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Wholesale Update

by 
Ethan Chernofsky
 on 
March 31, 2020
Wholesale Update

There is a downside to stocking up for the long haul. Once you have all the things you need, there is little need for more visits. While some expected that the thrill of being able to get out could overcome a lowering demand for actual items, this may not be the case after all. 

Instead, the impact of social distancing is being felt across the board. What does it mean for the top wholesale and mass merchandise players? We dove into the location data to find out.

Wholesale’s Limitations

Following several weeks of massive year-over-year visit increases, Costco, Target and Walmart all saw traffic declines for the first time since the crisis began. While Sam’s Club still saw a year-over-year increase, it is likely to be as much an indication of the company’s overall resurgence as anything coronavirus related.

Critically, the benefit that these brands saw in the early days of the coronavirus are being dampened by increasingly strict regulations. The major question is whether these brands are seeing a temporary decline driven by customers having already bought the things they need or are they finally experiencing the direct impact of a coronavirus trend that could ultimately impact all sectors.

Is The Effect Regional?

But to truly analyze the impact, it is critical to dive deeper, to state-level data. Looking at Costco visits in different states where coronavirus impact was extreme (New York), moderate (Florida and Texas) and relatively light (Arizona) showed a telling result. While the earlier rush to wholesale seems to have impacted the entire country almost equally, the slowdown had a greater effect in areas that have been hit harder. New York is seeing a major effect, being one of the centers of the crisis in the US at a nearly 10% decline, while Arizona and Texas, though still seeing declines from the earlier peaks, had much more moderate drops.

The positive here is that the data indicates that as the situation improves, and doesn’t worsen, consumer behavior tends to return to more normal patterns. Should this trend hold, it’s a very strong endorsement for those who believe that wider retail activity could quickly return to previous levels should the preventative measures being enacted serve their ultimate goal.

Highs to Lows

But, even if there are positive signs, it’s important to consider the overall impact. Walmart and Target, arguably the two strongest offline retailers in the US, both felt their first major negative effect of the coronavirus. Target, a brand that could seemingly only see visit growth, saw visits that were 25.8% below the weekly baseline for the period from January 2019 through March 2020, the lowest visit total in that period.

Walmart also saw its lowest weekly visit total for that same period when visits dropped 12.1% below the baseline. However, there were several weeks in January 2019 and one in January 2020 where the declines were at least 11.0% below. And, the lack of a decline is a further indication that Walmart’s holistic approach to retail is as resilient as any in the wider landscape.

The New Norm?

Target, Walmart and top wholesalers like Sam’s Club and Costco were strong performing retailers coming off of an incredibly productive period. While it is certainly possible that the downturn will hold, it is equally likely that as consumer needs begin to grow again and the goods that were originally stored up diminish, growth will return. 

Even more, there are clear indications that the local magnitude of the coronavirus effect matters. Areas that were harder hit will see bigger downturns in traffic, while lesser affected areas may show continued growth. This puts a clear emphasis on helping to bring the crisis to a close as quickly as possible.

Finally, it’s critical not to ignore the potential impact of delivery, curbside pickup and other mechanisms these brands are utilizing to maintain access for customers in times of social distancing. The key factor to watch will be whether the pace of the decline continues, and how quickly resurgence will take place.

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