• Peak Opportunity Partners

‘Quarantinis,’ Bread Makers and Badminton: What’s Hot in Down Consumer Market

Wall Street Journal analysis finds households shifted from supermarkets to online and from Whole Foods to waffle irons as lockdowns hit.



U.S. consumer-spending patterns shifted in late March and early April as Americans adapted to continuing business closures and work-from-home orders to curb the spread of the new coronavirus.

A Wall Street Journal analysis of household-spending data found grocery-store visits retreated after initially surging in mid-March, when the shutdowns gained steam. In the more recent period, online grocery shopping and spending on alcohol delivery boomed. U.S. consumers shelled out more on bread makers, puzzles, board games, bubble makers and booze. They bought tomato seeds for their gardens and home-improvement supplies for their shelters. They snapped up printers and space heaters to outfit home offices and in many cases started online psychotherapy.


Meantime, they cut spending on clothes, though not so much on sweatshirts and pajamas. And consumers are still spending less overall than before the pandemic, as the online-sales boom remains too small to offset the bigger drop in in-person shopping.

The recent turn in consumer spending followed sharp declines in spending on hotels, restaurants, airlines and other travel in mid-March, along with increases in spending in general merchandise stores, gun and ammunition shops and marijuana suppliers.


These latest data don’t cover the last week in April, when authorities allowed some businesses to reopen in states including Mississippi, Colorado, Georgia, Oklahoma, Alaska, Texas and South Carolina, with social-distancing measures in place.


Here is a look at consumer-spending patterns in late March and early April.


HOARDING BOOM AND BUST

Grocery sales in stores nearly doubled in the period between March 12 and March 18 compared with the same week a year earlier—surging at rates that surpassed patterns around Thanksgiving, according to data from Earnest Research, which tracks trends in credit-card purchases (and therefore skew somewhat toward higher-income consumers).

The grocery-store buying frenzy came around the time Disneyland and Broadway theaters closed, many schools shifted to remote learning and the White House recommended Americans stop unnecessary travel and avoid bars, restaurants and groups of more than 10 people. The San Francisco Bay Area’s six counties issued the nation’s first stay-at-home orders to a large population on March 16. California issued the first statewide stay-at-home directive on March 19. Sales slowed quickly in the weeks that followed.


Change in weekly in-store sales volume vs. the same week a year earlier


The hoarding boom faded in late March and early April, though the bust played out differently at leading grocery chains. Foot traffic to Whole Foods and Trader Joe’s in early April was half of what it was a year earlier, compared with Safeway’s decline of just 17%, according to Placer.ai, a foot-traffic analytics firm that interprets location data from 30 million mobile devices in the U.S.

Stores located in denser cities where Whole Foods and Trader Joe’s are predominant—places hit quickest and hardest by the virus—might have seen a greater drop-off in foot traffic as shoppers shunned crowded areas and as social-distancing policies capped the number of shoppers allowed inside at a time. This might also be because both chains specialize in premium items, said Placer.ai Vice President of Marketing Ethan Chernofsky.


Change in foot traffic vs. the same week a year earlier

Online-grocery sales surged in the week after in-store buying fell, between March 26 and April 1, as more consumers stayed home. Online sales at warehouse clubs Costco Wholesale Corp. and BJ’s Wholesale Club Holdings Inc. were up threefold in the week between April 2 and April 8, compared with the same week a year earlier, while purchases at online grocers like Peapod and Amazon.com Inc. were almost 2.5 times higher.

“Online grocers could be one of the long-term benefactors of shifting consumer behavior,” said Michael Maloof, associate director of consumer-brand insights at Earnest Research. “Despite supermarket sales returning to near pre-Covid levels, online-grocery sales continue to accelerate astronomically,” he said, referring to Covid-19, the disease caused by the new coronavirus.





LIFE UNDER LOCKDOWN

Working From Home

Millions of Americans began working remotely in late March and early April, as more local authorities issued stay-at-home orders. The need to outfit home offices drove a miniboom in printer sales, said Marshal Cohen, chief analyst at the NPD Group Inc., a market-information and advisory-services firm that collects and analyzes point-of-sale transaction data. The work-from-home scramble also might be behind the sudden rise in heater sales, as people began working out of their basements and other unheated spaces in their homes.

Spending on clothes nosedived as consumers found that with nowhere to go, there was no need to get all dressed up. While apparel spending plunged across the board, sales of more comfortable items—sweatshirts and pajamas—fell much less sharply. “Consumers recognize now this is a weakness in our wardrobe,” said Mr. Cohen. “They’re realizing if you wear a sweatshirt three days in a row and throw it in the laundry you need another one.”


Eating and Drinking at Home

Many Americans boosted their booze buying. Sales on Drizly, an online alcohol marketplace that connects buyers with local merchants, surged nearly 17-fold in the week between April 9 and April 15, compared with the same week a year earlier.


One notable boom in demand on Drizly involved a conspicuously named beer. Corona orders started booming in mid-February, weeks before the broader pickup in sales, said Liz Paquette, head of consumer insights at Drizly. After surging throughout March, Corona sales growth began to slow in mid-April, relative to other Mexican beers, said Ms. Paquette.

Consumers seem to be embracing lockdown by making cocktails—or “quarantinis” as some were dubbed. A much bigger share of Drizly user spending now goes to spirits, compared with 2019—and a much smaller share on wine.


Sales of cocktail ingredients like garnishes, bitters and syrups are growing the fastest, relative to the company’s forecast for growth before the pandemic. Demand for gin, mezcal and various kinds of whiskeys has also been brisk.


Crazy for "Quarantinis"

People are eating their carbohydrates, too. Sales of bread makers leapt more than any other discretionary item besides necessities like toilet paper and hand sanitizer, says NPD’s Mr. Cohen—only to drop off sharply in the last two weeks. Spending on waffle irons and sandwich makers also has come down from a peak in early April.


Consumers are adapting other aspects of life to their new housebound reality, as well. Talkspace, an online psychotherapy company, reports that its new-user volume more than doubled between mid-March and April 26, compared with the same period in 2019. Scores tracking the average anxiety level increased by almost a standard deviation between March 15 and March 31, said a Talkspace spokesperson—a magnitude of increase that the company has never seen before in the four years it has gathered this data.


Playing at Home

How are consumers keeping busy once the Negronis are mixed and the sourdough is in the oven? Spending on online gaming (think hit games Fortnite or Minecraft) has soared, while growth in streaming services like Netflix and Disney+ has continued at its pre-coronavirus pace, according to Earnest Research.


Consumers also turned to more classic forms of amusement like jigsaw puzzles and board games in late March and early April, according to sales trends tracked by NPD. The need to entertain stir-crazy children was likely driving this increase, said Mr. Cohen, spurring demand for bubblemakers, badminton sets and other outdoor toys and sporting goods. However, sales of both indoor and outdoor toys snapped back by mid-April.


Some consumers are channeling their spending impulses into backyard recreation. Jamie Mattikow, president and chief executive officer of seed company Burpee, said sales of seeds have been growing at an annual rate two to three times higher than before the pandemic.

“We’ve seen particularly strong growth in tomatoes, peppers, squash and beans,” said Mr. Mattikow. “During the last recession, we definitely saw a spike in sales but nothing like the magnitude we’ve seen in the last month or so.”

The gardening craze is part of what Earnest Research’s Mr. Maloof said was a larger do-it-yourself boom. Sales of home-improvement goods—a category that includes hardware, building supplies, nurseries and paint—have risen at double-digit rates since mid-March, compared with the same period a year ago.


Change in home improvement-related sales vs. same week a year earlier


NPD’s Mr. Cohen chalks this up to the “home-centric nature” of our daily lives. “That’s number one. Number two is just trying to keep busy—I mean I’ve never seen so many people building treehouses in my life,” says Mr. Cohen, who lives in Long Island, N.Y.



CONSUMER-SPENDING SLUMP

Consumer spending overall, however, remains depressed. Some of this reflects the drop in in-person shopping, which typically accounts for a much larger share than online purchases. But some of it stems from worsening consumer finances due to layoffs. Nearly 27 million people have filed for unemployment benefits since mid-March. A survey conducted by LinkedIn, an online job marketplace and networking site, on April 1-10 found that 28% of respondents reported a drop in income or wages in March.

More than half said they cut back on spending, the survey found. Around one-third of respondents said they had already dipped into their savings.

Source: The Wall Street Journal

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