When stay-at-home orders due to the Covid-19 pandemic forced many U.S. brick-and-mortar retailers to close late winter shopping, and this spring, some sector observers feared that government measures would existing gap between the retail industry would expand haves and have-nots.
A few months later, that fear became a reality.
Amazon, Walmart, and Target all recently reported record sales and profit statistics for their second quarters ending in June and July, as closing government-mandated retailers gave fewer options for brick-and-mortar shopping and more consumers move spending online. Big groceries as well as home improvement giants like Home Depot and Lowe’s that were considered essential have also gone well.
Meanwhile, large specialty retailers who do not sell groceries but who preached pandemics, such as Kohl’s and the parent company of TJ Maxx and HomeGoods, have suffered steep declines, in part because governments have ruled them “nonessential” and their forced doors closed for long periods in large markets. Meanwhile, department store stores such as Macy’s announced major layoffs and store closures earlier this year, and their upcoming revenue reports could paint an even happier picture.
“This is what happens when 80 percent of your competition is forced out of business,” said Sucharita Kodali, a retail analyst at Forrester Research, about Amazon, Walmart and Target’s financial results.
A drastic shift to online ordering has certainly driven the results for these companies. U.S. e-commerce sales grew 44.5 percent year-over-year in the second quarter, according to estimates this week from the Department of Commerce’s Census Bureau. Sales of e-commerce had grown by an average of 15.6 percent over the previous four quarters. Amazon was already the clear choice no. 1 for online shoppers in the US before the pandemic hit, and the crisis cemented that fact only. Strong and improving e-commerce operations at Walmart and Target have also played a role in their respective successes. Walmart said its online sales nearly doubled in its second quarter, while Target’s e-commerce sales nearly doubled, the retailer said this week. At the same time, the extent of suffering at chains like TJ Maxx marks how these stores have failed to invest heavily in e-commerce.
The Big 3 from Amazon, Walmart, and Target were also well positioned because each provider and pickup services offer in one form or another. Nearly 46 million U.S. households place an online order for grocery delivery in June, according to the Brick Meets Click / Mercatus Grocery Survey.
But Walmart and Target also benefited from the fact that many local governments allowed them to stay open because they sold food and other essentials. Those statements also allowed them to sell non-essential items in their stores, such as clothing, beauty, and furniture, while competitors focused exclusively on those categories they could not sell because they were forced to be ‘non-essential’. Even with its strong e-commerce numbers, nearly 83 percent of Target’s sales in the quarter still occurred at its stores.
Target marked $ 5 billion in ‘share profit’, as a new company it took from other retailers, in the first half of 2020. That total represents more than its total profit for the market share for the whole of 2019, the retailer. While Target saw strong, non-surprising growth in food and beverage, it recorded more than 30 percent growth in the non-essential home furnishings category and more than 10 percent in clothing.
The state of Vermont ordered Walmart, Target and other large-box companies to stop selling non-essential items such as clothing in late March, while nonessential retailers were ordered closed. But that was an exception to how most states and cities treat these giants.
“They were absolutely unfairly favored by staying open,” Kodali said.
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