Retailers have had it incredibly hard this year. Between having to close doors due to the coronavirus pandemic for an uncertain amount of time and then reopening with new social distancing protocols, it’s been a struggle, especially on the financial front.
Not only have retailers’ sales suffered due to mandated closures, but it is the continuous roadblocks retailers have faced after reopening of stores. Starting with obtaining protective gear for store workers to tackling supply chain delays and even sustaining damages to stores in events leading up to the George Floyd protests, retailers across the board have not been able to catch a break.
And now, with the uncertainty surrounding the outcome of the U.S. presidential election, retailers are finding themselves in yet another situation where their businesses could be in jeopardy.
It has been three days since the election night and the country is yet to know who the president will be. And going by how things are unfolding, retailers might soon start noticing a decline in their holiday sales.
American consumers have naturally been both distracted and naturally anxious as they wait for the results to come in, and as such, shopping is not exactly top of mind for them. Retailers, too, are anxious over how the election outcome might impact their business.
Here’s how the unfolding election drama is impacting consumers’ spending behavior and the holiday retail business:
Delayed results means delayed spending
While consumers had essentially started their holiday shopping, especially online, the uncertainty surrounding the election outcome is putting a big damper on consumers’ interest in opening up their purse strings, according to Greg Portell, lead partner in Kearney’s global consumer practice, a strategy and management consulting firm. Portell believes that delayed results “will absolutely pause consumer spending.”
In a survey of 1,000 U.S. consumers last month, Adobe found that 26 percent percent of consumers said the presidential election’s outcome would affect their holiday spending. In comparison, 63 percent of retailers told Adobe they expect Americans will be more confident in spending post-election.
This is not a new phenomenon, either. Adobe Analytics, which tracks the web transactions of 80 of the 100 biggest internet retailers in the U.S, found that online sales dropped by 14 percent the day after the 2016 election when Trump was elected to office and 6 percent the day after the 2018 midterms.
“If we don’t get closure and the election results actually end up taking longer than the traditional evening or the morning of the next day, then we might see a little bit of a hangover and a pause right there,” said Jason Woosley, vice president of commerce product and platform at Adobe.
But while consumers wait anxiously for votes to tally up, there is also the possibility of a court battle and civil unrest, hence retailers in major cities such as Los Angeles, Washington, D.C., and New York City are boarding up their storefronts.
On Wednesday, Trump falsely claimed to have won the election and said he would head to the U.S. Supreme Court to get “all voting to stop.” Regardless of how the U.S. Supreme Court rules, a prolonged election battle will only create more anxiety and impact consumer spending behavior.
If the election results in civil unrest, consumer spending will halt, leading to a disappointing holiday season. But even without the rioting and looting, consumers may lack overall enthusiasm to shop especially as they are already wary of in-store shopping given the uncertainty the COVID-19 pandemic has brought upon the economy. The concerns around the spread of the coronavirus are only increasing, with the U.S. recording the second-highest single-day tally to date with another 91,500 new cases of the virus on Tuesday.
We’ll get through it again
In the third quarter, consumers showed that they were willing to spend as they found themselves adjusting to the “new normal” COVID-19 presented.
Matt Shay, president and CEO of the National Retail Federation, said in October that all signs pointed to improving consumer confidence and that retail sales were expected to continue to rebound, especially as the unemployment rate continued to trend downward.
“There is a general consensus that we will work through this,” said Shay.
According to the U.S. Bureau of Labor, as of September, the unemployment rate was 7.9 percent, which equates to about 12.6 million people, according to Refinitiv.
“Historically, political events can be a bit of a distraction, but consumers have the ability to separate what’s happening in the political world from the way they live their day-to-day lives,” said Shay.
But even with that in mind, COVID-19 has impacted players within the retail space differently, sharpening the divide between retail winners and losers. At the beginning of the pandemic, it was essentials such as athleisure and household items that experienced a surge in demand. Then came the demand for self-care products as consumers found themselves indulging in facial serums and face masks. Even at-home workouts became a thing, putting at-home fitness equipment like Peleton and MIRROR in a new position of demand. And then, more recently came the revival of resale platforms.
That is not to say that all merchants within these segments have thrived; the ones that have done well were able to quickly pivot and meet changing consumer demands. These top-performing retailers succeeded in enhancing and expanding their digital footprint while also optimizing their in-store experiences.
As stores began to reopen in April, big-box retailers such as Walmart, Target, and Lowe’s took advantage of the opportunity and looked to bring customers back with contactless offerings such as touch-free checkout, buy online, and pick-up in-store (BOPIS) and even contactless returns.
Lowe’s managed to save the trick-or-treating experience by bringing it to the curbside this year, while Target prepped for the holiday season by doubling its holiday staff to meet the demand for contactless-services. Walmart has also made several efforts to optimize both its digital and in-store experience.
While NRF has yet to release its holiday forecast, according to its early October survey of 7,660 consumers, it is estimated that consumers will spend $997.79 on average this year on gifts and holiday items such as food and decorations, revealing a nearly $50 drop from last year.
But without a declared winner in the U.S. presidential election, many might hold off on spending. For how long? Only time and the election will tell as the results could lead to civil unrest and temporary store closures.