In Freefall: COVID-19 and Retail Sales

This article is translated and republished from the original article in German by Inga Fechner, economist at ING.

Chart of the Week

Numerous restrictions have been in place for over a week to reduce the spread of COVID-19. Schools and stores are closed. Places that tend to be bustling with people, especially when the weather is pleasant, are now eerily empty. It is no surprise that sales in the retail sector have plummeted, as our chart of the week shows.

Daily turnover in Germany and Austria (% change compared to the previous week)

Source: Suburbia, ING Economic & Financial Analysis

While extensive restrictions have been in effect in Austria since March 16, which were announced on March 13, the German government took a little longer to act. Yet, at the same time, public life was grinding to a halt. People’s increasing adoption of social distancing is clearly evident in retail sales since the weekend of 13th March, as we determined from data from Suburbia. Turnover across restaurants, hotels and leisure venues dramatically dropped over the weekend, compared to the previous weekend. 

The restrictions are still in effect, at least until Easter, and will continue to be a problem for numerous economic sectors. Fiscal support measures by governments and central banks are an important step in cushioning the impact of the slump. However, the impact cannot be completely reversed. At least for this year, we will see negative growth for the first time since the financial crisis for many economies.  

Do French people love their lovers or mothers more?

France is renowned as a nation of romantics. So with Valentine’s Day around the corner, we wanted to see if this reputation is justified. 

We looked into our luxury cosmetics and fragrances dataset* to compare sales in the periods leading up to Valentine’s Day, Mother’s Day and Father’s Day. Outside of Christmas, these are all historically the most popular times of year for fragrance purchases.

When surveyed before Valentine’s Day back in 2016, 69% of French people said they weren’t even planning to celebrate it. But it appears attitudes have shifted since then… 

Our data reveals that French people spend more on their significant others than they do on their mothers or fathers. The difference isn’t marginal either – Valentine’s Day sales are a whopping 39% higher than Mother’s Day sales! 

And while news reports show Father’s Day spending continues to trail far behind Mother’s Day, our data shows just the opposite with 34% higher sales for the former. 

What’s interesting is that Valentine’s Day sales have steadily increased year on year, while sales for the other two occasions have experienced dips in previous years. 

Of course, there could be other reasons to explain these gaps. People may be splashing out on flowers or a nice evening out instead. Buying habits are also shifting as millennials increasingly seek experiential gifts for Mom like spa treatments, according to retail consulting firm Unity Marketing

As for Valentine’s Day, we expect the boom in fragrance sales around Valentine’s Day to continue. A perfume may not be as enduring as the memory of an experience – but at least it lasts longer than flowers and candy!

About our data:

Suburbia partners with companies in the payments and retail industries to create data sets that track anonymized consumer purchases across Europe, delivering a daily view into some of the world’s biggest consumer brands. For insights on luxury cosmetics and fragrances trends, Suburbia’s data set covers sales in over 130 retail outlets in France.

Why Returns Could Be Good For Retailers

‘Tis the season for…returns? 

Much of the focus over the holidays is on how much shoppers spend at retail and ecommerce but there’s another annual ritual – no less significant – that fails to draw as much attention: returns. 

Average return rates vary widely by industry, sales channel and product category. For instance, CNBC reported that online orders of clothing and shoes tend to have the highest return rates of up to 40%.

Since fragrances are popular for gifting, we looked into our luxury cosmetics data set to analyze the rate of returns in France during and after the holiday period. Returns of unwanted items tend to be stable throughout the year, averaging out at around 3% of sales every month.

But once you look at returns on a daily basis, there’s a particular date on which the numbers skyrocket. In the US, January 2 has been dubbed as “National Returns Day” but in France, shoppers clearly waste little time as December 26 is the biggest day of the year for returns. In fact, returns on this day tend to be more than four times higher than on January 2. 

Returns offer an untapped opportunity

The surge of returns doesn’t necessarily mean calamity for retailers. Instead, they can see the increased traffic as another opportunity to engage customers and encourage additional purchases while they’re in store.

You’d think it would be hard for shoppers to pass up on all the deals offered during the post-holidays markdowns. But interestingly, our data shows that sales on December 26 are among the lowest in December, even dipping below sales from December 27 to 29.

It means there’s still room for sales growth on this busy day. A study by marketing technology company Valassis found that 94% of consumers said they are more likely to buy from retailers offering a smooth returns experience, and 36% said that means quick in-store returns. 

Naturally, people would be less inclined to browse around the store if they’ve just had to endure waiting in line for half an hour to return an item. It sounds obvious but many retailers often fail to create dedicated in-store points for returns to make the process as quick and easy for customers as possible.

It’s clear that the post-holiday return season presents yet another opportunity for retailers to interact and engage with customers – because today’s experiences can drive tomorrow’s purchases.

About our data:

Suburbia partners with companies in the payments and retail industries to create data sets that track anonymized purchases across Europe, delivering a daily view into some of the world’s biggest consumer brands. For insights on consumer spending on luxury cosmetics and fragrances, Suburbia’s data set covers sales in over 130 retail outlets across France. Find out more about it here

Weekend: A burger and two cola’s, please!

You know that junk food that has little to zero nutritional value and that you secretly love eating? You know how you usually combine it with drinks that are bad for you, and that the combination is high in calories when consumed in excess, which we end up doing? How often is sometimes for you? Once a week? Cheat-weekends only?

Most things that are served at fast food restaurants qualify as junk food. So that means  fries, greasy burgers, hot dogs, ice cream, chips, candy, cookies, and cake; basically all the things we crave for.

According to BBC Good Food Nation Survey, in 2016 one in six young people aged between 16 to 20  in the UK eat fast food twice a day. The same survey found that most people ate fast food on average two days per week. On the other side of the North Sea, the Netherlands prides itself for a healthy population.  

Junk food is popular because it is convenient, cheap, addictive and it becomes a habit quite easily. Anyone who visits a fast food restaurant can order a burger off a euro menu. For under ten euros, you can get a full meal. That is the reason why junk food is so popular among low-income groups. For as long as an instant Cup-A-Soup will cost less than an orange or a banana, the hungry and the poor will aim for the cheaper alternative.  

The other drive behind this popularity is the fact that it is convenient. Almost everywhere, vending machines or kiosks offer a wider variety of junk food than healthy food. And as the name indicates: You can order a fast food meal and then eat it in less than five minutes later.  You can even order it online while driving to the fast food chain and pick it up with no waiting time. Exactly what the fast society was missing.

Data and Insights

Do the Dutch however eat these varieties of junk food every day? Our sample is quite small and it is far away from being representative to answer this question. That means that nominal values of consumption in the figure below are only useful when compared to one another.

What is remarkable from the figure above is the weekend peeks. During weekends the consumption of junk food is approximately five times higher than on Monday or Tuesday. As people go out more often in the weekend, their preference for burgers and hot-dogs increases. Convenience of the food might be the right explanation for it.

What goes better with a burger than a cola? The consumption of cola-like drinks (Coca-Cola or Pepsi) also follows a weekly fluctuation. There are seven times more cola consumed in the weekend as when compared to Mondays or Tuesdays. In other words, every burger lover orders two colas to wash the burger down in the weekends.

The same movement we see in the other popular soft-drink of Fanta. Different from Cola, Fanta lovers consume the soft-drink more and its weekend peaks are less higher on relative terms.

Read the full report here.