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Placer Bytes: Mass Merchandise Consumer Behavior Changes, Macy's Prognosis

Ethan Chernofsky
May 11, 2020
Placer Bytes: Mass Merchandise Consumer Behavior Changes, Macy's Prognosis

In this Placer Bytes we dive into COVID-19’s impact on the way we shop within the Mass Merchandise sector and provided a potential bull case for Macy’s.

Lasting Consumer Behavior Changes?

With the pandemic leaving a massive impact on the retail sector, much of the discussion has rightfully centered around the huge impact on sales and performance. Yet, coronavirus has affected the way consumers shop as well, and this could potentially last far longer.

Looking at shopping patterns for Walmart and Target during March and April 2020 and comparing it to behavior from the same months in 2019 shows some very interesting changes. In 2019, 40.7% of customers who visited a Walmart nationwide came immediately from home. Unsurprisingly, this number shot up by 16.2% to 56.9% for March and April 2020 as a result of stay-at-home measures. 

And, the impact here has been felt most heavily by other retailers. There was a 4.3% decline in those visiting a restaurant before a Walmart visit and a near 1.0% decline after. And a 3.2% decline in shopping at other locations prior to a Walmart visit. Although we continued to shop for essentials, the shopping trips themselves were cut much shorter, thus having a wider impact.

Restaurants may have been the hardest hit cross-shopping partner. Looking at cross-shopping patterns for March and April 2019, 39.4% of Walmart visitors also visited a McDonald's during the period and 25.2% also visited a Starbucks. These numbers plummeted to 28.7% and 13.1% respectively in March and April 2020. For Target shoppers, cross-shopping numbers for the two month period dropped from 39.6% to 27.6% at McDonald’s and 33.0% to 23.1% at Starbucks. 

In fact, the only cross-shopping that wasn’t negatively impacted was unsurprisingly, grocery, where visits were level at Kroger, Publix, and others. 

But cross-shopping wasn’t the only behavior impacted. The times when consumers shopped changed as well. The daily distribution of visits at Walmarts in 2019 (dark blue), saw significant increases in midday visits at the expense of evening and night visits. In fact, every hour between 9am and 5pm saw a significant jump during March and April in 2020.

The effect was true for day of week distribution, as well for Target in 2019 (red) and 2020 (yellow). Saturday visits dropped from 22.7% of overall traffic to 17.6%, while Mondays and Tuesdays saw increases of nearly 1.0%, and Wednesday and Thursday visits rose by 2.5% and 2.7% respectively.

And this may shed light on a major and potentially sustainable change, how we balance work and life. Working from home has enabled many to optimize their schedules to visit Walmarts and Targets at non-peak hours - evenings and weekends. This reduces crowds at stores and enables brands to have a steadier flow of customers in a more “socially distanced” manner. But, should some working-from-home elements remain in place post-COVID-19, the impact could potentially sustain itself and have a significant effect on staffing and behavior. 

And, it isn’t just the retailers that are impacted. Imagine if we weren’t forced to buy groceries on weekends, how could we potentially fill that time? There are significant economic opportunities that may come from more flexible scheduling, and the coming months may put those on display.

Macy’s Prognosis

Macy’s is a very interesting case. The brand, like so many others in the apparel space, has been hit particularly hard, with many voicing concerns for the model itself. Yet, there is a bull case for Macy’s. Except for December 2019 and January 2020, every month since January 2019 has seen significant year-over-year visit growth. Even February 2020 saw visits increase by 5.3% year over year with overall visits coming in at 6.5% below the monthly baseline for the period.  

But, COVID-19 did hit very hard. Visits in March were down 69.8% year over year, and in April they were down to zero, with all stores closed. However, a silver lining does exist. Not only is Macy’s a brand that enjoyed positive momentum heading into the crisis, but many of its biggest competitors are being affected as well. J Crew has filed for bankruptcy, as has JC Penney and Neiman Marcus with more expected in the coming weeks. And all of these have high cross-shopping behavior with Macy’s

Does this guarantee a rebound? No. Does it mean that there is an audience that Macy’s could effectively engage with? Absolutely. And the opportunities do seem to be present based on early returns from openings. In South Carolina locations, of which admittedly there are only a very small number, the brand actually had year-over-year growth of 8.6% in daily traffic on Wednesday, May 6th.

So with the opportunity clearly available, the impact of direct engagement with competitor audiences may determine the brand’s future.

Check back in with for more updates. 

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