs 2020. Only 1 was down YTD vs 2019. (Relevant Retail YTD Avg Annual Growth Rate since 2019 = +10.2%)

After hitting bottom in April 2020, Relevant Retail has now beaten the previous year’s $ for 14 consecutive months. The group set an all-time record of $407B in December and finished 2020 +$260B vs 2019. 2021 started strong, with record sales in every month. March > June were 4 of the 6 biggest of all time. Essential channels are still the primary drivers:

  • Nonstore Retailers – The biggest driver. Online shopping continues to grow in # of households and in $.
  • Food & Beverage – Grocery– Restaurant $ are improving but consumers continue to eat & drink more at home.
  • Bldg Materials/Garden/Farm– Their “Spring” lift continues unabated as consumers focus on their home.
  • SuperCtrs/Club/Value/$ Strs – They keep the GM channel positive. Value is still a major consumer priority.

Regarding the Individual Large Channels (Includes YTD Avg Annual Growth Rate since 2019)

General Merchandise Stores – Sales fell in June but all other numbers are positive. YTD Department Stores $ remain up vs 2020 but down vs 2019. They were having problems before the Pandemic. After dipping to +7.5% in February, the growth rate by Club/SuperCtr/$ stores has remained near the current 8.4%. These stores are still the key to this channel.

  • YTD Avg Annual Growth: All GM = +6.8%; Dept Stores = -0.9%; Club/SuprCtr/$ = +8.4%

Food and Beverage, plus Health & Personal Care Stores – Sales in Grocery were down in March>May from 2020 – No surprise, as these were 2020 binge months. In June they beat 2020 $. The Health, Personal Care group finished 2020 at +1.8%. 2021 has started even better. With strong March > June sales, YTD they are +10.7% vs 2020 and +9.5% vs 2019.

  • YTD Avg Annual Growth: Grocery = +6.7%; Health/Drug Stores = +4.6%

Clothing and Accessories; Electronic & Appliances; Home Furnishings – March > June have been spectacular for all these channels. The increase in Clothing Stores vs June 2020 was not “off the chart” but was still +49.4%. Although all of these groups were down vs May they remain positive in all measurements vs 2020 or 2019 for the 4th consecutive month.

  • YTD Avg Annual Growth: Clothing = +3.6%; Electronic/Appliance = +2.5%; Furniture = +10.1%

Building Material, Farm & Garden & Hardware – Their Spring lift began on time in 2020 and has never stopped. They have greatly benefited from consumers focusing on their home needs. They finished 2020 +53B (+13.8%). Sales took off in March, set a record in April then dipped slightly in May & June. They are +18.3% YTD. Avg Annual Growth = +14.6%

Sporting Goods, Hobby and Book Stores – Book & Hobby stores are open but Sporting Goods stores have driven the lift in this group. Consumers turned their attention to personal recreation and sales in Sporting Goods outlets took off. The group ended 2020 +5.5% vs 2019. The growth accelerated in 2021. January > June set monthly records and March had the most $ of any non-December month in history. June YTD they are +44.6% vs 2020. Avg Annual Growth = +17.5%

All Miscellaneous Stores – Pet Stores were deemed essential but most other stores were not, so closures hit this group particularly hard. Sales hit bottom at -$3.8B in April then began to rebound. They finished with a strong December and ended 2020 down $1.0B, -0.7%. In March sales took off and the channel set a new all-time monthly record of $14.39B in May. However, they beat that record in June with $14.41B. Their YTD sales are now 31.9% above 2020 and 25.1% more than 2019. Their recovery has become very real. YTD Avg Annual Growth = +11.9%

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV. The pandemic accelerated the movement to online retail. In February 2020 NonStore $ were +8.6% YTD. In December monthly sales exceeded $100B for the 1st time. They ended 2020 at +21.4%, +$162.9B. This was 63% of the total $ increase for Relevant Retail Channels. Their 2020 performance far exceeded their 12.9% increase in 2019 and every month in 2021 has produced record $. June was +2.0% vs May and +12.0% vs 2020. Their YTD $ are +19.1%. YTD Avg Annual Growth = +18.5%

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – 2020 was quite a year. April & May had the 2 biggest year over year sales decreases in history while December sales broke $600B for the first time. 2021 may become even more memorable. March>June became the 4 biggest Retail $ales months in history with the 4 largest year over year monthly sales increases ever. The total increase was +$608B, almost quadruple (3.87 times) the -$157B decrease from March>June 2020. At yearend 2020, Restaurants, Auto and Gas Stations were still struggling but Auto had largely recovered. Relevant retail had segments that also struggled but overall, they led the way for Total Spending to finish the year +0.5% vs 2019. 2021 has grown even more positive. The Auto Segment is setting sales records. Gas Stations, with help from inflation, is all positive vs 2020 and 2019 and thanks to a great June, so are Restaurants. The details show that the recovery in Relevant retail has become real for virtually all channels and monthly sales continue to set records. Retail has recovered but one question remains, “How high can the $ go?”

 

 

U.S. Pet Services Spending (Non-Vet) $7.84B (↓$0.97B): 2020 Mid-Year Update

The US BLS released their Mid-Year Update of the Consumer Expenditure Survey covering the period from 7/1/2019 to 6/30/2020. In our analysis of Pet Supplies Spending, we saw the drop in spending sparked by tariffs had now reach 18 months. However, Pet Food Spending turned up, first in the 2nd half of 2019, as it recovered from the FDA warning on grain free dog food. Then it had a huge lift in the 1st half of 2020 as many Pet Parents “panic” bought food due to the onset of the pandemic. Now we turn our attention to Pet Services. The Mid-year numbers show that spending in this segment was $7.84B, down $0.97B (-11.0%) from the previous year. Up until 2018, this segment was known for consistent, small growth. In 2018, increased outlets and competitive prices brought on a wave of new users and spending increased +$1.95B. Spending remained near this new high normal until we reached 2020. March closures due to the pandemic drove spending down $0.78B in the first half so that Pet Services spending returned to the Mid-Year 2018 level. This deserves a closer look. First, we’ll review recent Services spending history since 2014.

Here are the 2020 Mid-Year Specifics:

Mid-Year 2020: $7.84B; ↓$0.97B (-11.0%) vs Mid-Yr 2019

  • Jul > Dec 2019: ↓$0.19B
  • Jan > Jun 2020: ↓$0.78B

Pet Services is by far the smallest industry segment. However, except for 2010 and 2011, the period immediately following the Great Recession, it had consistent annual growth from 2000 through 2016. Spending in Food and Supplies have been on a roller coaster ride during that period. Services Spending more than tripled from 2000 to 2016, with an average annual growth rate of 7.6%. Spending in the Services Segment is the most discretionary in the industry and is more strongly skewed towards higher income households. Prior to the great recession, the inflation rate averaged 3.9% with no negative impact. The recession affected every industry segment, including Services. Consumers became more value conscious, especially in terms of discretionary spending. Services saw a slight drop in spending in both 2010 and 2011, but then the inflation rate fell to the 2+% range and the segment returned to more “normal” spending behavior. In mid-2016 inflation dropped below 2% and continued down to 1.1% by the end of 2017. This was primarily due to increased competition from free standing businesses but also an increase in the number of Pet Stores and Veterinary Clinics offering pet services. While prices still went up slightly, there were deals to be had and consumers shopped for the best price. There was no decrease in purchase frequency. Consumers just paid less so spending fell slightly. In the 2nd half of 2017 spending turned up again. More Consumers began to take advantage of the value and convenience of the increased number of outlets offering Services. This deeper market penetration caused Services Spending to take off in 2018, up $1.95B, by far the biggest annual increase in history. Prices turned up again in the first half of 2019, increasing  2.8% from 2018. However, Services spending inched up $0.09B. In the 2nd half of 2019 Value shopping again came to the forefront as spending fell -$0.19B. Then came 2020 and the pandemic. Many of these nonessential businesses were forced to close and spending fell -$0.78B to $7.84B, the same as Mid-Year 2018.

Let’s take a closer look at some spending demographics – Age and Income.

The graphs that follow we compare spending for the 12 months ending 6/30/20 to the previous 12 months. The graphs also include the 2019 yearend $, so you can see spending changes in the 2nd half of 2019 and the 1st half of 2020.

The first graph is for Income, the single most important factor in increased Pet Spending, especially in Services.

Here’s how you get the change for each half using the Over $70K group as an example:

Mid-yr Total Spending Change: $6.02B – $6.43B = Down -$0.41B (Note green outline = increase; red outline = decrease)

  • 2nd half of 2019: Subtract Mid-19 ($6.43B) from Total 2019 ($6.47B) = Spending was up $0.04B in 2nd half of 2019.
  • 1st half of 2020: Subtract Total 2019 ($6.47B) from Mid-20 ($6.02B) = Spending was down -$0.45B in 1st half of 2020.

  • We again added an Over/Under $100 measurement. You see how Services Spending is skewed towards higher incomes. The halfway spending point is probably about $125K so 20% of CUs spend 50% of Services $. $70K+ had a slight uptick in the 2nd half of 2019 due to $50>$150K. All other big groups trended down in both halves.
  • The two individual groups below $50K declined in both halves. The $30>$50K had the biggest drops and finished down -$0.41B (-41.4%). They gave back most of a 47% increase a year earlier from a spending surge by Retirees.
  • The middle income $50 to $100K showed the least impact of any group. Spending by the $50>$70K was virtually unchanged in both halves. The $70>$100K group had a small lift in the 2nd half of 2019 and showed almost no impact due to the pandemic so they were the only group to finish positive for the year, +$0.11B (+9.8%).
  • The two over $100K groups had the biggest pandemic impact in $, -$0.44B but for the year they actually gained slightly in share of Services $, moving up to 61.0% from 60.2%.
  • Income is the single biggest factor in choosing the discretionary convenience of Pet Services and it appears that the start of the pandemic has made it even stronger.

Now, Services’ Spending by Age Group.

  • There are a multitude of spending patterns, and none are tied specifically to young or old.
  • Last year the 55>64 yr old Boomers had the only overall decrease. This year the 25>34 year olds had the only increase. It was minor and their spending was flat in the 1st half of 2020. Overall, it was quite a turnaround.
  • The 45>64 and 75+ groups had the same pattern with a lift in the last half of 2019, followed by a drop in the first half of 2020. The 35>44 yr and 65>74 groups were down in both halves, but the Gen Xers were down -$0.58B, -32%.
  • The continuing decrease by the 35>44 group is significant . They are now down -$0.75B (-37.5%) from 2018’s $2B.

Now let’s look at what is happening in Pet Services spending at the start of 2020 across the whole range of demographics. In our final chart we will list the biggest $ moves, up and down by individual segments in 11 demographic categories. Remember, the pandemic drop in the 1st half of 2020 was -$0.78B, a big change from +$0.09B in 2019.

Obviously, 2020 has not started out well, due to pandemic closures. In 4 of the 11 categories, all segments spent less on Services. Also, the $ changes from the losers are overwhelming larger than the positives of the winners. The -$0.78B decrease in Pet Services came from 72 of 82 demographic segments (88%) spending less. The negative impact of the pandemic on the Services segment was extremely widespread.

There is only one usual winner – Self Employed and one usual loser – Singles. However, there are many surprises:

Winners:

  • Under 25 yrs
  • High School Grads
  • Rural
  • Gen Z

Losers:

  • Mgrs/Professionals
  • BA/BS Degree
  • Homeowners w/Mtge
  • Gen X

Like the Supplies segment, the younger groups are providing the only positives. However, the groups are much more defined. We also should note than while the <25 group had the only 1st half lift by any age group, the 25>34 year olds had the only Mid-Yr 12 month lift for any age group and held their Services spending ground in the 1st half of 2020.

The 1st half 2020 positives are coming from specific groups of the youngest Americans, – <25 yrs old, Gen Z (mostly singles) and young, small families – 3 people, Oldest Child 6>17. 4 person CUs also increased spending in 2020 and Millennials were only down slightly -$0.01B. The importance of the younger groups continues to grow as the Baby Boomers must ultimately “pass the torch”.

In 2018 the Services segment reached a new level of prominence in the Pet Industry. In 2019 spending dropped slightly. Then came the pandemic and spending fell sharply. How did we get to this point and what comes next?

We have noted that by 2017 the number of outlets offering Pet Services had radically increased. This created a highly competitive market and the inflation rate dropped to near record lows. Value conscious consumers saw that deals were available, and they took advantage of the situation. However, they didn’t increase the frequency of purchase. They just paid less. This drove overall Pet Services spending down in the 1st half of 2017. The segment started to recover in the 2nd half but not enough to prevent the first annual decrease in Pet Services spending since 2011. However, it was a start. In 2018, more consumers started to recognize the convenience offered by more outlets. The latest big food upgrade was also winding down. The result was that Services started a deeper penetration into the market, especially in the younger groups. The < 45 groups spent $1.47B more on Services in 2018, 74% of the total $1.95B increase in the segment. After such a big lift, a slight downturn in 2019 was not unexpected and it happened, -$0.1B. Then came 2020. Many Services outlets were deemed nonessential and forced to close due to the pandemic. Services Spending fell -$0.78B.

What will happen in the 2nd half of 2020? There was no national mandate so re-openings were dependent upon local decisions. It’s likely that we will see a further decline. One thing hasn’t changed. Pet Services have become an important option that is exercised by an increasing number of Pet Parents. Now, in 2021 America has “opened up”. The Services segment should rebound strongly. We’ll get the full year 2020 data in September and the 1st half of 2021 in May 2022.