June Industry Roundup at a Glance
It may be accurate to call this inaugural edition of the Industry Roundup ‘the damage report.’ It’s well known that the pandemic has affected nearly every facet of the economy, led to millions of lay-offs, and presented unprecedented financial hardship to many businesses.
At GRUBBRR, we know how much our clients’ industries have been affected. Here are some of the facts, figures, and predictions for two of the industries we serve the most.
- Forbes reports that approximately half of the restaurant industry’s workforce, which employed roughly 15.5 million people prior to the pandemic, has already been laid off. Job losses from the restaurant industry alone has displaced 3.5 percent of America’s entire workforce.
- In the days and weeks leading up to the state and city lockdowns in March, restaurants were seeing single digit growth in dine-in sales, according to data collected by OpenTable.
- That same data tracked the decline and recovery for dine-in sales:
- The worst period of decline for dine-in sales spanned from March 20th – May 21st, where dine-in sales were between 90 – 100 percent less than they were on the same day the previous year.
- Since May 21st, there has been steady recovery, but it has not even begun to approach pre-COVID numbers. In the U.S., restaurants were seating about 65 percent less diners as they had before the pandemic as of June 17th.
- Globally, that 65 percent recovery figure is about on par with the rest of the world. However, some countries have seen much stronger recoveries in the past two months, likely due to different public health circumstances. For example, Australia and Germany are now seeing their dine-in rates return to nearly normal rates, with decline from the previous year spanning from 15 – 23 percent.
- These figures have fueled restaurant innovation across America. Among the most common approaches to handling the coronavirus has been expanding takeout operations, which has enabled restaurants to maintain their kitchen staffs and generate revenue. As reopening begins in most cities and states, even in limited capacities, restaurants are focusing most of their efforts on sanitation and safety. This includes the following adjustments:
- New floor plans to accommodate capacity limits
- Staff training on proper safety protocols
- Investing more resources in takeout and delivery
- Experts estimate that between 5-10% of pre-COVID demand may be lost forever due to the sudden and immediate decline in in-person shopping for months on end. Projections from the same study also show that sales for retailers will not return to what they were before the pandemic until the end of 2020, at best.
- However, the pain has not been experienced uniformly across the entire retail industry. The Washington Post reports that whereas the department store Kohl’s has seen a 41 percent decline in revenue since the pandemic, Home Depot saw a seven percent increase in sales following the nationwide lockdown, and the retail giant Walmart saw online sales soar by 74 percent, which boosted the company’s overall sales by nearly 10 percent this past quarter.
- A likely cause of this disparity – where some chains have seen increased sales while others have dropped – is what Forbes contributor Jason Goldberg calls ‘retail bifurcation.’ The concept is simple: Companies that supply essential goods and offer robust delivery and curbside pickup options enjoyed the consumers’ rush to stock up on goods. Other retailers were left behind, either because their products weren’t essential to consumers, or because they consisted solely of brick and mortar operations.
- In that same piece, Goldberg outlines two predictions for the retail industry:
- (1) Short term behavior will be adopted and create long term change. Goldberg hypothesizes that as consumers become more familiar with online shopping and delivery services, even for things like groceries, they will continue to rely on them after the pandemic and incorporate these habits into their lifestyles.
- (2) The economic hardships posed by the pandemic will affect the market. Goldberg predicts that consumers, due to the widespread loss of wages, will seek better deals and change their spending habits. We will likely see a focus on ‘discount retailers’ and ‘value-oriented store brands’ in the future.
The takeaway from these facts and figures shouldn’t be that these industries are doomed. There is certainly pain and loss as restaurants and retailers adjust to the new reality – and for unemployed workers, that pain is the sharpest. However, in order to continue competing and growing in this environment while preventing further losses, it is important to monitor industry trends and keep up with the latest developments to ensure you have the sharpest insights into how the market is changing.