“Throughout this crisis, we have deepened our relationship with American consumers and introduced millions of them to our digital fulfillment services,” Target’s chief executive, Brian Cornell, said on an earnings call.
These advantages have won the stores new customers who might have previously preferred local grocers or hardware stores. Target added 10 million new digital customers in the first half of this year.
“It’s creating a massive opportunity, and if they are smart about it, this is going to help them retain those customers and continue to fuel their growth,” Mr. Mantis of 1010Data said.
Whether the retailers are able to sustain this growth will depend partly on how much disposable income their customers have. The stimulus payments and $600 weekly increase to unemployment benefits meant that millions of unemployed Americans were still able to buy necessities at stores like Walmart and Target, and in some cases a few extras, like toys to keep their children entertained at home. But with the $600 payments now stopped, and Congress still deadlocked on an additional aid package, some shoppers may have to tighten their belts.
In contrast, many people who have held onto their jobs and are now working from home full time have found themselves with more discretionary income than ever before. People who might have spent money on dining out, travel or event tickets are now redirecting those funds toward home improvement projects like buying a hot tub, building a home movie theater, redecorating a home office or building a guest cottage.
“Sales were driven by a consumer focus on the home, core repair and maintenance activities, and wallet share shift away from other discretionary spending,” Lowe’s chief executive, Marvin Ellison, said on Wednesday in an earnings release.
The recent sales growth of big box stores is good for the economy, keeping supply chains strong and helping ensure job security for the millions of people the retailers employ, said Matt Williams, managing partner at the Brand Federation, a consulting firm.
“For the economy, it means consumers are still spending, maybe not at the same volumes and on the same things as in the past, but they’re still spending,” Mr. Williams said. “That’s encouraging.”
But it comes with a cost, particularly for small businesses, whose survival has long been threatened by the increasing dominance of corporate retailers.
While large retailers like Walmart and Target were deemed essential businesses when the pandemic hit, many small stores were not, and they were forced to close their doors, leading to lost revenue and wasted inventory. Many small businesses did not have a robust e-commerce business before the virus struck, and they have lost customers while they struggle to adapt.
People are also less likely to start their own businesses during this period, unable to muster enough capital or fearful that their businesses will fail in such uncertain times, said Ryan Gellis, founding partner of RMG Media, a digital commerce agency.
“It’s part of why a pandemic is a tragedy,” Mr. Gellis said. “It is not just the loss of life, but the loss of people’s ability to run their own businesses and pursue that American dream.”
Source: The New York Times