The COVID-19 pandemic has already reshaped the future in retail, with global sales dropping 5.7 percent in 2021 as a result of the crisis. However, total retail sales in the United States increased to $5.58 trillion from $5.4 trillion in 2019, according to Oberlo. US retail sales have been growing over the past decade, but the pandemic and the crisis it sparked slowed down this growth in early 2020. However, as US retailers continue to search for new ways of adapting their operations to the “new normal,” concerns over the Delta variant are threatening the fragile stability of the market.
Americans seem to be cutting down on spending, as concerns regarding the Delta variant of COVID-19 curtailed activity across the country, and the government stimulus program reached its end. In July, retail sales fell 1.1%, worse than the Dow Jones estimate of a 0.3% drop. Total sales excluding automobiles dropped by 0.4%. The US is not alone in facing a drop in retail sales, as new risks emerge. Retail sales in China rose by just 8.5% in July compared to last year, and that is considerably lower than the 11.5% forecast. Is the Delta variant a new threat to global sales, or are people just struggling to adapt to the post-pandemic market?
Thriving in a Post-pandemic Market
According to Deloitte, global retail managed to survive an unexpected crisis and a market-shaping year. Shopping habits changed in the blink of an eye, as health and safety issues quickly became a purchase driver. E-commerce changes and new digital tools that would normally have taken years to complete were brought to the market in a matter of months. All this made retail sales bounce back, and helped the US economy survive one of the most troublesome crises in its history. However, the effects of the COVID-19 pandemic continue to put pressure on the market even as the pandemic subsides, while concerns continue to grow as the number of Delta variant cases rise.
Although few actually believe that the Delta variant will cause another lockdown, its impact on the economy remains undeniable. As the Centers for Disease Control and Prevention (CDC) revised its mask-wearing guidance and urged Americans to wear masks indoors in areas with “substantial or high transmission,” sales dropped across the country in July. The new rules, and the growing anxiety about the variant these rules are meant to prevent, may be just some of the reasons why shoppers are now leaving stores. However, there are also good reasons to predict a new surge in E-commerce. Taking all this into account, it may be safe to say that thriving in a post-pandemic market involves dealing with numerous uncertainties in the near future and being ready to adapt to almost anything.
Reason to Hope
Although everyone is getting increasingly worried as new variants of the virus are now appearing across the world, some remain uncertain they are putting notable pressure on the economy. Federal Reserve Chairman Jerome Powell claimed only time will tell how the US economy will weather the recent COVID-19 surge and the emergence of the new Delta variant. He went on to say that, as successive waves of the pandemic appeared over the past year and a half, the economic implications tended to decrease in severity from wave to wave. While the chair of the Federal Reserve did provide some relief with his statements, he also noted that the healthcare crisis is still casting a shadow on the economy.
Chairman Jerome Powell is actually not alone in saying it remains to be seen what effects, if any, will the new wave of the pandemic have on the economy as a whole, and retail in particular. According to the Financial Times, some of the largest retailers in the US have recently made earnings announcements that seem to contradict this story. Walmart, Target, and Lowe’s raised sales forecasts after surpassing expectations for the three months to the end of July, and one of the main reasons seems to be the fact that Americans are returning to stores. However, if people are indeed returning to physicals stores, E-commerce sales are expected to drop, as Walmart’s forecast seems to indicate.
Even if Delta variant concerns will prove to be no threat for the economy on their own, the simple fact that projections regarding physical store sales vs. E-commerce sales is already dividing the market may be enough to turn these concerns into real threats for retailers across the country.
