Information by distribution channel

Retail Channel Monthly $ Update – May Final & June Advance

Time for our monthly update on U.S. retail sales by channel. The current COVID-19 crisis has caused turmoil in the Retail Marketplace. Consumer spending behavior has changed and continues to evolve. In this report we will track the changes and migration between channels. We will do that 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 – approximately 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.

This means to get the full picture in our monthly channel update we need to look at the latest release of both reports. We will begin with the Final Retail Report from May and then move to the Advance Retail Report for June. This will also allow us to better track the consumers’ evolving spending behavior in terms of channel migration.

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

We’ll start with the May Final report. The Retail Market was beginning to recover after hitting bottom in April. First, we will look at some major retail groups. (Note: The Data in all graphs is Actual, Not Seasonally Adjusted)

The final total is $2B more than the Advance report projected a month ago. Although Relevant Retail was $2B less than expected, the Auto segment was $3B better. Restaurants also were $1B more than the early numbers but Gas Stations’ $ were the same. $ales were up vs April across the board but down for all but the Relevant Retail group vs 2019 and YTD.

The Spring Lift usually begins in late March and peaks in May as consumers focus on the outdoors. Closures and “staying at home” pushed that back. Things began to open up in May, but except for Relevant Retail, $ were down vs 2019.

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

  • Overall – Strong recovery from April as all channels, but Drug Stores had increases, 7 of 11 with double digit %.
  • Building Material Stores – This group typically has their biggest annual lift in Spring. This is unchanged and even amplified. Farm Stores are doing especially well with spectacular increases vs 2019. Although Sporting Goods stores are not included in this group, they have a similar Spring lift pattern. You can see that consumers really opened up to sports/recreation activities in May.
  • Food & Drug – Supermarket sales continue with strong growth. Drug Stores also had a March sales rush on essentials that ended in April and the decline continued into May as sales for both months were down vs 2019.
  • General Merchandise Stores – Sales in $ Stores and Clubs/SuperCtrs show continued strength with $ Stores showing the most growth. Some Discount Department stores were closed and shopping in others was often limited to essentials. You can see that they began to recover in May but are still down vs 2019.
  • Office, Gift and Souvenir Stores – Most of these stores were closed. In May they began to slowly open up.
  • Internet/Mail Order – “Stay at home” has further accelerated this channel’s growth. This will likely continue as the crisis has introduced many new consumers to online shopping and the behavior is likely to become habitual.
  • A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores. Pet Stores account for 22 to 24% of this group’s total sales. Pet Stores were generally deemed essential, but most stores were not. The others began reopening in May so there was a big lift from April. They were up 21% through February which is why they still have 4.9% YTD increase.

After a disastrous April, May saw the beginning of a slow recovery. As businesses began to re-open the numbers started to move in the right direction. Driven by the Internet, Supermarkets, SuperCtrs/Clubs/$ Stores and Hdwe/Farm the Relevant Retail Segment turned positive in all measurements. June brought even more widespread re-openings. Let’s see how the situation is progressing. Here are the Advance numbers for June.

April was the biggest spending drop in history. May was $97B better but still the second worst decrease in history, -$40B from 2019. In June, monthly sales turned positive for the first time since February as Total Retail was up $12B vs 2019.

Total Retail – Total Retail spending increased $12B, +2.3% vs 2019. It was the smallest increase since June 2019 but more importantly, the first since February. Sales through February 2020 were up $60B, +6.6% versus 2019. Then came COVID-19. Hopefully, we bottomed out at -$113B in May. We are still down -$100B YTD and -$170B from February.

Restaurants – Spending increased $6B over April but was still down $18B vs 2019. The year started out good, up $9B (+8.1%) through February. Then mandates forced many restaurants to close. Delivery and curbside pickup couldn’t make up the difference. Even the gradual re-opening in May and June was not enough as spending is now down $86B YTD.

Automobile & Gas Stations – If you can’t go out, except for necessities, then your car becomes less of a focus in your life. Buying a car was definitely less of a priority. Auto Dealers, both new and used, have been combating this with some fantastic deals and a lot of advertising. In June they turned the corner as sales were up $10B versus 2019. In terms of Gas Stations, May is traditionally the beginning of the vacation travel season but not in 2020. Although sales increased in May and June, they are still down -$42B YTD. People are still not driving as much, whether for commuting or road trips.

Relevant Retail – Less Auto, Gas and Restaurants – Many non-essential businesses began to shutter their doors in March but there was also a rash of binge/panic buying for “necessities” and a big lift in groceries as consumers focused on home cooking which drove spending up $19B. Then came April. With a full month of closures and an end in binge buying, spending dropped $34B from March. In May, the overall market began a slow reopening so spending began to move in the right direction. Nonstore, Grocery and SuperCenters/Clubs & $ Stores continued their growth. The spring lift in the Hardware/Farm channel got even stronger and Sporting Goods stores got on  board. In June, these big drivers couldn’t quite match their May numbers, but the openings became more widespread and the Relevant Retail group now has posted positive numbers versus last month, last year and year to date for 2 consecutive months.

Now let’s look at what is happening in the individual retail channels across America. In June, consumer spending in the relevant retail market grew even more positive versus 2019. Let’s see where the $ came from. These groups are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

 

The increase over May was driven by re-openings. The increase vs 2019 and YTD came from essential businesses.

Observations

After a full month of stay at home and widespread closures there was surge in May. Things truly opened up in June which fueled an increase over May. However, the essential channels are responsible for the lift vs 2019.

  • Nonstore Retailers – Even more consumers are online shopping.
  • Food & Beverage, especially Grocery– Restaurant $ are still down so consumers continue to eat & drink at home.
  • Sporting Gds/Hobby/Books – Stores re-opened and consumers began to return to outside recreational activities.
  • Bldg Materials/Garden/Farm – A bigger than usual Spring lift continues as consumers focus “on their home”.
  • SuperCtrs/Club/Value/$ Strs – Sales slowed in April, but they came back strong in May and it continued in June. This group turned the whole Gen Mdse channel positive. It clearly shows that value is still a consumer priority.

Regarding the Individual Large Channels

General Merchandise Stores – Regular Department stores began reopening and Discount Department stores held their ground, so this cut the losses for Department Stores. Club/SuperCtr/$ stores provided the big positive force. In April consumers dialed back their panic buying and spending on discretionary items was also down significantly. In May and now June we saw consumer spending return to a more normal pattern in the big and small stores that promise value.

Food and Beverage, plus Health & Personal Care Stores – The Grocery segment is still driven by increased Food sales due to a slow restart by restaurants, up 10.5%, +$6B. Sales in the Health, Personal Care group are up slightly from May but remain down overall. Many Personal Care stores are now slowly reopening but Drug Stores sales are essentially flat.

Clothing and Accessories; Electronic & Appliances; Home Furnishings – More and stores are reopening, producing a spectacular increase in sales over May. However, June $ were still down from 2019. They all had the same pattern, with Clothing Stores being the most extreme. Their sales were up 84% from May but still down 24% vs 2019 and 39% YTD. These channels have a long way to go to recover.

Building Material, Farm & Garden & Hardware – This channel has its biggest spending lift in the Spring. The shelter in place rules caused many consumers to turn their focus to their needs at home, including house and yard repair and improvement. This has accelerated and extended their Spring lift. Sales are up across the board, including +9.9% YTD.

Sporting Goods, Hobby and Book Stores – Book and Hobby stores which had been closed are now open. Sporting Goods stores had generally been open but organized sports were on hold, parks closed, and non-essential travel was discouraged. In May things began to open up and this expanded in June. Consumers again sought outdoor recreation. Sales doubled from April to May and grew 31% in June. June $ even beat 2019 by 22%, but YTD they are still down 6%.

All Miscellaneous Stores – This group is mostly small to medium specialty stores – both chains and independents. While Pet Stores are essential, most other stores in this group are not. The closures hit this group particularly hard. May sales were up 27% from April as the reopening began and grew 12% in June. However, they were still down 5% vs June 2019 and are down 7% YTD. In February they were up $2.6B, +14.1% YTD. Now they are down -$4.7B – a big turnaround.

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV businesses. The COVID-19 crisis has only accelerated the ongoing movement to online retail. Compared to 2019, NonStore was up 16.3% in March, 22.5% in April, 25.3% in May and 30.3% in June. Since April they have been the leader in all sales measurements either in $ or % increase. As you can see, their lead is growing. Also, their YTD sales are up 18.4%, exceeding their 12.9% annual increase in 2019. This early year lift bodes well for 2020 as much of their annual increase is usually driven by Christmas.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded along with their store sales in their regular channel. Whether they are up or down, their online sales are included in the totals.

Recap – After a record drop in spending in April, the situation improved slightly in May, but it still was the 2nd biggest year over year monthly retail sales decline in history. Restaurants, Auto and Gas Stations all had big sales increases in May and now June, but they are still struggling. The Relevant Retail segment has provided the only true positive as sales are up in all measurements for 2 consecutive months. However, for many segments in this group there is still a long way to go. In June Total Retail turned positive for the first time since February and Relevant Retail appeared to be moving towards a more routine pattern – a new normal. However, we are now seeing a resurgence of the virus and retail restrictions are being re-implemented in many areas and are likely to become more widespread. This is going to be a long battle with no end in sight. We will continue to monitor the data and provide you with regular updates as the situation evolves.

 

 

The Impact of COVID-19 on Small Businesses – 6/27 Update

Small Businesses are at the core of our nation’s economy and the challenges they face are important to everyone. To better understand the impact of COVID -19 on these businesses and aid decision makers in serving their urgent needs, the U.S. Census Bureau directly reached out to small businesses. For the Survey, the Census Bureau defined a small business as a single location business with employment between 1 and 499 and receipts of at least $1,000.

Consisting of 16 questions, this 5-minute survey reached close to 1 million businesses split across a 9-week rotation to reduce burden and lessen survey fatigue. The survey included small businesses in every area of the U.S. Economy. This initial survey began in the week ending 5/2/20 and was completed in the week ending 6/27/20 so we are able to track the evolution of the COVID-19 impact over 8 full weeks.

The results are first categorized by major, 2 digit NAICS code classification. Slightly more specific data (by 3 digit NAICS code) also became available so that we are able to more closely track elements which are relevant to the Pet Industry. Here are the 14 “pet relevant” groups for which we have compiled data:

  • National Avg: Covers All Major Areas with a few Exceptions like Agricultural Production and Religious Organizations
  • Product Related Groups:
    • 31-33: Manufacturers – All manufacturers
      • 311 – Food Manufacturers (Both Human & Animal)
    • 42: Wholesalers/Distributors – Wholesalers/Distributors of any type products
      • 424 – Distributors of Nondurable Goods (Includes food and nondurable supplies)
    • 44-45: Retail Trade – This includes everything from gas stations to Pet Stores (#453910). No restaurants
      • 444 – Building Materials/Hardware/Farm
      • 445 – Food & Beverage Stores
      • 452 – General Merchandise Stores
      • 453 – Miscellaneous Retailers (includes Pet Stores)
      • 454 – Nonstore Retailers
  • Services Related Groups:
    • 54: Professional, Scientific and Technical Services – Legal, Advertising Agencies, etc… and Vet Clinics (#541940)
    • 81: Other Services – Funeral Homes, Barber Shops, Auto Repair, etc … and Pet Care Services (#812910)
      • 812 – Laundry & Personal Care (includes Pet Care Services)

The data from each group has been bundled into 3 charts showing the group’s responses to 8 particularly relevant questions about the impact of COVID-19.

Here are the charts and the questions that will be answered on each:

Chart #1: Impact of Covid-19 on Your Business

  1. Overall, how has this business been affected by the COVID-19 pandemic?

Chart #2: Key Business Elements – Weekly Changes

  1. In the last week, did this business have a change in operating revenues?
  2. In the last week, did this business have disruptions in its supply chain?
  3. In the last week, did this business temporarily close any of its locations for at least one day?
  4. In the last week, did this business have a change in the number of paid employees?

Chart #3: Government Assistance & Your Outlook For The Future

  1. Since 3/13, has this business requested/received financial assistance from Paycheck Protection Program (PPP)?
  2. Since 3/13, has this business received any financial assistance from any Federal Program?
  3. In your opinion, how much time will pass before this business returns to its usual level of operations?

We are not going to review each group in this report. We will take a closer look at the Overall Retail Trade (NAICS 44-45) and 3 retail subchannels – Miscellaneous Retailers (includes Pet Stores), Nonstore Retailers and Hardware/Farm Stores. We also will review Personal Care Services which includes Pet Care. At the conclusion of the report we will make the data for all 14 groups available for you to download. You can then pick the ones that are most relevant to your particular business.

A word of caution: Remember, this data is only for the small businesses in any particular classification. It doesn’t include the big chains, which could be impacted differently because of their size, capabilities or resources.

Let’s get started with the Retail Trade

  • There is a big negative impact on the retail trade,76.0%. However, it is still faring better than the overall market which stands at 82.7% negative as of 6/27.
  • The negativity has moderated but the readings for all response groups have basically plateaued since 6/13.

  • Every measurement on this chart began moving in the right direction but most have plateaued since 6/13. In terms of revenue, 40% still showed a decrease which is still better than the national average, 42.6%. Retail outlets are also doing better than the Nation overall at generating increased $ – 29.1% to 19.7%.
  • Supply chain problems are high but stable. Much of the country was opened up in June so temporary closures only affected 15.3% of businesses – a big drop from 43.7% eight weeks earlier.
  • The employment situation has improved, especially in terms of businesses decreasing the number of employees. However, that situation has also become static, with the same number adding as cutting and 80% maintaining the status quo.

  • 97% of retail trade businesses that applied for PPP funds have received payment. In fact, 79% of all small retail businesses have received some form of government assistance.
  • In terms of outlook, although the number of businesses now expecting little or no effect by COVID-19 has grown significantly from 5.1% to 13.3%, this is a small segment. The most popular forecast (40.8%) is over 6 months for a return to normal. When you combine that with the 10.3% who believe that things will never be normal again you get over half, 51.3% who think that recovery will take considerable time. However. This is better than the overall national average of 53.6%

Now let’s drill a little deeper – Miscellaneous Stores, which includes Pet Stores

  • While Pet Stores were generally deemed “essential”, most stores in this group, like gift shops, art dealers and used furniture stores were not, which explains the high initial negative impact. It did moderate slightly in May but turned sour in mid-June.
  • After peaking at 16.7% on 6/6, the number of businesses reporting a positive or little no effect on their business fell to 13.2% by 6/27.

  • The change in revenue started in the right direction but has basically plateaued. Although businesses reporting decreased revenue have actually increased since 6/13.
  • Supply chain problems remain a big factor and they too have gotten worse since 6/13.
  • Closures have been cut in half but still affect almost 1/3 of the group (31.8%)
  • The employment situation has gotten significantly better but there are still twice as many businesses losing employees (14.9%) as those adding employees (7.4%).

  • The PPP funds have been distributed. 96% of businesses who applied have received funds. In fact, 81.5% of this group have received some form of federal aid.
  • This group’s projected recovery time has gotten worse since mid-June. Now 49.1% say that it will be over 6 months until a return to normal and 14.6% say normal will never return. That is 63.7% of these businesses.

Next, let’s look at Nonstore Retailers

  • Although the negative view is less than at the beginning, it is trending up. However, so is the positive view, The biggest decrease occurred in little/no effect which fell from 14.2% to 8.7% in the week of 6/27.

  • The revenue situation improved in May but has plateaued in June. 22-24% are posting increases. 35-37% report no change and about 40% are seeing decreased revenue.
  • Supply chain problems increased in mid-June but improved by 6/27, Closures improved in June but were up and down on a weekly basis.
  • The employment situation generally became more stable in June as hiring and layoffs both slowed. Although there was a little more turmoil in the week of  6/27.

  • 98% of businesses that requested PPP have received funds and 72% of the businesses in this group have received some form of government assistance.
  • Their overall projection for recovery grew worse in June. By 6/27 43.3% said it would take over 6 months and 9.7% said normal would never return. That’s 53% which is about equal to the National Average (53.6%) but worse than Total Retail (51.3%), which is somewhat surprising for a nonstore group.

Our final Retail Trade group is Hardware/Farm Stores

  • Except for an uptick in negativity during the week ending 6/6, their impression of the impact of COVID-19 on their business has steadily improved. By 6/27 their negativity score (55.6%) was the lowest of any retail group that we measured, including Food & Beverage Stores at 59.4%.

  • Their revenue began moving in the right direction and by 6/13 the number with increases exceeded the number with decreases. It has become relatively stable – about 33% up, 30% down and 37% with no change.
  • Supply chain problems are stable, but high at 56+%. Closures are down dramatically and were only 6.7% as of 6/27.
  • Hiring has slowed, after peaking during the week of 6/6 but still exceeds layoffs. 81.4% are now showing no change in the number of employees.

  • 99% of businesses that have applied for PPP have received their money and 75.4% of the group has received some form of federal assistance.
  • This group projects a speedier recovery than any other retail group. 38.3% expect a return to normal in 6 months or less but 26.6% say that there has been little or no effect on their business. That totals 64.9% which is much better than the National Average of 46.4% and 48.9% for Total Retail.

Finally, let’s look at the Personal Care Services Channel, which includes Pet Care Services

  • This segment was hugely impacted by closures but even opening up has not much improved their assessment of the situation. The negativity is still extraordinarily high at 91.5%. Although it has moderated slightly, almost 2/3 of the businesses, 65.2% still see the situation as extremely negative.

  • The revenue situation has gradually improved but 50.6% of businesses are still reporting a decrease in $ as of 6/27.
  • Supply chain disruptions are improving and are lower than many other channels. Closures have decreased by 54% since May 2nd but still affect 3 in 10 businesses (30.8%).
  • The employment situation is still negative – 7.8% hiring; 19.5% laying off, but it has reached its highest level of stability as 72.7% maintained the status quo in the week of 6/27.

  • 94% of businesses that applied for PPP have received funds and 84.4% of the group has received some form of federal assistance, which is better than the National Average, 77.0% and the Total Retail Trade, 78.7%.
  • Their outlook is rather bleak and almost the exact opposite of Hardware/Farm stores. 47.9% project over 6 months for a return to normal while 19.0% say normal will never return. That totals 66.9%, two thirds of all personal care outlets.

As you can see from our examples, the specifics can vary widely by business category. As the economy began re-opening the situation was generally improving. However, we have seen a resurgence in the virus. This is leading to reimplementation of some business restrictions and has produced an overall feeling of uncertainty among consumers. Until we have a stability in health, a return to normalcy in business will be greatly slowed. COVID-19 has had an especially negative impact on U.S. Small Businesses. Even small businesses in channels that are showing overall growth during the crisis, like Hardware/Farm and Nonstore, are having serious problems. The overall national growth in these channels is being driven by the “big guys”, like Home Depot and Amazon. The overall projection for a return to normal for small businesses is increasingly over 6 months, which would put it in 2021.

That concludes our analysis of this initial survey. As you can see the situation is far from over. Hopefully the Census bureau will conduct periodic future surveys so that we can fully monitor the progress of small businesses through this crisis.

Finally, as we said, more data is available for you. Files with the specific data/charts for all 14 business categories that we identified as relevant to the Pet Industry (including those used in this report) are available for download. Each file is a 1 page word document with 3 COVID-19 impact charts for a specific business category. There is no commentary – just data. Pick the ones that are most relevant for your business and share them with your associates. STAY SAFE!

National Average & Major Business Categories

More Defined Supply Chain Categories

Drilling Down into the Retail Trade

Finally, Personal Care Services (includes Pet Care)

 

 

 

 

 

 

 

 

 

 

 

 

Retail Channel Monthly $ Update – April Final & May Advance

Time for our monthly update on U.S. retail sales by channel. The current COVID-19 crisis has caused turmoil in the Retail Marketplace. Consumer spending behavior has changed and continues to evolve. In this report we will track the changes and migration between channels. We will do that 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 – approximately 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.

This means to get the full picture in our monthly channel update we need to look at the latest release of both reports. We will begin with the Final Retail Report from April and then move to the Advance Retail Report for May. This will also allow us to better track the consumers’ evolving spending behavior in terms of channel migration.

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

We’ll start with the April Final report. This was the depth of the crisis (hopefully). The impact is very visible. First, we will look at some major retail groups. (Note: The Data in all graphs is Actual, Not Seasonally Adjusted)

It is slightly better ($8B) than the Advance report projected a month ago. Although Restaurant $ales were $2B less than expected, the “Relevant Retail” segment was $10B better. Gas Stations also were $1B more than the early numbers but The Auto Segment was “spot on”. However, It was still by far the worst year over year monthly performance in history.

In a “normal” April we are generally into the Spring Lift as consumers begin to turn to outside activities. However, the widespread closures and “stay at home” guidelines generally ended that behavior.

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

  • Overall – Any binge spending ended in April as only Internet and Hardware/Farm had a March to April increase.
  • Building Material Stores – This group typically has their biggest annual lift in Spring. It appears that this is unchanged. Farm Stores did especially well with spectacular increases in all measurements. Although Sporting Goods stores are not included in this group, they have a similar Spring lift pattern. However, the results are totally different. You truly see the impact of the sports/recreation “shut down”.
  • Food & Drug – Although the March binge buying is over, Supermarket sales continue with strong growth. Drug Stores also had a March sales rush on essentials, but that clearly ended in April as sales are below April of 2019.
  • General Merchandise Stores – Although the March binge buying is over, sales in $ Stores, Clubs/SuperCtrs are both up, with $ Stores showing the most growth. Most traditional Department stores were closed and shopping in many Discount Department stores was often limited to essentials. The result is that sales were down -44.5% vs April 2019.
  • Office, Gift and Souvenir Stores – Most of these stores are deemed non-essential. You see the result.
  • Internet/Mail Order – “Stay at home” has further accelerated this channel’s growth. This will likely continue as the crisis has introduced many new consumers to online shopping.
  • A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores. Pet Stores generally account for 22 to 24% of this group’s total sales. Although Pet Stores were generally deemed essential most stores were not. The group was up 21% YTD in February which is the only reason that they are still “hanging on” to a YTD increase.

April was certainly a terrible month for retail spending, the biggest Total Retail $ drop in history. The March binge/panic buying ended in April and we saw the huge negative impact of a full month of non-essential business closures. In May, a very slow reopening of the economy began. Let’s see how it is progressing. Here are the Advance numbers for May.

April was the biggest spending drop in history. May was $95B better but still $42B (-7.7%) below May of 2019. That  gives us an idea of how serious the current situation is and how long the recovery may take.

Total Retail – Total Retail spending fell $42B, -7.7% vs 2019, edging out March for the 2nd biggest drop in history. Remember, 2020 started off strong. Spending through February was up $60B, +6.6% versus 2019. Then came the COVID-19 crisis and now it is down -$116B – a $176B turnaround in just 3 months.

Restaurants – Spending increased $11B over April but was still down $26B vs 2019. The year started out good, up $9B (+8.1%) through February. Then social distancing began, and many restaurants closed. Delivery and curbside pickup couldn’t make up the difference as spending fell $78B in 3 months so this group is now down $69B YTD.

Automobile & Gas Stations – If you can’t go out, except for necessities, then your car becomes less of a focus in your life. Buying a car was definitely less of a priority. Auto Dealers, both new and used, tried to combat this with some fantastic deals and a lot of advertising. It appears to be helping but sales were still down $7B versus 2019. In terms of Gas Stations, May is traditionally the beginning of the vacation travel season but not in 2020. Prices are still down but people are still not driving as much as they used to, whether for commuting or road trips.

Relevant Retail – Less Auto, Gas and Restaurants – Many non-essential businesses began to shutter their doors in March but there was also a rash of binge/panic buying for “necessities” and a big lift in groceries as consumers focused on home cooking which drove spending up $19B. Then came April. With a full month of closures and an end in binge buying, spending dropped $34B, -10.7% from March and 16B, -5.2% vs April 2019. In May, the overall market began a slow reopening so spending began to move in the right direction. Nonstore and Grocery, along with SuperCenters/Clubs & $ Stores continued their growth. The spring lift in the Hardware/Farm channel got even stronger and the group which includes Sporting Goods, Hobby & Book Stores bounced back to beat their May 2019 numbers. The Relevant Retail group now has positive numbers in all measurements – vs last month, last year and year to date.

Now let’s look at what is happening in the individual retail channels across America. In May, consumer spending in the relevant retail market returned to positive numbers. Let’s see where the $ came from. These groups are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

Every group had a May sales increase over April, but performance was mixed when it came to vs 2019 and YTD. 

Observations

April was a full month of stay at home, widespread closures and reduced discretionary spending so it was an easy number to beat. However, only 7 of 13 groups had positive numbers for May 2020 vs 2019:

  • Nonstore Retailers – Even more consumers are online shopping.
  • Food & Beverage, especially Grocery– Restaurant $ are still down so consumers continue to eat & drink at home.
  • Sporting Gds/Hobby/Books – Stores reopened and consumers started to return to outside recreational activities.
  • Bldg Materials/Garden/Farm – A big Spring lift as consumers focus “on their home” even more than usual.
  • SuperCtrs/Club/Value/$ Strs – Sales slowed in April, but they came back strong in May and it was enough to turn the whole Gen Mdse channel positive. This group of stores offers great value which is still a consumer priority.

Regarding the Individual Large Channels

General Merchandise Stores – Some Regular Department stores began reopening and Discount Department stores held their ground, so this cut the losses for Department Stores. Club/SuperCtr/$ stores provided the big positive force. In April consumers dialed back their panic buying and spending on discretionary items was also down significantly. In May we saw consumer spending return to a more normal pattern in the big and small stores that promise value shopping.

Food and Beverage, plus Health & Personal Care Stores – The Grocery segment is still being driven by increased Food sales due to restaurant closures, up 14.3%, +$8B. Sales in the Health, Personal Care group are up minimally from April but remain down overall. Many Personal Care stores are slow to reopen and Drug Stores sales are essentially flat.

Clothing and Accessories; Electronic & Appliances; Home Furnishings – As stores reopen there was a spectacular increase in sales over April. However, May $ were still down big time from 2019. They all had the same pattern, with Clothing Stores being the most extreme. Their sales were up 209% from April but still down 63% vs 2019 and 43% YTD. These channels have a long way to go to recover.

Building Material, Farm & Garden & Hardware – This channel has its biggest spending lift in the Spring. The shelter in place rules caused many consumers to turn their focus to their needs at home, including house and yard repair and improvement. This has further accelerated the usual Spring lift. Sales are up across the board, including +6.7% YTD.

Sporting Goods, Hobby and Book Stores – Book and Hobby stores which had been closed started to reopen. Sporting Goods stores had generally been open but organized sports were on hold, parks closed, and non-essential travel was discouraged. In May things began to open up and consumers once again sought outdoor recreation. Sales literally doubled from April. The May Sales even beat 2019 by 6%. However, YTD they were still down 10%.

All Miscellaneous Stores – This group is mostly small to medium specialty stores – both chains and independents. While Pet Stores are essential, most other stores in this group are not. The closures hit this group particularly hard. May sales were up 27.3% from April as the reopening began but they are still down 24.3% vs May of 2019. In February they were up $2.6B, +14.3% YTD. In 3 months, this changed to down -$4.3B, -8.3%. That’s quite a negative turnaround.

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV businesses. The COVID-19 crisis has only accelerated the ongoing movement to online retail. Compared to 2019, NonStore was up 16.3% in March, 22.5% in April and 25.3% in May. Since April they have been the leader in all sales measurements regardless if it is in $ or % increase. Also, their YTD sales are up 16.6%, exceeding their 12.9% annual increase in 2019. This early year lift bodes well for 2020 as much of their annual increase is usually driven by Christmas Holiday spending, which is still to come.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded along with their store sales in their regular channel. Whether they are up or down, their online sales are included in the totals.

Recap – Hopefully, April was the “bottom” in the COVID-19  impact on the American way of life and consumer spending. Although the situation began to improve slightly in May, it still beat out March to register the 2nd biggest year over year monthly retail sales decline in history. Restaurants, Auto and Gas Stations all had big sales increases over April, but they are still struggling. The Relevant Retail segment provided the only true positive as sales were up in all measurements. However, for many segments in this group there is still a long way to go. As the situation evolves, spending will no doubt move back to a more routine pattern – a new normal. No one knows how long that this will take and what long term impact the COVID-19 crisis will have on U.S. consumers’ spending behavior. We will continue to monitor the data and provide you with regular updates as the situation evolves.

 

 

 

 

U.S. Census Bureau Small Business Pulse Survey – Measuring the Impact of COVID-19

Small Businesses are at the core of our nation’s economy and the challenges they face are important to everyone. To better understand the impact of COVID -19 on these businesses, the U.S. Census Bureau is reaching out to small businesses in order to aid decision-makers in serving their urgent needs. For the Survey, the Census Bureau defines a small business as a single location business with employment between 1 and 499 and receipts of at least $1,000.

Consisting of 16 questions, this 5-minute survey reaches close to 1 million businesses split across a 9-week rotation to reduce burden and lessen survey fatigue. The survey reaches out to small businesses in every area of the U.S. Economy. The first survey was conducted between 4/26/20 and 5/2/20 and results were released on 5/14. This report includes the data from that initial survey as well as the data from the weeks ending 5/9 and 5/16. It will be presented in charts that will allow you to track the evolution of the responses as we progress through this crisis.

The results are categorized by major NAICS code classification. This report will show the National Average plus results from 5 big groups which are relevant to the pet industry:

  • National Avg: Covers All Major Areas with a few Exceptions like Agricultural Production and Religious Organizations
  • Product Related Groups:
    • 31-33: Manufacturers – All manufacturers
    • 42: Wholesalers/Distributors – Wholesalers/Distributors of any type products
    • 44-45: Retail Trade – This includes everything from gas stations to Pet Stores (#453910). No restaurants
  • Services Related Groups:
    • 54: Professional, Scientific and Technical Services – Legal, Advertising Agencies, etc… and Vet Clinics (#541940)
    • 81: Other Services – Funeral Homes, Barber Shops, Auto Repair, etc … and Pet Care Services (#812910)

Each group will have a separate section in the report which will have 3 charts showing the group’s responses to some particularly relevant questions about the impact of COVID-19.

Here are the charts and the questions that will be answered on each:

Chart #1: Impact of Covid-19 on Your Business

  1. Overall, how has this business been affected by the COVID-19 pandemic?

Chart #2: Key Business Elements – Weekly Changes

  1. In the last week, did this business have a change in operating revenues?
  2. In the last week, did this business have disruptions in its supply chain?
  3. In the last week, did this business temporarily close any of its locations for at least one day?
  4. In the last week, did this business have a change in the number of paid employees?

Chart #3: Government Assistance & Your Outlook For The Future

  1. Since 3/13, has this business requested/received financial assistance from Paycheck Protection Program (PPP)?
  2. Since 3/13, has this business received any financial assistance from any Federal Program?
  3. In your opinion, how much time will pass before this business returns to its usual level of operations?

Advance Observations (Spoiler Alert)

  1. The negative impact is widespread and deep across the U.S. Economy.
  2. Business measurements, like revenue, closures and employment are generally moving in the right direction, but… slowly.
  3. As we come fully to grip with the crisis, it becomes more apparent that recovery will take quite some time.

Now Let’s Look at the Details

We will start with the overall National Small Business Response Averages.

Then, we will move to the Product Related Groups and Wrap it up with Services.

At the conclusion there will be a link to download a PDF copy of the report!

NATIONAL AVERAGE

  • Total Negative is down slightly. The biggest drop is in large negative as both the moderate negative and little/no effect groups move up.

  • All measurements are moving steadily in the right directions. Although it is at an extremely low level, the group with an increase in revenue basically doubled in 2 weeks. Supply chain problems remain an issue and over 1/3 of the businesses still are reporting closures but this is down 20% from May 2nd. Employment is definitely slowly improving.

  • ¾ of all small businesses requested help from the PPP. It is finally coming through as 89% of those that submitted a request have received funds as of 5/16. With help from numerous Government agencies, like the Small Business Association, 72% of the Small Businesses have received financial assistance.
  • In terms of outlook the biggest decrease came in those expecting to return to normal in 2 to 3 months while the biggest increase came in the over 6 months group.
  • Things are turning in the right direction in basically every measurement, but the movement is slow. As businesses became involved in the reality of the situation, it is becoming increasingly obvious that a return to normal will take some time.

MANUFACTURERS

  • Total negative is slightly below the national average, but their evolving pattern is similar – a drop in large negative with increases in moderate negative and little/no effect. However, their Moderate negative share now ranks #1.

  • Their Revenue is moving in the right direction but the gain in the number with an increase was miniscule. While their Supply chain issues are significant, they have the lowest percentage of closures for any group. The employee count is also coming together but like Revenue, the gain in the number adding personnel was small.

  • 4 out 5 Manufacturers have requested PPP assistance and as of 5/16, 87% of those who applied had received funds. 77.8% of Small Manufacturers have received some Federal Financial assistance. This is the highest % of the 5 groups.
  • Although there was a slight increase in those stating that their was little or no impact on their business, the biggest movement in the projections is to over 6 months, which grew from 32.4% to 38%. The 2 to 6 month group fell from 51.9% to 45.1%.
  • The manufacturing segment is ultimately dependent upon retail so slowed business there will ultimately work its way up the distribution chain. This group is generally moving in the right directions but changes, especially increases tend to happen at a slower pace.

WHOLESALERS/DISTRIBUTORS

  • The overall negative impact has remained stable and very high, ranked 2nd of all 5 groups. However, it is moderating slightly. Little impact is up slightly. Overall, positivity is down slightly but is still the 2nd highest, behind Retailers.

  • Revenue is moving in the right direction. However, the percentage with decreased $ is the highest of all groups. Supply Chain problems are over 50% and 2nd highest, while Closures have the 2nd lowest rate. Employment remains very stable and moving towards a return to normal.

  • 70% have applied for PPP assistance and 87% have received funds. However, this group has the highest percentage of businesses receiving no Federal financial assistance of any kind – 34%.
  • Their outlook is also moving towards a longer recovery time. 38.6% of Distributors now believe that it will take over 6 months to return to normal, the highest percentage of any group. The size of the groups who saw little or no impact on their business and those who think they will never return to normal has stayed about equal, unlike any other industry segment.
  • The recovery of Distributors is dependent upon the recovery of their retail customers. The faster the Retail Business returns, the faster the distributors gain $. The key is that they need to be ready and able to handle it.

THE RETAIL TRADE

  • The overall negativity is the lowest of any group and is increasingly seen as moderate. However, the biggest reason the number is low is that 8.7% of Retailers are seeing a positive impact. Online retailers are one example.

  • While the situation is still dire, Retailers are having the best results in terms revenue flow, with 22.2% having increased $. They are doing this despite having a very high rate of Supply Chain problems and Closures, although Closures are down 27% in 2 weeks. Employment is also improving, and they lead the way with 9.7% adding workers.

  • Over ¾ of Retailers have applied for PPP assistance. By 5/16, 87% of those that applied had received funds. In fact, 74.5% of all Small Business retailers have received some type of financial assistance from the federal government.
  • On May 2, 53% of retailers said things would be back to normal in 2 to 6 months. In 2 weeks that number has fallen to 46% and the number that think that recovery will take more than 6 months has risen to almost 35%.
  • Next to the Health Care Segment, the Retail Segment is where we see the biggest visual impact of the COVID-19 pandemic. With stay at home and closures, we are seeing a huge movement to online shopping. However, that is not enough. This segment, without restaurants accounted for $5.4 trillion dollars in consumer sales in 2019. That’s a lot of ground to make up. Plus, the fate of the manufacturing and distributing segments is directly tied to Retail.

PROFESSIONAL, SCIENTIFIC and TECHNICAL SERVICES (INCLUDES VETERINARY CLINICS)

  • Their initial perceived negative impact of COVID-19 was high at 87.5%, but it was still the lowest of the 5 groups. Also, many more, over 50%, believed the impact to be moderate rather than large. They also have the highest percentage saying there will be little or no impact from COVID-19 on their business.

  • In terms of Revenue change they have the most consistency of any group – the highest percentage of no change, 32.9% – the lowest percentage with an increase and the second lowest percentage with a decrease. They also have faced the least amount of Supply problems as well as the lowest percentage of closures of any group dealing directly with consumers. Employment shows the highest percentage of no change while the increases/decreases are headed in the right directions.

  • 71% applied for PPP and by 5/16, 91% had received their funds. In regard to overall Government aid, 69% have received Federal financial assistance. Only Distributors, at 64% had a lower number.
  • Despite their stability in business elements and the fact that 1 in 9 say that COVID-19 has had little or no impact on their business, the outlook on recovery time for most has worsened. The group estimating a 2 to 6 month return to normalcy has fallen from 53% to 48%, under half. Over 1/3 now think it will take 6+ months to recover.

OTHER SERVICES (INCLUDES PET CARE SERVICES)

  • At 92%, COVID-19 had the biggest negative impact on this group. It was also very severe. Although it has moderated slightly, the ratio of businesses with Large Negative over those with Moderate Negative remains at nearly 2 to 1.

  • 80% of businesses reported a change in revenue in the week ending 5/16. The negative number was 65%. This was the highest among those interacting with consumers, but down significantly from the 78% peak. Those reporting increased $ is up to 14.9%, 2nd place behind Retailers. Supply Chain problems remain high and they have the highest percentage of closures. In terms of Employment, they are moving in the right direction – slowly. They are below the national average in additions, lowest of the group of 5 in “no change” and highest in the group for decreases.

  • 80% have applied for PPP and as of 5/16, 86% of received funds. 74% of the group have received some Federal aid $.
  • 32% of this group originally expected a return to normal in 3 month or less. The size of that optimistic group has dialed back to 26%. The mid-range 4 to 6 month group has remained steady at 27%. However, the group that projects 6+ months to recovery now represents 1 in every 3 businesses. We should also note that 1 in 11 businesses say they will never return to normal, the highest number in our group of five.

That wraps it up for the 5/16 update. If you would like a PDF copy of the report, click the button below.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail Channel Monthly $ Update – March Final & April Advance

Time for our monthly update on U.S. retail sales by channel. The current COVID-19 crisis has caused turmoil in the Retail Marketplace. Consumer spending behavior has changed and continues to evolve. In this report we will track the changes and migration between channels. We will do that 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 – approximately 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.

This means to get the full picture in our monthly channel update we need to look at the latest release of both reports. We will begin with the Final Retail Report from March and then move to the Advance Retail Report for April. This will also allow us to better track the consumers’ evolving spending behavior in terms of channel migration.

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

We’ll start with the March Final report. This was the first month of the crisis. The impact is very visible. First, we will look at some major retail groups. (Note: The Data in all graphs is Actual, Not Seasonally Adjusted)

It looks just like the Advance report projected a month ago. All 3 of the groups that are down in YTD $ were up at least 8% through February. March is the start of the traditional Spring lift, but not in 2020. If you can’t go out, you don’t think about a new car. It also doesn’t matter how cheap gas is if you aren’t driving.

The “Relevant” retail is the only positive and we know that it is being driven up by binge/panic buying of necessities. Food is the biggest driver. If you can’t go out to eat, you cook at home.

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

Observations – We’ll look at them in groups

  • Building Material Stores – This group typically has their biggest annual lift in Spring. It appears that this is unchanged. In fact, there is a significant increase over last year. Farm Stores are doing especially well with double digit increases over March 2019 and YTD. Although Sporting Goods stores are not included in this group, they have a similar Spring lift pattern. March Sales were up from February, but still down 8% vs 2019.
  • Food & Drug – This is where we see the greatest positive impact from “Stay at Home”. Supermarket sales are skyrocketing – +30% vs 2019. Drug stores are also experiencing a big lift as consumers stock up on necessities.
  • General Merchandise Stores – It’s about Food. Sales in $ Stores, Clubs and SuperCenters are all up 12+% vs 2019. Most traditional Department stores are closed and the shopping in many Discount Department stores is often limited to essentials. This has helped depress sales by -10% vs March 2019.
  • Office, Gift and Souvenir Stores – Most of these stores are deemed non-essential. You see the result.
  • Internet/Mail Order – “Stay at home” has further accelerated this channel’s growth. This will likely continue as the crisis has introduced many new consumers to online shopping.
  • A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores. Pet Stores generally account for 22 to 24% of this group’s total sales. The group was up 21% YTD in February. Although that pace has slowed slightly to +17%. Consumers are still shopping for essentials, like Pet Products in these outlets.

March was certainly a terrible month for retail spending, the biggest Total Retail $ drop in history. Binge/panic buying buoyed up the Relevant Retail sector but that is temporary and non-essential business closures became widespread by the end of the month.  We’ll see what a full month of shuttered doors brings. Here are the Advance numbers for April.

March was terrible, with the biggest spending drop in history. However, it was nothing compared to April. It is obvious that a full month of stay at home and business closing orders had a huge impact across the Retail Marketplace.

Total Retail – Total Retail spending fell $108B, -21.2%. This unprecedented drop is literally 3 times greater than the record decrease set in March. Remember, 2020 started off strong. Spending through February was up $60B, +6.6% versus 2019. Then came the COVID-19 crisis and now it is down -$82B – a $142B turnaround in just 2 months.

Restaurants – Spending was up $9B through February, +8.1%. In March Social Distancing began and many restaurants closed. Spending fell $18B, turning a $9B increase into a $9B decrease. April brought a full month of the restrictions and spending plummeted, down $31B, -49% vs 2019. Many restaurants are offering delivery and curbside pickup, but this can’t replace eating in restaurants. This group is now down $40B YTD.

Automobile & Gas Stations – If you can’t go out, except for necessities, then your car becomes less of a focus in your life. Buying a car is definitely less of a priority. Auto Dealers, both new and used, are trying to combat this with some fantastic deals and a lot of advertising. It doesn’t seem to be working. In terms of Gas Stations, prices are down sharply but as we have said, it doesn’t really matter much how cheap gas is if you’re not driving.

Relevant Retail – Less Auto, Gas and Restaurants – Many non-essential businesses were forced to shutter their doors in March. However, there was also a rash of binge/panic buying as consumers literally battled over toilet paper and sanitary wipes. The closure of restaurants, schools, and businesses, along with many people now working from home caused a big lift in home cooking. This drove up spending at Supermarkets, SuperCenters and Warehouse Clubs. These 2 factors overcame the impact of closures and Relevant Retail Spending in March was up 6.3% and YTD 5.9%, +$49B. Then came April, with a full month of closures. Plus, while grocery spending continued to be strong, the bingeing and hoarding slowed markedly. Spending dropped $43B, -13.4% from March and cut the YTD growth in half. However, the YTD, +2.1% for Relevant Retail is the only positive number in any measurement for any of the big groups on the entire graph.

Now let’s look at what is happening in the individual retail channels across America. In April, spending turned down in Relevant Retail. Let’s see if we can find any positives. These groups are less defined than in the Final Monthly reports and we will look all across the whole market, not just pet relevant outlets.

A full month of stay at home resulted in few “winners” and the impact on the “losers” is even more pronounced.

 Observations

You quickly see that the negative impact from a full month of stay at home, closures and reduced discretionary spending was widespread. Only 3 groups had positive numbers for April:

  • Nonstore Retailers – Stay at home has moved even more consumers to online shopping.
  • Grocery Stores – Stay at home means “eat at home”. Food sales continue to surge.
  • Bldg Materials/Garden/Farm – A near normal Spring lift as “at home” consumers also focus “on their home”.

The panic/binge buying of March ended in April as spending fell in all but 2 groups – Nonstore and Bldg Materials.

Regarding the Individual Large Channels

General Merchandise Stores – April also wiped out the overall YTD gains of GM stores. Regular Department stores are closed, and discount department stores continued their downward sales trend. Club/SuperCtr/$ stores had provided the only positive note. In April consumers dialed back their panic buying and Spending on discretionary items was also down significantly. This combination of factors drove sales down 6.7%, -$3.1B vs April 2019 in this largest GM group.

Food and Beverage, plus Health & Personal Care Stores – The initial March wave of binge/panic buying in March ended in April. The Grocery segment is still being driven by increased Food sales, up 14.5%, +$8B. However, sales in the Health, Personal Care group turned down, essentially wiping out the previous YTD gains. While Drug Stores are essential, many Personal Care stores are shuttered.

Clothing and Accessories; Electronic & Appliances; Home Furnishings – Some Electronic stores are deemed essential but most of the other stores in these groups are not. All saw a huge 60+% drop in sales but Clothing stores took the biggest hit, down 89.3%, -$19.1B from 2019. Even before the crisis, their online sales were growing, but not enough.

Building Material, Farm & Garden & Hardware – This channel has its biggest spending lift in the Spring. With many consumers sheltering in place, their focus has turned to their needs at home, including house and yard repair and improvement. Their spending pattern is the closest to “normal” of any brick ‘n mortar group. The Spring lift is apparently still “on” as their sales are up 7% over March, 2.6% over April 2019 and 5.6% YTD.

Sporting Goods, Hobby and Book Stores – Many Book and Hobby stores have been classified as non-essential, but most Sporting Goods stores are open. They also usually have a big spending lift in the Spring. However, with organized sports on hold, many parks closed, and non-essential travel discouraged, the need for products in the sporting goods arena is greatly diminished. This group was down 24% in March, but the decline increased in April – Down $3B, -48.7% vs 2019.

All Miscellaneous Stores – This group is mostly small to medium specialty stores – both chains and independents. While Pet Stores are essential, most other stores in this group are not. In March, YTD sales for this group were up solely because of a spectacular early year performance by the All Other Subgroup, which includes Pet Stores. In April this was not enough to overcome a full month of closures as Sales for All Miscellaneous Stores were down across the board.

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV businesses. In April, the ongoing movement to online accelerated. They were up 12.1% in March. Their April increase was 21.2%, +$13.1B. They took over the lead from Grocery Stores in all sales measurements regardless if it is in $ or % increase. Two things are significant. Unlike many other channels that had a big lift in March, their $ sales didn’t fall off in April. They were 6.7% higher. Also, their YTD sales are up 13.8%, exceeding their 12.9% annual increase in 2019. This early year lift bodes well for 2020 as much of their annual lift is usually driven by Christmas Holiday spending, which is still to come.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded along with their store sales in their regular channel. Whether they are up or down, their online sales are included in the totals.

Recap – April clearly shows the huge fundamental impact that the COVID-19 pandemic has had on the American way of life and consumer spending. The impact is also evolving as we saw the panic buying in March end in April. As the situation continues, spending will no doubt move back to a more routine pattern – a new normal. No one knows how long the current situation will last and what long term impact it will have on U.S. consumers’ spending behavior. We will continue to monitor the data and provide you with regular updates as the situation evolves.

A Final Note From the Census Bureau: Due to COVID-19 many businesses are operating on a limited capacity or have ceased operations completely. The Census Bureau has monitored response and data quality and determined estimates in the Advance Retail Report for April 2020 and Monthly Retail Report for March 2020 both meet publication standards.

Retail Channel Monthly $ Update – February Final & March Advance

The current health crisis, with its stay at home restrictions, has resulted in many business closures and generally disrupted the U.S. Retail Marketplace. As consumer spending behavior evolves, we will regularly track the changes and migration between channels. We will do this with data provided by the U.S. Census Bureau.

The Census Bureau constantly gathers sales data from retailers across the U.S. and publishes the results every month. Two reports are released approximately mid-month. They are the Advance Retail Sales report and the Monthly Retail Sales report. The Retail Sales Report is more detailed and includes data from all respondents, but it is published about 6 weeks after month end. The Advance Report is released at the same time and gives a quick look at the most recent month. The sample size for the advance report is smaller so it doesn’t drill as deep into the channels, but the results have proven to be statistically accurate with the final monthly reports.

We will publish monthly updates covering both reports. They will include:

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

Let’s get started with February. This data is from the Final Report and will show us the status of the retail market before the crisis. First, we will take a look at some major retail groups. (Note: All Data is Actual, Not Seasonally Adjusted)

February traditionally has the lowest retail spending of any month. We are just coming off of the holiday season, including Christmas closeout buying in January but it is still mid-winter, so the Spring spending lift has not begun.

As you can see, February spending went well with all of these groups having a strong performance vs 2019. The Year to Date numbers were also very positive. The relevant retail group (less Auto, Gas & Restaurants), which most impacts the Pet Industry, was up 5.7% YTD. This pace was significantly higher than 2019’s 3.7% annual increase.

Everything was looking good. Let’s see how some Key Pet Relevant channels were doing.

Observations – We’ll look at them in groups

  • Building Material Stores – This group typically has their biggest annual lift in Spring. It appears that they are getting an early start with a significant increase over last year. Farm Stores even had an increase over January. Although Sporting Goods stores are not included in this group, they have a similar Spring lift pattern. They are also off to a strong start after being down 1.6% in 2019.
  • Food & Drug – These stores tend to have more balanced monthly spending with less pronounced lifts. Supermarkets had a strong monthly lift vs 2019 which may reflect an early start on anticipated necessity buying.
  • General Merchandise Stores – From $ Stores to Warehouse Clubs. All had a similar pattern of increases. Once again, this undoubtedly reflects early stocking up on necessities in anticipation of possible future shortages.
  • Office, Gift and Souvenir Stores – They have the expected pattern. Sales fading after the holidays, with a more normal 3.6% increase for the month.
  • Internet/Mail Order – Their pattern is also “usual” as this segment continues strong growth.
  • A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores. Pet Stores generally account for 22 to 24% of this group’s total sales. A strong January was followed with an even stronger February, + 24%. This was a continuation of the 23% annual increase for this group in 2019. Pet Stores were surely a significant contributor to the big numbers.

February was certainly a strong month for retail spending. If we were not in the current health & business crisis, the numbers would bode well for a record spending year in 2020. However, we are definitely in an unprecedented situation. Let’s see the advance numbers for March.

First, the big spending groups.

This is certainly a big change from February.

Total Retail – Overall retail spending fell $36B, -7.0%. This is the largest one month year over year decrease since they began doing the survey in 1951. Sales were still up from February which gives us an indication of just how big the March lift is in a normal year.

It is readily apparent where the stay at home and business closing orders were having the maximum impact.

Restaurants – Spending for the month was down 25%, $16.4B from 2019. Remember this segment was up $10B, 8.8% YTD in February. One month turned it completely around. Obviously, delivery and pick up can’t make up the difference from the widespread ban on eating in restaurants.

Automobile & Gas Stations – Obviously, if you can’t go out, except for necessities, then your car becomes less of a focus in your life. Buying a car is less of a priority and it doesn’t matter much how cheap gas is if you’re not driving.

Relevant Retail – Less Auto, Gas and Restaurants – Although many non-essential businesses were forced to shutter their doors in March, overall, this segment showed strong growth in the month. There was a double digit increase in spending over February and sales vs March 2019 and YTD 2019 were also up sharply. Building upon the strong February lift, this group is up 5.3% for year to date spending over 2019. That is 43% greater than their 3.7% annual increase in 2019. Undoubtedly, much of the lift was due to binge spending on necessities, from hand sanitizer and cleaning products to toilet paper. However, the closure of restaurants, schools, and businesses, along with many people now working from home caused a lift in home cooking. This necessitated increased spending at Supermarkets, SuperCenters and Warehouse Clubs. This should continue but the binge shopping will fade as routines become more stabilized.

Now let’s look at what is happening in the individual retail channels across America. Spending is up in Relevant Retail. Let’s see which groups are winning and losing. These groups are less defined than in the Final Monthly reports and we will look all across the market, not just pet relevant outlets.

The positive or negative impact of the COVID-19 crisis is readily apparent.

Observations

Sales are either up or down, across the board – vs last month, last year or year to date, with 1 exception – Miscellaneous Stores. This group still has a YTD increase vs 2019 due to strong early year performance by the All/Other Misc. subgroup.

While the plus or minus rule is generally true, the reasons behind it are often somewhat cloudy. In most states businesses were deemed essential or non-essential, which dictated if and how that they can remain open. Food and drug stores are obviously essential everywhere, but many other groups fall into a grey area. Also, some general merchandise stores were allowed to stay open, but could only sell essential products. Let’s take a brief look at the results. When possible, will bundle them into larger groups.

General Merchandise Stores – Overall, their increase vs last year is slightly above normal at 5.7%, +$3.3B. SuperCenters, Clubs and $ stores all provide necessities and are showing a strong 12.7% increase. However, in many areas they are prevented from selling non-essential products. Department Stores are a mixed bag. The Discount Stores are open at least for necessities but the traditional Department Stores are closed, which drove a big decrease in spending.

Food and Beverage, plus Health & Personal Care Stores – Grocery stores are obviously essential and driven by the initial wave of binge, necessity spending. Their 27%, $15.5B increase over 2019 is the largest of any channel. Liquor stores are also essential, and they are showing plus numbers too. While Drug Stores are essential, many Personal Care stores are shuttered. The Health, Personal Care increase is higher than usual, but the lowest of any of any positive performing group.

Clothing and Accessories; Electronic & Appliances; Home Furnishings – Electronic stores are generally deemed essential but most of the other stores in these groups are not. Clothing stores took the biggest hit, down 52%, -$11.5B from 2019. We should note that even before the pandemic, consumers bought 30% of their clothing online.

Building Material, Farm & Garden & Hardware – This channel has its biggest spending lift in the Spring. With many consumers sheltering in place, their focus has turned to their needs at home. One of these is obviously house and yard repair and improvement. Their March sales are up 10.1%, +$3.5B over 2019.

Sporting Goods, Hobby and Book Stores – While many Book and Hobby stores have been classified as non-essential, most Sporting Goods stores are open. They also usually have a big spending lift in the Spring. However, with organized sports on hold, many parks closed, and non-essential travel discouraged, the need for products in the sporting goods arena is greatly diminished. Together, this group is down 24% versus March 2019.

All Miscellaneous Stores – This group is mostly small to medium specialty stores – both chains and independents. While Pet Stores are essential, most other stores in this group are not. The only reason that their YTD sales are up is because of a spectacular early year performance by the All Other Subgroup, which includes Pet Stores.

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV businesses. This channel is up 12.1%, +$7.3B in March. This puts them second only to Grocery in terms of the size of their March increase. This is no real surprise as spending has increasingly moved online in recent years. In fact, the 12.1% increase is actually smaller than their 12.9% annual increase in 2019. However, it is unusual, coming this early in the year, as much of the annual lift is usually driven by Christmas Holiday spending.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded along with their store sales in their regular channel. Whether they are up or down, their online sales are included in the totals.

Recap – The COVID-19 pandemic has had a fundamental impact on the American way of life and consumer spending. When you look at the winners and losers you see a common theme. The winners are focused on home and necessities. The losers are truly placed in the discretionary category, at least for now.

Much of the initial lift was undoubtedly caused by panic buying, out of fear. As the situation continues, spending will no doubt move back to a more routine pattern. No one knows how long this will last and what long term impact it will have on U.S. consumers’ spending behavior. We will continue to monitor the data and provide you with regular updates as the situation evolves.

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U.S. Retail Trade – 2016 $ales Update by Channel – Going for the Gold!

The Total U.S. Retail Market in 2016 reached $5.5 Trillion dollars – up $172B (+3.2%). This is significantly better than last year’s (+2.3%). In 2016, the decline in Gas prices slowed but still caused a $25B drop in Gas Station revenue. At the same time, the increase in Auto and Restaurant sales also slowed. For this report, we will focus on the “Relevant Retail” Total – removing Restaurants, Auto and Gas Stations from the data. This still leaves us with $3.3 Trillion to “divvy up”.

In a recent report we reviewed the 2016 sales performance of the Top 100 U.S. Retailers. That covered the “Headliners” but everyone can’t be a headliner. How are specific Retail Channels performing? We’ll start with a market overview and then work our way down.    (Base Data is from the U.S. Census Bureau Retail Trade Report)

Also, Please Take Note: As you are reviewing this detailed data and wondering exactly how does all this relate to Pet Products sales, consider these 2 facts from the 2012 U.S. Economic Census:

  1. Retailers other than Pet Stores generated 66.5% of all the Pet Products revenue in the U.S.
  2. Pet Products, on average, generated 1.94% of the total revenue of all non-pet stores that chose to stock them.

  • Restaurants (Food Service) – 12% of Total Retail – up 5.9%, which was about 25% less than last year’s (+8.1%).
  • Automobile Sales – almost 21% of the Total – Revenue also grew +4.1%, but 33% slower than 2015’s (+6.3%)
  • Gas Stations – 7.6% of the Total (In 2014 they were 10.3%) – ↓Down 5.7% from 2015. Gas prices hit bottom in February ‘16 and turned up, passing 2015 prices in November, but still down 11% for the year. (CPI from USBLS)
  • Retail, Less Food, Auto and Gas – Up 3.6% to $3.3 Trillion, about the same as last year’s +3.5%. It is 59.8% of the total U.S. Retail market and is growing 12% faster than the Total but still slower than Restaurants and Auto.

To put this year into perspective, let’s look at the overall performance in recent years.

The U.S. retail market has grown each year since 2012. It is just a matter of how much. In 2015 the precipitous drop in Gas prices had a huge impact on the overall market. Restaurants have shown accelerating growth but dialed it back in 2016. Auto sales are still strong but the growth is slowing. Our “Relevant Retail” Segment has been the most consistent. As expected, its 3.6% growth is below the 4.2% increase of the Top 100 Retailers. However, it will serve as a benchmark as we review the individual channels. Above 3.6%, a channel is gaining market share; Below 3.6%, they are losing share.

Now, we’ll slice up the U.S. “Relevant Retail” Channel “Pie”.

These are large slices of the U.S. Relevant Retail pie. Three divisions – General Merchandise Stores, Food and Beverage and Non-Store account for 58.8% of the total. This is up slightly from 58.6% in 2015. The increase is all from Non-Store Retailers. The other two major segments are losing share. All are very important to the Pet Industry. In our analysis of Pet Products Sales based upon the 2012 U.S. Economic Census, these three major divisions produced 59.7% of total Pet Products sales. Consumers spend a lot of money in Pet Specialty Stores but Pet Products are also “on their shopping list” in the outlets where they spend most of their money.

Because they are so huge, major Divisions of the market generally don’t show much movement in market share in just one year so the changes in General Merchandise, Non-Store and Food & Beverage are very significant. Each of the major divisions includes a number of sub segments. For example, General Merchandise includes Traditional Department Stores, Discount Department Stores, Supercenters and Clubs as well as $ and Value Stores. These specific retail channels can have even greater movement in share because this is the level that the consumer “views” when making their initial shopping choice. Change at this level is where any ongoing consumer shopping migration first becomes apparent.

Here is the Market Share change “Rule” for 2016: To gain 0.1% in Market Share your $ increase must exceed the amount generated by a 3.6% sales increase PLUS an additional $3.3B. Example: If a channel did $100B in 2015, they need to do $100 +$3.6 + $3.3 = $106.9B to gain just 0.1% in 2016 share. You will see channels with revenue increases that still lose share because the increase was less than 3.6%. It shows that even small changes in share are significant.

With that overview, we’re ready to drill deeper into the data. Let’s look at the 2016 performance of some of the specifically “Pet Relevant” Channels to see which are doing the best…and worst in gaining consumer spending. Eleven of the twelve were chosen because they generated at least 1% of the Total Pet Products (food & supplies) spending in the last Economic Census – 2012. I have also included Traditional Department stores on the list even though they have never truly embraced Pet Products. They have long been a fixture in the U.S. Retail Marketplace. Their continued decline, as consumers migrate to outlets which better fit their needs, has profoundly affected U.S. retail shopping as generally they were the “anchor” stores for the Shopping Malls across America.

We will use 2 separate graphs to illustrate the situation in these Pet Relevant Channels. The first will show the % change in sales in 2016 vs 2015. The next will “show us the money” by translating the % into $ gained or lost. Then we will have observations on each segment

Remember, you must be up at least 3.6% or you’re losing market share!

The leader comes as no surprise. However, 9 of 12 these pet relevant channels, including some huge ones, are losing market share. In the next chart, we’ll “show you the money!” Remember, the Total increase for the “Relevant Retail” Market was $116B and you must be up 3.6% PLUS $3.3B just to gain just 0.1% in Market Share.

The relative growth in the Internet/Mail Order Channel is even more pronounced when you look at the change in $ spent!

OBSERVATIONS BY CHANNEL

Look for: (% of Total Business from Pet Products for stores that stock Pet – 2012 Economic Census)

  • Internet/Mail Order – $490.9B, Up $57.2B (+13.2%) – 49.4% of the total increase for the $3.3T Relevant Retail Market came from Internet/Mail Order. The Consumer Migration to this channel is accelerating – gaining 1.25% in Market Share in just a year and passing SuperCtrs/Clubs for the #2 spot behind Supermarkets. (1.2% Pet)
  • Super Markets – $600.3B, Up $12.4B (+2.1%) This largest sub-segment is no longer holding its ground as it lost 0.3% in Market Share in 2016 and 0.5% since 2014. The Internet/Mail order channel has recently put increased focus on grocery products and is pushing very hard to become the leading retail channel. (1.6% Pet)
  • Department Stores – $56.4B, Down $2.5B (-4.3%). As stated, this segment is not particularly relevant to Pet but they are part of the best “visual” example of the channel migration of the U.S. consumer. 50 years ago they “ruled” the GM category. Then they started to slide as they failed to adapt to the changing wants and needs of the consumer. One small example of this is their failure to address America’s growing relationship with our companion animals. (N/A Pet)
  • Discount Department Stores – $98.2B, Down $9.3B (-6.5%). The rise of this segment started the downhill slide of Department Stores but their tenure at the top of GM was relatively brief as the SuperCenters/Clubs offered true 1 stop shopping. Now, they have begun a precipitous slide as consumers shopping for general merchandise items are clearly opting for either the internet or the one stop shopping in the Clubs/SuperCenters. (2.3% Pet)
  • SuperCenter/Club Stores – $450.6B, Up $8.8B, (+2.0%). These outlets with their broad mixture of grocery and general merchandise…at great prices quickly became a dominant force in the retail market. They were second only to Supermarkets in Market Share for many years. However, in 2016 consumers increasingly chose the value and convenience of the internet. Despite a $8.8B increase in revenue they lost 0.2% in market share and fell to third place in the race for the consumers’ $.  (2.4% Pet)
  • $ & Value Stores – $70.6B, Up $1.4B, (+2.1%). – A Great Value and easy to shop – 2 of U.S. Consumers’ major “wants”. This segment has shown steady growth in recent years but it flattened out in 2016. (4.3% Pet)
  • Drug Stores – $272.4B, Up $9.0B, (+3.4%). 60+% of the revenue comes from Rx Drugs. The growth in this segment is driven primarily by a 4.6% increase in Rx Prices over 2015. (CPI – US BLS) (0.3% Pet)
  • Sporting Goods – $46.3B, Flat +$0.0B, (+0.0%). A Minor player in Pet. There was some turmoil in the category with the closing of Sports Authority. Net for the year was “no gain”.(N/A Pet)
  • Home Centers – $271.7B, Up $17.9B, (+7.0%). Considering their size, these “project driven” outlets have never done a significant Pet Business. Two Top 10 U.S. Retailers – Home Depot and Lowe’s are driving the growth. (0.6% Pet)
  • Hardware – $23.3B, Up $0.2B, (+0.9%). Sales were flat most of the year. An uncharacteristic December sales “lift” produced 70% of the total year’s increase. (2.6% Pet)
  • Farm and Garden Stores – $44.4B, Up 0.3B, (+0.7%). This segment has been growing in recent years in both overall sales and in Pet. However, 2016 looks like a repeat of 2015 in that 100+% of the segment’s small sales growth came from Tractor Supply who reported a $0.55B increase in our Top 100 Post. (8.9% Pet)
  • A/O Miscellaneous Stores $77.9B, Up $7.0B, (+9.9%). Florists, Pet Stores, Art Dealers…are typical of the segments bundled into this group. Based upon the 2012 Economic Census, Pet Stores probably account for over 20% of this segment. These stores, whether chain or independent, tend to be small to medium in size. Their strong increase is evidence of another consumer trend – a move to a more personalized shopping experience. (Pet Stores 91%)

The chart below puts the Market Share of each of these segments for 2016, 2015 & 2014 in a visual format so that it is easier to appreciate the relative sizes. Growth in share since 2014 is indicated by a green box, a decline is boxed in red.

Now we’ll wrap it up with a brief summary and a detailed chart for future reference.

SUMMARY 

Pet Stores remain #1 for Pet Products. However, in the Overall Market, there are 3 Olympic Medalists. In 2016 the gold still belongs to Supermarkets. As you recall, in 2015 we saw the race for the Silver between SuperCenters & Club Stores and the Internet/Mail Order segment really “heat up”. In 2016 that race was all over. Internet/Mail order took over 2nd place in March and continued to pull away. They have now set their sights on the Gold, which has been held for many years by Supermarkets. Amazon, the largest retailer in the segment, has indicated that they will now actively pursue the fresh grocery business. In fact, they recently purchased the Whole Foods Supermarket Chain to facilitate that effort.

Supermarkets (18.2%) currently lead the Internet/Mail order segment (14.9%) by 3.3%. In 2014, the lead was 6.1%. Supermarket sales are increasing, but not fast enough. Unless something radical happens, Internet/Mail Order will become the #1 U.S. Retail Channel no later than 2019 and perhaps by 2018.

Overall, 2016 was similar to 2015 – with a 3.6% increase, up slightly from 3.5%. Once again the Internet/Mail Order Channel provided most of the excitement and 49.4% of the growth. The big increase by the A/O Miscellaneous Channel, which includes Pet Stores and other smaller format retailers, seemed to reinforce a less publicized consumer trend to more personalized shopping. After years of growth, the $/Value Stores segment may have plateaued but the big negative was the increasingly sharp decline in sales by Discount Department Stores – down -$6.9B in 2016 and  -$9.1B since 2014.

The U.S. Retail Market continues to grow and evolve as the consumer migrates to the channels which best fulfill their current wants and needs. This is not a new phenomenon. It has always been that way. Currently, the “Channel of Choice” is Internet/Mail Order and the movement is accelerating. Traditional Brick ‘n Mortar stores will not go away but they must adapt as “electronic” is on track to become the dominant force in U.S. Retail even sooner than we expected.

Finally, the Chart below contains Detailed 2014 > 2016 Sales Performance Data for over 30 U.S. Retail Channels.

Top 3 U.S. Retail Channels…Where did they come from?

In our report earlier this week we updated the race for the “Gold” by the Top 3 Retail Channels – Supermarkets, Internet/Mailorder and SuperCenters/Clubs. Over the past 20 years these Retail Channels have become increasingly important both to U.S. Retail and to the Pet Industry. In 2015 their combined sales were $1.46 Trillion, 45.8% of the total “Relevant” Retail U.S. Market (Less Restaurants, Auto and Gas Stations). In 2012 they accounted for 47.4% of all Pet Products sales in the U.S.

The retail marketplace is constantly evolving to better fulfill the wants and needs of the consumer. These key retail channels did not just magically appear fully formed in their current embodiment. They developed over the years, sometimes over decades or even over centuries. It is important to know their history to put their current standing into perspective and to speculate on the future. First, Supermarkets

grocery1

Supermarkets – A larger form of the traditional grocery store with a significantly wider variety of food and general merchandise items organized into aisles. They are generally located in residential areas with easy parking and extended shopping hours. They are also usually part of a chain of stores and feature relatively low prices due to volume purchasing.

In the U.S., Grocery Stores developed in the mid to late 1800’s, including A&P which was founded in 1859, but they all required a clerk to retrieve the consumers’ purchases. The first self-service grocery store was Piggly Wiggly, which opened in 1916. However, these early grocery stores did not sell fresh meats or produce. Combo stores were developed in the 1920’s. According to a study by the Food Marketing Institute in conjunction with the Smithsonian, the first Supermarket was King Kullens, opened on 8/4/1930 in Jamaica, Queens in New York City. A key feature was a separate parking lot, which made shopping more convenient. Other grocery store chains like Safeway and Kroger initially resisted the move to the supermarket format. However, the depression era consumers were looking for value and convenience so the supermarket format became the norm.

After World War II, automobile ownership proliferated and the “suburbs” were developed. Supermarkets followed their customers and rapidly expanded, usually as regional chains and generally located as the anchor store in “strip malls”.

In the late 70’s and early 80’s Supermarkets began broadening their appeal even more with the development of generic foods, which ultimately morphed into private label. They also radically expanded their selection of general merchandise items. This influx of higher margin items significantly helped their bottom line. Ultimately, they added food service, coffee shops, pharmacies and even bank branches to help fulfill the consumers’ desire for value, convenience and selection. Obviously, the store size also grew to accommodate these new features. Next SuperCenters…

supermkt

SuperCenters or Hypermarkets – These huge, high volume retail stores are basically a Supermarket combined with a Discount Department Store. The forerunner of this channel was Fred Meyer’s “one-stop shopping center” opened in Portland Oregon in 1931. Through the 30’s, 40’s and 50’s they kept adding departments and expanding the store size up to 70K square feet. The first modern sized Hypermarts, up to 160,000 square feet, opened in the 1960’s. Meijer, a Midwest chain opened the first “supercenter” in Grand Rapids, Michigan in June 1962 under the name Meijer’s Thrifty Acres.

In the late 1980s and early 1990’s the three major Discount Store Chains, Walmart, Target and Kmart “got on board”. Walmart opened Hypermart USA in 1987 which became Wal-Mart Supercenters in 1988. Target opened Greatland stores in 1990 which became the larger Super Targets in 1995. Kmart opened its first Super Center in 1991 which became Super Kmarts. By the mid 1990’s these Chains had firmly prioritized their efforts behind the SuperCenter one stop shopping format. Now Club Stores…

clubs

Warehouse Club Stores – These huge, no frills outlets offer a wide variety of grocery and general merchandise items at exceptionally low prices due to reduced margins. They appealed to both consumers and small business owners. Products are often packaged and sold in a larger quantity than in other outlets and all customers are required to pay an annual membership fee. The first Warehouse Club was Price Club, founded in 1976 in San Diego. 1983-84 was the true beginning for today’s major players in this channel with the 1983 founding of Costco, Kmart’s Pace (later sold to Sam’s Club) and Sam’s Club (Walmart). BJ’s Wholesale Club opened their doors in 1984.

Internet/Mailorder Defined – This segment really encompasses retail sales done over the phone, by mail or through the internet. They all have common elements. Every sale takes place without an in person, face to face interaction and is not “rung out” through a cash register in a brick ‘n mortar store. One other common element is a visual presentation of the product in a catalog, on TV or on the internet. It all started with…

mailorder

Mail Order – Amazingly enough this “channel” traces its beginnings to 1498 in Italy with the first known catalog – selling books. 1667 saw the first seed catalog in England. Even Benjamin Franklin got into the fray in 1744 with the first catalog in Colonial America – selling scientific and academic books. However, the world’s first “true” modern mail order service was begun by Pryce-Jones in 1861 in England, selling flannel and rugs. By 1880 he had over 100,000 customers and was rewarded with a knighthood in 1887.

In the U.S., Hammacher Schlemmer  (1848) is the earliest still surviving mail order business. However, they didn’t publish their first catalog until 1881. Montgomery Wards produced its first mail order catalog in August of 1872 and became the leading player. Richard Sears began selling watches by catalog in 1888 but by 1894 he had expanded his catalog to 322 pages and began to dominate the industry. In 1933 Sears produced its first annual “Sears Christmas Wishbook”, perhaps the most famous catalog of all time. We generally champion the internet for its huge variety of products. However, we should remember that from 1908 to 1940 you could buy an entire pre-cut house from Sears by mail order. They sold 75,000 of them which were shipped by rail then delivered in truckloads to your lot to be assembled by your friends and family – amazing. Mail order continued to flourish as a small but integral part of the U.S. Retail market until technological changes altered the retail landscape –TV and then, the internet.

tv-1

Sales primarily through TV is a subset of Mail Order Sales and became a part of the retail marketplace with the development and proliferation of cable/satellite TV. As the number of channels grew, the need for funding/advertisers grew. Many companies looked upon this as an opportunity to directly “reach” their consumers, bypassing traditional distribution channels. Ultimately, it has expanded to dedicated time slots on many networks and even whole networks whose sole function is direct retail sales. Finally, the Internet…

internet1

Internet /E-Commerce – Perhaps the single biggest change in the U.S. and in fact, the world in the last 20 years has been the rise of the internet. It has altered virtually all aspects of our life and most certainly our spending behavior. There are many aspects of business which are now handled through the internet but in our report our primary focus was consumer online shopping.

The precursor to the internet was ARPANET which allowed networking between academic entities. In 1984 CompuServe launched the Electronic Mall, the first comprehensive e-commerce service. The first web browser, WorldWideWeb was developed in 1990. Netscape 1 was created and released in late 1994 which included the first secure encryption of transactions. In 1995 both Amazon and eBay were founded and the race truly began. 2000 was a down year as the dot-com bubble burst. However, in 2003 Amazon posted its first yearly profit and the segment began to grow. Continued developments in both software and hardware, along with intense competitive pressure have made this channel easier, more affordable and much more accessible to a greater number of Americans. This trend continues as every year both internet coverage and online shopping increase.

I hope this expanded narrative helps put the Retail Revenue numbers into better perspective.

Click here to view the earlier post with all the “numbers”.

U.S. Retail Trade – 2015 $ales Update by Channel – Going for the Gold!

The Total U.S. Retail Market in 2015 reached $5.3 Trillion dollars – up $119B (+2.3%). The Market was significantly slowed by a precipitous drop in Gasoline prices resulting in a -$103B decline in revenue. For this report we will concentrate on the “Relevant Retail” Total – removing Restaurants, Auto and Gas Stations. This still leaves us with $3.2 Trillion to “divvy up”.

In a recent report we reviewed the 2015 sales performance of the Top 100 U.S. Retailers. That covered the “Headliners” but everyone can’t be a headliner. How are specific Retail Channels performing? We’ll start with a market overview and then work our way down.    (Base Data is from the U.S. Census Bureau Retail Trade Report)

First, Please Take Note: As you are reviewing this detailed data and wondering exactly how does all this relate to Pet Products sales, consider these 2 facts from the 2012 U.S. Economic Census:

  1. Retailers other than Pet Stores generated 66.5% of all the Pet Products revenue in the U.S.
  2. Pet Products, on average, generated 2% of the total revenue of all non-pet stores that chose to stock them.

ChannelUpdate-15-1

  • Restaurants (Food Service) – 12% of Total Retail – had an exceptional year, up↑8.1%.
  • Automobile Sales – 20% of the Total – also did well, up↑6.5%.
  • Gas Stations – 8% of the Total – ↓Down 19.2% from a year ago. Motor Fuels account for over 80% of the total revenue of gas stations. Gas prices are down 27% from 2014. (CPI from USBLS)
  • Retail, Less Food, Auto and Gas – Up 3.5% to $3.2 Trillion. This is 59.8% of the total U.S. Retail market and it is growing 50% faster than the Total but at only half the rate of Restaurants and Auto.

To put this year into perspective, let’s look at the overall performance in recent years.

ChannelUpdate-15-2

Gas prices had a huge impact on the overall market. The Auto and Restaurant segments have maintained strong growth rates. In fact restaurant sales growth is accelerating. In our “Relevant Retail” Segment, growth has slowed by 19% to 3.5%. This is also significantly below the 4.8% growth rate of the Top 100 Retailers. As we look at the individual channels, the 3.5% growth rate will serve as a benchmark. – Above 3.5%, a channel is gaining market share; Below 3.5%, they are losing share.

Now, we’ll slice up the U.S. “Relevant Retail” Channel “Pie”.

ChannelUpdate-15-3

These are large slices of the U.S. Relevant Retail pie. Three divisions – General Merchandise Stores, Food and Beverage and Non-Store account for 58.6% of the total. If you look back at our post on the channel migration of Pet Products Sales, you will see that in the 2012 these three divisions produced 59.7% of total Pet Products sales. Consumers spend a lot of money in Pet Specialty Stores but Pet Products are also “on their shopping list” in the outlets where they spend most of their money.

Because they are so huge, major Divisions of the market generally don’t show much movement in market share in just one year so the changes in the General Merchandise Stores and Non-Store “Divisions” are very significant. Each of the major divisions includes a number of subsegments. For example, General Merchandise includes Traditional Department Stores, Discount Department Stores, Supercenters and Clubs as well as $ and Value Stores. These specific retail channels can have greater movement in share because this is the level that the consumer “views” when making their initial shopping choice. Change at this level is where any ongoing consumer migration first becomes apparent.

Here is the Market Share change “Rule” for 2015: To gain 0.1% in Market Share your $ increase must exceed the amount generated by a 3.5% sales increase PLUS an additional $3.2B. Example: If a channel did $100B in 2014, they need to do $100 +$3.5 + $3.2 = $106.7B to gain just 0.1% in 2015 share. It’s not easy!

Enough “overview”! Let’s look at the 2015 performance of some of the specifically “Pet Relevant” Channels to see which are doing the best…and worst in gaining consumer spending. Eleven of the twelve made the list by generating at least 1% of the Total Pet Products (food & supplies) spending in the last Economic Census. Traditional Department Stores are also included although they have never embraced Pet Products. They have long been a fixture in the U.S. Retail Marketplace. Their slow fade, as the consumers migrated to outlets which better fit their needs, has profoundly affected U.S. shopping as generally they were the “anchor” stores for the Shopping Malls across America.

We will use 2 separate graphs to illustrate the situation in these Pet Relevant Channels. The first will show the % change in sales in 2015 vs 2014. The next will “show us the money” by translating the % into $ gained or lost.

Remember, you must be up at least 3.5% or you’re losing market share!

RetailChannelUpdate-15-4

The leader comes as no surprise. However, there are some huge channels that are losing ground. Now, I’ll “show you the money!” For your reference, the Total increase for the “Relevant Retail” Market was $108B and you must be up 3.5% PLUS $3.2B to gain just 0.1%!

RetailChannelUpdate-15-5

The growth in the Internet/Mail Order is even more pronounced when you look at the change in $ spent!

OBSERVATIONS BY CHANNEL

Look for: (% of Total Business from Pet Products for stores that stock Pet – 2012 Economic Census)

  • Internet/Mailorder – $432B, Up $46.6B (+12.1%) – 43% of the total increase for the $3.2T Retail Market came from Internet/Mailorder. The Consumer Migration to this channel is accelerating – gaining 1.1% in Market Share in just a year. (1.2% Pet)
  • Super Markets – $588.3B, Up $14.4B (+2.5%) This largest subsegment is barely holding its ground as it lost over 0.1% in Market Share. Right now the major competition is from SuperCenters/Clubs. However, the Internet is positioning itself to also become a factor. (1.6% Pet)
  • Department Stores – $58.4B, Down $2.2B (-3.6%). As stated, this segment is not particularly relevant to Pet but they are part of the best “visual” example of the channel migration of the U.S. consumer. 50 years ago they “ruled” the GM category. Then they started to slide as they failed to adapt to the changing wants and needs of the consumer. One small example of this is their failure to address America’s growing relationship with our companion animals. (N/A Pet)
  • Discount Department Stores – $106.3B, Down $1.2B (-1.1%). The rise of this segment started the downhill slide of Department Stores but their tenure at the top of GM was relatively brief as the SuperCenters/Clubs offered true 1 stop shopping. (2.3% Pet)
  • SuperCenter/Club Stores – $440.1B, Up $6.8B, (+1.6%). These outlets with their broad mixture of grocery and general merchandise…at great prices quickly became a dominant force in the retail market. They are second only to Supermarkets in Market Share. However, they “needed” to be up $15B in 2015. A Sales increase of $7B and they lost -0.3% in Market Share. (2.4% Pet)
  • $ & Value Stores – $68.8B, Up $3.3B, (+5.0%). – A Great Value and easy to shop. The recent steady growth in this segment is proof that American consumers want Value AND Convenience. (4.3% Pet)
  • Drug Stores – $263.3B, Up $11.5B, (+4.6%). 60+% of the revenue comes from Rx Drugs. The growth in this segment mirrors a 4.6% Increase in Rx Prices over 2014. (0.3% Pet)
  • Sporting Goods – $47.1B, Up $2.4B, (+5.4%). Minor player in Pet, had a strong first ½ in 2015.(N/A Pet)
  • Home Centers – $254.0B, Up $13.4B, (+5.6%). These “project driven” outlets have never done a significant Pet Business for their size. Two Top 10 U.S. Retailers are driving the growth. (0.6% Pet)
  • Hardware – $23.4B, Up $0.8B, (+3.5%). A strong first half – up 7.1%, then flat in the second half – the result – no gain…or loss in market share. (2.6% Pet)
  • Farm and Garden Stores – $44.6B, Up 0.4B, (+0.8%). This segment has been growing in recent years in both overall sales and in Pet. However, in 2015 it appears that 100% of the segment’s small sales growth came from Tractor Supply who reported a $0.4B increase in our Top 100 Post. (8.9% Pet)
  • A/O Miscellaneous Stores $70.4B, Up $3.6B, (+5.4%). Florists, Pet Stores, Art Dealers…are segments bundled into this group. Based upon the 2012 Economic Census data, Pet Stores probably account for almost 25% of this segment. In 2015, they held their ground against the big segments. (Pet Stores: 91% of Total revenue is from the sale of Pets & Pet Products)

The chart below puts the Market Share of each of these segments for 2015 & 2014 in a visual format so that it is easier to appreciate the relative sizes. Growth in share is indicated by a green box, a decline is boxed in red.

RetailChannelUpdate-15-6

Now we’ll wrap it up with a brief summary and a detailed chart for future reference.

SUMMARY 

Pet Stores are still #1 for Pet Products. In the Overall Market, there are 3 Olympic Medalists. There is no change for the Gold. Supermarkets remain the largest Retail Channel. However, the race for the Silver is heating up. SuperCenters & Club Stores are growing….but losing Market Share. The Internet/Mailorder segment is growing even faster than anticipated. Gaining 1.1% in Market Share in a $3T annual market in 1 year is definitely fast. In an upcoming report we’ll revisit and update this race between these three…which right now is focused on the Silver. However, you have to wonder what will happen when the internet turns its attention to grocery items.

Overall, 2015 was somewhat disappointing. The $ales increase was 19% less than in 2014 and without the incredible increase by the Internet/Mail Order Channel, there was little excitement or growth. There were a couple of good small points that relate to the Pet Industry – the continued growth of the $/Value Stores and the better than average increase in the A/O Miscellaneous Channel. (Pet Stores included).

Bottom Line: The U.S. Retail Market is growing and evolving as the consumer migrates to the channels which best fulfill their current wants and needs. Today, the “Channel of Choice” seems to be Internet/Mail Order and the movement is accelerating. As always, to survive and prosper, you must identify consumer needs and adapt.

Finally, the Chart below contains Detailed 2015 Sales Performance Data for over 30 U.S. Retail Channels.

RetailChannelUpdate-15-7

 

Pet Stores in the U.S. – A 25 year $ales history – 1987 to 2012

Pet Food and Supplies are sold seemingly everywhere today – 150,000 outlets of all kinds – clothing stores, supermarkets, even gas stations. However, when you look at the beginning of this colossal industry, you must think of the independent pet store as the foundation on which the massive “Pet Skyscraper” was built. We will take a look back to 1987 to see where this channel was and how it has evolved through the years.

The data in this report is courtesy of the U.S. Census Bureau – their Economic Census. The early years have only basic information but since 2002, more detailed information is readily available.

Let’s take a look at some data:

PetStores1
This little chart has a wealth of information but let’s make it a little easier. First with Total $ales:

PetStores2

  • Total Growth: $13.36B (+982.3%); Average annual growth rate = +10.0%
  • Real Growth: $6.83B (+502,2%): Average annual growth rate = +7.4%

Pet Food and Supply prices went up 79.8% from 1987 to 2012. This is an annual inflation rate of 2.4% which is lower than the overall U.S. inflation rate of 2.9%. However, this doesn’t tell the whole story. From 2007 to 2009 Pet Food and Supply prices increased an incredible 17.0%. (8.2% per year). Coming at the onset of the recession, this drove consumers to look for value. The result was that many consumers moved to other channels, resulting in a 15% drop in market share. Food and Supply prices have fallen or at least flattened out since 2009, but the rate of “real” sales growth in Pet Stores has slowed significantly.

No matter how you look at it, the overall sales growth since 1987 has been amazing! Let’s look at some key contributing factors to the retail $ales growth in Pet Stores.

PetStores3

  • 1987 to 1992 – The Number of Pet Stores grows significantly – from 5475 to 7150 (30.8%). The number of employees per store is about the same. Superstores were just getting started so these were mostly traditional stores. The amount of sales per store increases 50% as American’s love for pets truly begins to show. The result – sales basically double in 5 years – to $2.7B.
  • 1992 to 1997 – The initial rise of Superstores. Note the 37.1% increase in employees per store. They are being built and they generate significantly more volume per store – 76.6%. The result – sales more than double in 5 years and now total $5.5B.
  • 1997 to 2002 – Superstores continue to rise but at a cost to the independents. The net result is 692 fewer outlets (-8.3%). The Sales per store increases 50.8% which reflects the higher percentage of superstores. The total channel sales growth slows markedly from the spectacular rate of the previous the 10 years. The result – sales reach $7.6B – an increase of 38.2%.
  • 2002 to 2007 – The channel adds 1156 stores – a 15.2% increase – and reaches a record high number. Most of the new outlets are superstores. The per store sales volume goes up 30.5%, reflecting this change. The result – sales grow 50.3% to $11.4B.
  • 2007 to 2012 – Huge price increases…plus a major recession in this time period. There is no growth in the number of stores, but an even higher percentage are superstores. Sales reach $14.7B. The increase is 29.9%. This is the smallest in 25 years and exactly mirrors the per store sales volume growth. Also consider:
    • The overall pet food and supplies category (in all channels) grew 50% from 2007 to 2012
    • Actual Pet Store Sales from 2007-2012 was only up 7.7% – (Factoring in the huge price increases)
    • The result – Pet Store Sales grew but the channel had a rather a big loss (-15%) in market share.

Now that we have a good overall picture of the growth in the Pet Stores Segment, let’s open the door and go inside. We’ll look at the sales of some major product categories – number of stores, $ales, share of the stores’ total revenue. We’ll see if there is any “internal migration”. Detailed information is available since 1997 so that will be our major focus.

PET STORES: NAICS CATEGORY 45391

PetStores4

Let’s review each of these 6 product categories to see how they have fared from 1997 to 2012. To enhance the visual aspects of the analysis, we will divide them into 2 segments based upon sales volume – major and minor. Pet Foods and Supplies have always generated at least 80% of the receipts in Pet Stores. Here’s what their sales look like since 1997.

PetStores5

Pet Food became the largest category in 2007 and increased its lead in 2012.

  • Sales in 2012 were $6.72B; $4.66B (226.2%) since 1997.

During the same timeframe, overall Pet Store sales were up 167.3% so Pet Food Sales was a major factor in the channel’s growth. The introduction of numerous premium foods probably helped this category take over and hold the number 1 position. Sales of the premium foods were also less likely to be poached by other retail channels.

Pet Supplies was the biggest dollar producing category until Food took over in 2007.

  • Sales in 2012 were $5.16B; $3.1B (150.5%) since 1997.

The rate of growth for Pet Supplies is slightly below the overall channel rate, which is being pushed up by food sales. Growth is slowing in this product category because of the increased retail distribution in competitive channels – especially since the recession. Pet Supplies pricing has actually fallen since 2009, which indicates just how strong the competition is.

Next we’ll look at the “minor” volume product categories including Pets; Fish & Aquarium Products; Pet Care Services; All other NonPet Products. Book sales are bundled in with NonPet sales. Changing technology has depressed all Book Sales. Pet Book revenue in 2012 has actually fallen below 1992’s sales. In this section, changes in the number of outlets offering a product category may become significant.

PetStores6

Pet Sales – This “product” category is what the Pet Industry is all about. Although it should be noted that Dogs and Cats are by far the most popular companion animals and most are not acquired in Pet Stores.

  • Sales in 2012 were $0.36B; Essentially equal to 1997.

If you consider the increase in prices since 1997 (39.8%), the amount of pets being sold is actually down 27.0%. The number of outlets selling live pets has fluctuated up and down but is only down 5% from 1997. The only conclusion is that acquiring pets in pet stores is losing its popularity.

Fish & Aquarium Products – This too was a signature category. Aquariums have always been a mainstay of pet stores.

  • Sales in 2012 were $1.15B; $0.37B (47.4%) since 1997.

Sales dropped sharply in 2002 primarily due to the radical drop in store count. This was a strong growth period for super stores and a lot of independents carrying fish went out of business. Store count and sales bounced back in 2007 but have virtually zero growth since then. Flat sales in a growing market indicate this category has turned downward.

NonPet Products – This category can encompass a lot of ground – clothes, gift cards, hardware…almost always with a pet theme or in some way relating to Pets.

  • Sales in 2012 were $0.2B; $0.05B (33.3%) since 1997.

This is a very minor segment. Considering price increases, it has actually declined since 1997.

Pet Care Services – This puts a retail “face” on services, a fast growing segment of the total Pet Industry.

  • Sales in 2012 were $1.13B; $1.02B (927%) since 1997.

Making pet care services available in Pet Stores makes “total sense” and obviously the consumers have responded. This category contributed 10.8% of Pet Stores’ total increase in sales from 1997 to 2012. Services in Pet Stores grew 54.7% between 2007 and 2012. This was greater than every other category including food and actually greater than the overall Pet Products growth in the entire retail market. Pet Stores lost 5.9 points of market share between 2007 and 2012. Without the strong appeal of in store pet services, the loss may have been greater.

Now let’s try to get a visual of all the movement. The best way to compare these different categories is by looking at their relative share of the total. The following graph shows the market share attained by year for each of the Pet Product categories that we have reviewed. Let’s take a look. Then recap our Pet Store observations.

PetStores7

 

Here’s where the categories are in 2012 and their change in market share since 1997:

  • Pet Food – 45.7% 8.6 pts
  • Pet Supplies – 35.0% 2.5 pts
  • Aquarium Fish/Products – 7.8% 6.5 pts
  • Pet Services – 7.7% 5.6 pts
  • Pets – 2.4% 4.0 pts
  • NonPet Products – 1.3% 0.8 pts

Summary – 1987 to 2012

The Pet Store Channel has grown spectacularly since 1987, becoming the #1 channel for Pet Products in 1997 and holding that position for over 10 years. Then the recession pushed many consumers to more value conscious channels. Some of the major events in this journey were:

  • Creation and proliferation of Super Stores (provided the broad product selection the consumer demanded)
  • Development of Premium Pet Foods (often limited distribution, helped Pet Stores gain & retain market share)
  • Growth of “in store” Pet Care Services (another “plus” in sales which helps attract consumers to pet stores)
  • Stagnated sales in the Aquarium Fish hobby (still a large category, but the growth seems to have stopped)
  • Decline in the purchases of live pets (Not the largest source of Dogs and Cats, but birds, reptiles and small animals)
  • Growth of the internet (provides an even better selection of pet items than stores…and at a better price)
  • Major Recession in 2008 – 2009. (which brought to the forefront the retail pricing in the channel)
  • Radically Increased Competition as Pet Products are available in Outlets doing 47% of total U.S. retail.

Pet Stores, with 33.8% of the market currently hold the #2 position behind the total of All General Merchandise Stores. However, they are still the single biggest individual retail channel segment, with a substantial lead over SuperCenter/Clubs at 24.1%.

What does the future look like for Pet Stores? They are not significantly adding outlets and they are being attacked on all sides by SuperCenters/Clubs, The Internet, Supermarkets and even $ Value stores, who provide varying benefits of value, convenience and in the case of the internet, even wider selection.

The key for Pet Stores is the “personal” nature of pets. People are called “pet parents” for a reason. Pet Stores can and should provide the most personal experience for their customers. How many other outlets allow you to bring your pet into the store…actually try on a harness…sample a treat? Where else can you find a knowledgeable person to talk to about any issues that you’re having? However, they must also respond to the competition…a website, with online ordering (and in store pickup option); take a hard look at margins; run strong, well timed promotions – bundled and/or cross segment; use displays; develop or maximize a loyalty program with consumer specific deals and other  technological advances; conduct regular category management reviews to identify trends and maximize productivity; actively search for and add new products that give a “real” enhancement to the lives of Pets and their “parents”. It’s a battle for the consumer’s hearts and minds…and their Pet $. You must constantly fight hard to get and keep your share.