Recovery Decelerates as Consumers Opt to Stay Home
Abby Long is the Senior Managing Editor at PMG.
The following is included in PMG’s Summer Briefing Series, exclusive content and commentary provided to PMG clients 2/week on the marketing and business news that’s making headlines.
What a time to be alive. I can’t recall a season when so many different pressing issues dominated the news cycle. The Black Lives Matter movement, the pandemic, returning to school, tech vs. journalism, free speech and civil liberties, the Facebook ad boycott, China-US relations, and several more that escape me. Amid all this, I hope you’re finding helpful ways to unwind and unplug.
For today’s briefing, we’re focusing on the midsummer consumer behavior and business news that’s shaping sectors.
Dining & QSR
Entertainment & Media
Hospitality & Travel
This week, the famed Brooks Brothers declared bankruptcy and will close 51 stores, citing rent and poor sales as shopping malls — indoors and open-air — have yet to see a pick up in foot traffic since reopenings across the US began. Just days before, Lucky Brand also filed for bankruptcy, announcing it would immediately close 13 stores. Ascena Retail Group, which owns brands such as Ann Taylor and Lane Bryant, is rumored to be preparing bankruptcy filings as soon as this week.
From CBS News, “traffic at retail and food establishments ticked upward for most of April and May as businesses reopened, emboldening people to venture outside, but it has started to drop again since mid-June, marking one of the first periods of deceleration since city and state lockdowns began. That’s according to SafeGraph, which married anonymized cell phone data with its database of business listings and points of interest.”
In new Morning Consult data, it appears that the US response to the coronavirus is having downstream effects on American-based brands overseas. From the report, “forty percent or more of adults in each [European] market (including 49 percent of Germans) believe American companies are not doing enough in response to the coronavirus, with Italians significantly more satisfied with American brands’ responses to the outbreak than their French or UK. peers are.”
This dismal outlook has affected favorability and sales, with net trust, net favorability, NPS, and community impact declining for many companies that “identify as uniquely American, but play on a global stage.”
Source: Morning Consult
According to Retail Dive, specialty stores, including Bath & Body Works, HomeGoods, Gap, Athleta, and Marshalls, were the clear winners of the Fourth of July holiday week, thanks to aggressive price promotions. (Of note, Bath & Body Works announced Wednesday that it would be closing 200 stores over the next two years as the brand downsizes its brick-and-mortar footprint.)
According to reports, most performance boosts from the holiday were promotion driven and will likely remain unsustainable as states see cases rise and more people stay home. Search interest in off-price retailers with no ecommerce operations experienced a 16% boost over the holiday weekend, with department stores largely missing out on that consumer attention.
From Retail Dive, “week over week, on average… department stores declined 5%, suggesting the boost from the April stimulus checks diminished over time, while the reopening progress stalls in several states as COVID-19 cases peaked in the past weeks.”
Related: eMarketer reports China continues to lead the pack in driving online sales.
The comfortability and willingness to shop at malls seem to fall along partisan lines with Morning Consult reporting that 41 percent of Republicans say “they would be comfortable shopping at a mall, compared with 28 percent of independents and 23 percent of Democrats.”
Spas, tanning salons, and massage centers were permitted to reopen in New York’s Phase 3 reopenings under new requirements though consumers are still expressing concern in going to public spaces.
Convenience remains the most important attribute when shopping during COVID-19 as consumers face record uncertainty, limited options on the shelf, and economic turmoil. According to a recent McKinsey study, “more than 50 percent of consumers report spending more on convenience to get what they need, with ‘convenience’ increasingly being defined by contactless shopping, on-demand fulfillment, and inventory availability.”
As a result of this hyperfocus, we see brands make digital transformation a top priority. Just days ago, Walmart unveiled its Amazon Prime competitor, Walmart+ at $98/year, which includes same-day delivery of groceries, fuel discounts, and other perks. From Recode, “while COVID-19 panic-buying helped boost Walmart sales to record highs earlier this year, its US ecommerce presence is still only around an eighth the size of Amazon’s. Today, Amazon is valued at $1.5 trillion, while Walmart is worth $337 billion. And Amazon Prime is a big reason why.”
The US service sector rebounded in July, almost returning to its pre-COVID-19 levels, but a resurgence in coronavirus cases has forced some establishments, including restaurants and bars, to close again, threatening the chances of a quick recovery.
The food delivery economy continues its consolidation with Uber announcing its all-stock deal to acquire Postmates. Given Postmates’ smaller footprint in the market, no antitrust investigations are likely to be required, versus Uber’s exploration of acquiring Grubhub in June. According to Second Measure, only 12% of Uber Eats customers also used Postmates in Q1, signifying that Uber will likely net new customers it was previously missing out on.
“Data from restaurant reservation service OpenTable show a similar trend to retail, with the level of sit-down dining patrons picking up in early June but dropping again at the end of the month.”
Source: CBS News
US online grocery sales remain steady with slight declines when compared to earlier in the lockdown months. “According to Brick Meets Click, digital grocery sales hit $7.2 billion in June, which is up 9 percent month-over-month, but down from $6.6 billion in May and $5.3 billion in April.” As reported in SuperMarket News, “average online grocery spending per order fell to $84 in June, compared with $90 in May and $85 in both April and March, the survey found. The decrease came as more businesses reopened around the country, and municipalities relaxed pandemic restrictions, likely drawing more consumers into stores.”
Earlier this week, the Trump Administration released data on companies that secured Paycheck Protection Program (PPP) loans worth more than $150,000. Some quick facts,
The Treasury Department and SBA have issued 4.9 million loans totaling $521+ billion since the relief program launched in March.
The average loan size was $107,000, with 86.5 percent of loans totaling <$150,000.
About $38.5 billion in loans were returned by the end of May.
The stock market continues to experience record highs with Big Tech companies leading these gains as Apple, Amazon, Microsoft, and Google-parent Alphabet climbing at least two percent in recent days.
According to Global Web Index, Generation Z often cites the top reason they use social media is to keep in touch with friends, but according to new data, this trend has recently been replaced with the desire to use social media to stay up-to-date with current events.
The share of consumers who say they feel comfortable at theaters has barely budged since late May, and it is considerably below the share of consumers who are currently okay with going out to eat or to a shopping mall. In the latest data from Morning Consult, only 20 percent of all adults said they would go see a movie right now, down from 22 percent in late June and 23 percent in mid-June.
Also of note is that Generation Z adults’ comfort with going to the movies dropped significantly from late June to early July, down to 20 percent from 36 percent, while Baby Boomers (16 percent) reported no change from mid-June.
On TV, MSNBC tapped Ms. Joy Reid, an MSNBC political analyst and weekend host, to take over the slot Chris Matthew vacated when he resigned in March. She will become one of only a few Black women who have hosted evening news shows in the US. The former Fox News anchor, Shepard Smith, is joining CNBC as anchor of its 7 pm show as well.
It looks like the return to sports will be a rocky one. Two teams from last year’s World Series canceled team workouts due to safety concerns, blaming the MLB, while NBA teams are set to arrive at the Walt Disney World bubble throughout this week. Disney’s ESPN announced an exclusive partnership with Colin Kaepernick’s production company, Ra Vision Media, to bring forth conversations about race, sports, and culture. Also on the agenda, a firsthand look at Kaepernick’s rise from NFL player to a prominent civil rights activist. On the college scene, the Ivy League announced it would be postponing football and other sports until at least 2021.
The world is open for travel again, one country at a time. Although summer is peak travel season, the pandemic continues to devastate demand. Air travel spiked more than 90 percent over the July 4th weekend but is still down more than 70 percent from the first five days of July 2019. In the US, air travel continues to struggle though destinations across the world are touting incentives and offers in an attempt to encourage tourists and sightseers to pack up and travel again (albeit safely) amid the pandemic. The US State Department continues its advisory that US citizens avoid all international travel, warning that “changing conditions can leave travelers stranded abroad.”
According to a recent Brandwatch Daily Bulletin, “although search interest around vacations, movie theatres, and bars has not returned to pre-virus levels, interest has gradually increased since the onset of the virus and vacations have seen a particularly big jump this past week as some travel restrictions eased.”
Source: Brandwatch Daily Bulletin
Related: This International Air Transport Association map shows most countries’ travel rules and restrictions.
These trends, in turn, have led to peak interest in road trips and domestic travel in the States. And just in time, too, as the Magic Kingdom and Disney’s Animal Kingdom Theme Parks are reopening on July 11th, followed by EPCOT and Disney’s Hollywood Studios on July 15th. The Park reopening doesn’t signal business as usual with limits on attendance, reservations required, and controlled guest density in popular spaces as Disney seeks to replicate the successful reopening of Shanghai Disney Resort.
Andreessen Horowitz said, “during COVID-19, sales teams face a set of twin challenges – reduced IT budgets in an uncertain market and selling when business is virtual. Already half of B2B companies have reduced their budgets by over 40 percent. Overall, IT spend is predicted to drop eight percent in 2020 – as enterprises spend roughly $300 billion less than they did in 2019.”
Recommendation: In this report, the team at Andreessen Horowitz spoke with several notable enterprise executives and startup founders to identify what trends are shaping B2B and the sales cycle right now.
Since downturns see the most disruption in the market, today, businesses are taking this time to accelerate digital transformations to “reduce costs, improve customer experience, and remain competitive.” While budgets remain small, public cloud services, for example, are expected to grow 19 percent this year according to some analysts, with other companies investing in automation or remote collaboration tools, identifying clear pandemic winners.
Mark your calendars for the next antitrust hearing for the House Judiciary Subcommittee on Antitrust on July 27th, featuring the CEOs of Amazon, Apple, Facebook, and Google. Attention turned to China-US relations and how those tensions might affect tech with the US Administration “looking into” banning the popular Chinese social media app, TikTok, in the US. No official declaration has been made, but competitor Snapchat enjoyed a stock market boost from the news.
Since enforcement began on July 1st, CCPA has substantially impacted advertising, specifically on Facebook. From WITHIN Marketing Pulse, “Facebook’s implementation of Limited Data Use (LDU) is limiting how it uses personal information for Californians, making tracking customer behavior and audience targeting much more challenging for digital marketers. This, of course, has resulted in decreased efficiency for much of the ad dollars being spent targeting Californians.”
Instagram is testing a Stories-only feature to allow users to see more stories at once on one page.
Facebook released its annual civil rights audit, one day after meeting with leaders of the #StopHateForProfit boycott. Facebook also said it’s rolling out TikTok competitor Instagram Reels in India this week.
According to Adweek, upfront negotiations for ad time in the upcoming TV season have largely stalled.
Twitter said in a recent job posting that it’s working to create a new subscription service.
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That’s all we have for you this week. Have a great weekend!