Within just a few months, the COVID-19 pandemic has drastically altered the United States’ economy with devastating implications for both small and large businesses. The temporary closing of non-essential businesses like retail stores, coffee shops, bars, and restaurants has put millions out of work. Because of rampant unemployment and reduced income, consumers have shifted their buying patterns to reflect their newfound financial circumstances.

Retailers facing hard hits to their businesses are worried that these new emerging patterns in consumer spending may continue long after the pandemic disappears. With a nation of consumers forced to adopt online shopping habits, what exactly will happen to brick-and-mortar stores? Although the future is uncertain, economists’ predictions may help to shine a light on forthcoming retail trends.

Generational Shopping Patterns

Over the years, economists have accurately predicted shopping patterns based on evidence from generational patterns. Each generation shops for goods and services differently, which is due to varying factors. For example, the on-demand services of retail giants like Amazon fuel online shopping for millennials. However, older generations more widely prefer to shop at brick-and-mortar stores.

Millennial shopping has been closely monitored for retail and economic research, as their habits commonly predict forthcoming trends. During the COVID-19 pandemic, for example, researchers are seeing trends in which millennials are shopping more frequently online and less frequently in store. Furthermore, millennials are taking a deeper look into where they shop. Compared to other generations, they are further shifting the items they purchase and the locations they purchase from.

The Difference in Retail Sectors

Generational shopping patterns also influence which retail sectors are affected most. More than half of millennials are cutting their spending and strictly reevaluating where their money is going — compared to only 42% of Gen-Xers. This means the sectors in which millennials spend more of their money, such as clothing and electronic stores, are facing some of the biggest declines in sales.

In fact, a study conducted by the New York Times showed that clothing stores faced one of the heaviest blows in the economy, with sales falling over 50%. Similarly, auto and auto part sales fell more than 25%, while gas fell 17% — both due to a decline in travel and commute. These numbers show that various retail sectors have been greatly affected and are most likely to see further declines in revenue as the pandemic continues.

Recent Retail Trends

Several unfortunate trends are being seen across the economy and across retail stores in particular. Millions of people are filing for unemployment while thousands of stores are being forced to close. In fact, a recent report by the U.S. Department of Labor shows unemployment insurance claims approaching the 10-million mark. Additionally, large retail giants like Macy’s were forced to temporarily lay off 125,000 workers, while GAP has had to furlough 80,000 workers.

These mass unemployment claims are hurting entire social classes. The middle class has seen vast amounts of unemployment due to the pandemic, while many minorities and women working in retail stores have faced the same fate. Macy’s recently informed the public that they would reevaluate résumés once stores were able to be reopened — possibly diminishing the chances of previous employees to get their jobs back.

Additionally, retail trends have shifted in the direction of bulk shopping. Because many consumers fear that they will run out of necessities such as toilet paper and food, they are stockpiling goods and hoarding them in their homes. For example, warehouse giant Costco reported an increase in sales by 13.8%, according to the U.S. Chamber of Commerce. Also, on-demand shopping patterns are changing. Online shopping previously incentivized shoppers to pay instantly and receive goods within a few days. Now, necessities like toilet paper can take two weeks or more to be delivered.

On-demand buying is yet another trend that retailers will have to rethink. Rather than purchasing inventory as often as before, they are now purchasing it with an even higher focus on supplying demand. Retailers are looking to carry less inventory and instead prefer buying goods to sell when they see a high want or need. The pandemic has given new dimension to on-demand buying for retailers, forcing them to reevaluate their supply chain operations.

Lastly, retailers may create more interactive online experiences in the future. Some stores may even decide to go fully online by enhancing how customer interactions via online sales associates. With many people hesitant about returning to large crowded places right after the pandemic, retail stores can shift many products online and incorporate new features like virtual salespeople or product demonstrations.

Dire Effects

Except for portions of the industrial market, there are many adverse effects to real estate during this unexpected economic downturn. Before the pandemic, the majority of the product categories were quite healthy including retail, office, hotel, industrial, and multi-family. Different than in recent years, lower interest rates alone are not helping the market. Consumer confidence and job growth are very weak which is translating to fewer purchases of real estate.

Retail stores are quickly and drastically losing revenue. Unemployment is incredibly high, and consumers are searching for unique ways to stay economically afloat. Although new trends can provide insight into the future, there is little prediction on what will happen after the pandemic. Online shopping may surge while in-store shopping could decline. Ultimately, many retailers must answer how to adapt their concepts to corona fears.

Quality Commercial Real Estate Investment Advice

Staying on top of current trends and seeking quality and trusted advice will best help you navigate economic shifts now and in the long term. The commercial real estate professionals at Acquisition Consultants will use our 25+ years of local market expertise to compile a list of solutions to fit your needs and goals. To keep the stress out of these times and learn more on how we can help you, contact us today.

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