COVID-19 Crisis: Online Grocery Sales Hit Record Highs

PMG is providing near-daily briefings to track the novel coronavirus outbreak and its impact on the economy and business world for our customers. The briefing for May 13th, 2020 was sent to PMG customers this morning, and can be found below.

This past weekend was Mother’s Day, and despite the country’s current crisis, consumers still spent more on their moms than in recent years. According to analytics firm Profitero, one of the most searched terms last week was “Mother’s Day Gifts.” Furthermore, the National Retail Federation reported an 8.5% spike in Mother’s Day spending compared to the previous year. It seems that these extreme circumstances have prompted us to miss our moms more than ever, making the holiday that much more meaningful and important this year.

Now, onto this week’s briefing.

For the sixth week in a row, publishers have seen an increasing drop in social engagements around COVID-19 content. According to Brandwatch’s Weekly Bulletin, the average number of social engagements fell by 13% this week—the third-largest drop recorded so far. In like manner, the volume of content referencing COVID-19 has continued to steadily decline, dropping by 9% last week, compared to similar drops of 8% and 10% in the two weeks prior. Instead, consumers are now seeking out good news and positive stories to counter the influx of pandemic-related news coverage. In April, feel-good subreddits were up 29% compared to February; including /r/wholesomememes, /r/UpliftingNews, and /r/MadeMeSmile. 

Despite recent store openings, consumers continue to make the majority of their purchases online. According to a recent survey from Ipsos and USA Today, 41% of respondents said they had shifted more of their shopping from physical stores to online in April—up from only 13% who had done this by mid-March. Online grocery sales hit a record high in April, and grocery delivery and click-and-collect services grew 37 percent compared to March.

However, as supply and demand would have it, grocery prices also jumped by 2.7% in April as a result, the largest spike since 1974. Even after consumers come out of quarantine, they still plan to rely heavily on ecommerce. According to Global Web Index, 43% of internet users say they will shop online more frequently post-outbreak, 40% plan to buy more things online for home delivery, and 32% plan to visit stores less often.

Those whose finances have been significantly impacted by the economic downturn are now making purchase decisions based on value.This rings especially true in the food and grocery industry. According to research from Inmar Intelligence, participation in digital coupon programs has risen 93% since March 1st across the top 30% of national supermarket chains. 

After weeks of closure, several states in the U.S. are easing lockdown measures and allowing certain nonessential businesses, such as clothing stores, to reopen brick-and-mortar locations with increased safety measures in place. This includes Macy’s, which opened 68 stores on May 5th, Ulta Beauty, which opened 180 stores this Monday, as well as Urban Outfitters, Free People, and Anthropologie. 

Furthermore, TJ Maxx has reopened locations across the country, and hordes of shoppers flooded the stores, many of whom disregarded the social distancing recommendations implemented by the stores. While Nordstrom has yet to reopen any stores, it did announce plans to permanently close 16 locations. Neiman Marcus has officially declared Chapter 11 bankruptcy and is the largest U.S. retailer to collapse amidst the pandemic. Neiman Marcus temporarily closed all 43 stores in mid-March and had reopened ten for curbside pickup within the last few weeks.

As brick-and-mortar stores are allowed to reopen, many retailers are adjusting to significant changes in consumer shopping patterns. To no one’s surprise, since the outbreak began, consumers have drastically reduced in-store visits. According to a Capgemini COVID-19 study, the number of consumers who had high levels of interaction with physical stores has dropped 35% compared to before the pandemic. 

Out of those that do plan to visit stores, the majority said they’d prefer to shop with retailers that adopt in-store safety practices, including altered store layouts to encourage social distancing, mobile-based self-checkout systems, and contactless payments at the point of sale. Finally, consumers are most likely to shop brands that show a community-minded sense of purpose, and 53% said they’d expect to see this brand commitment over the next six months to nine months.

For the first time, skincare sales have surpassed makeup sales, according to NPD Group, as more consumers are altering their daily makeup regimen while staying at home. For some consumers, why spend more money on makeup when they have nowhere to go? Overall, sales of higher-end beauty products fell by roughly 14% in Q1. However, the uptick in the sales of skincare brands and products have helped offset the losses in makeup sales for various companies, including L’Oréal brands.

As more stores and restaurants begin to reopen, it will be interesting to observe the beauty trends that unfold. For example, if shoppers continue to wear masks, some industry experts have suggested we may see an increase in sales of eye makeup products while seeing a decline in lipstick sales. If working from home continues much longer, however, makeup sales may remain weak. Additionally, as consumers are strapped for cash, long term, we may begin to see shoppers switch from high-end cosmetics and skincare products to mass-market products, as was the case after the 2008 financial crisis. 

To try to stimulate sales and engage with customers, brands are exploring different tactics and markets. For some brands, SMS text messaging is making a comeback as the majority have a 100% open rate due to consumer’s dislike of having unread messages. However, brands are still keeping the current climate top of mind, focusing more on the product qualities and benefits and less on promotional content in their texts. On a lighthearted note, other brands are participating in TikTok’s social gifting campaigns in which users can virtually send promotional “gifts” from brands to their friends.

And lastly, more beauty brands are beginning to tap into gaming and esports. MAC Cosmetics, for example, recently launched its second collaboration with the popular game “Honor of Kings,” which sold out in ~24 hours in China. The collection is now global, including in the U.S. beginning May 21st. The relationship between fashion and gaming is more competitive, but the role that beauty plays in the space is only beginning.

The airline business continues to suffer, losing almost $400M every single day. The average number of passengers on a Delta commercial flight right now is 23, and airlines have cut their flight schedules by as much as 90%. Despite a $25B federal bailout as part of the coronavirus relief bill, industry analysts believe airline travel will continue to struggle for quite a long time. In order to preserve cash, airlines are cutting costs anywhere they can, including discouraging customers from seeking refunds, offering vouchers for future travel, encouraging employees to accept fewer hours or lower pay.

Things are looking just as bleak for the hospitality industry as well. Uber has now laid off 3,700 workers, about 14% of its global workforce. Uber’s announcement came just after Lyft laid off 17% of its workforce last week, and Airbnb cut 25% of staff — three of the many travel brands cutting costs and staff in order to stay afloat.

As consumers think about their postCOVID lives, many remain wary of travel. According to a Global Web Index multi-market study, just under 25% of consumers say they’re likely to take fewer vacations after the outbreak, and 30% say they’ll partake in local “staycations” or fewer trips abroad in general. Accordingly, a recent survey by the International Air Transport Association (IATA) found that 60% of people would wait for two months before booking flights after the coronavirus is contained, and 40% said they would wait for at least six months.

Despite reservations about travel, online mentions of staycations and camping are on the rise. According to the BrandWatch Weekly Bulletin, there were 375k social authors discussing camping plans in March and April, and the conversation is currently up 14% in 2020 compared to the average for January to April in the four years prior. Furthermore, “staycation” conversations are up 41% in 2020 compared to January – April in the years 2016-2019, with 51k mentions of a trip to the ‘Happiest Place on Earth,’ 45k mentions of the beach, and 8k mentions of road trips. 

In order to offset any potential production issues, Fox has proactively shifted some of its scheduled summer programming to the fall. In addition to implementing a more pandemic-proof schedule, the media company hopes that the NFL will reignite the ad sales marketplace, which has been struggling since live sports were first canceled in March. So far, the company is seeing significant advertiser interest in NASCAR, which resumes its season on Sunday.

Comedians are navigating the pandemic by launching a new wave of virtual comedy. Brandwatch Weekly Bulletin reports a steep spike in mentions around virtual comedy events since March 9th. ‘Parks and Recreations’ held a Zoom reunion at the end of April to raise money for COVID-19 relief, following in the footsteps of Saturday Night Live’s WFH episode earlier in the month.

Virtual live events continue. Condé Nast’s Bon Appetit hosted a star-studded benefit dinner party on Instagram Live. The virtual party streamed live on @bonappetitmag’s Instagram and featured stars such as Jonathan Van Ness and DeAndrew Jordan. The event promoted Instagram’s new donate button, encouraging viewers to donate to the Lee Initiative, a charitable group that’s been turning restaurants across the country into relief centers.

While the unemployment rate has met the CBO’s prediction for Q2, reaching 14.7%, the real unemployment rate could soon reach 25%, according to Treasury Secretary Steven Mnuchin. After a devastating month for American workers in April, the worst since the Great Depression, only one industry contributed a significant number of new jobs: general merchandise stores. Overall, they have increased their payrolls by 93.4K positions as the need for groceries and at-home necessities increased. 

One might expect the healthcare industry to have grown, but employment in healthcare actually fell by 1.4M as hospitals reduced elective surgeries, and Americans avoided going to their doctors and dentists for regular appointments. Although the number of unemployed is a daunting figure— to say the least — there is a small silver lining in the fact that the majority of those unemployed reported being temporarily laid off, as opposed to permanently losing their job.

As unemployment figures continue to rise, so do consumers’ expectations of losing their jobs. At the end of April, 20.9% of Americans indicated that they anticipate losing their jobs this year, an all-time high since the pandemic began. Additionally, consumers are rather pessimistic about housing prices, with more than 44% of consumers expecting them to decline. This is the first time since the Federal Reserve Bank of New York began its survey back in 2003 to see an expected decrease — rather than an increase — in house prices over the next year. But while prices may drop, mortgage credit availability has hit an all-time low since 2014 as lenders are warier of consumer’s financial stability.

Lastly, to round out the topic of personal finances, car sales have surprisingly increased after a steep decline. In the final weeks of April, sales for auto seller AutoNation were off by only 20%, according to the company’s chief executive. This can most likely be attributed to the fact that consumers are avoiding shared public transportation to protect themselves against the virus, but regardless, the numbers are still surprising.

While the sales pipeline is still sluggish compared to preCOVID, it is improving week-over-week. The number of closed business deals hit an all-time low during the week of April 6th at -36%; however they have slowly improved since. During the final week of April, they were only down 19%. Additionally, open rates of marketing emails continue to rise, up 20% compared to preCOVID. Even as businesses continue to send more emails, engagement from recipients is still strong, which provides a more optimistic outlook for May. While email marketing has always been an important channel to connect with customers through, more businesses have been leaning into the tactic in recent months.

In tech news, Salesforce recently launched its new website, Work.com, to help businesses and communities safely reopen. Its services range from contact tracing and emergency response management to employee wellness assessments and shift management. The site also hosts a Command Center for business leaders to gain a comprehensive understanding of their company’s readiness across multiple facets. 

But as the nation begins to reopen, some companies are considering whether working remotely may be more productive and cost-efficient. Twitter, for example, is allowing its employees to work from home permanently, while Google, Facebook, Amazon, and Slack are also giving its employees an extension. Those who are already experienced in working remotely are less affected than those who are new to the practice.

According to Slack, nearly one-third of workers who have begun working remotely in the past month or so say it has negatively impacted their productivity. In contrast, only 13% of experienced remote workers say the same. In recent weeks, people are also having more, and larger, meetings, with meetings of over eight people growing by 14% in March. Lastly, employee surveillance software has seen a spike in sales as more employees cannot be kept in close view.

For ActivTrak, for example, inbound requests have increased 3x in recent weeks. Over these next few weeks, it will be interesting to observe if, how, and when companies begin taking the leap of faith to return to the office.