Retailers were suffering before the COVID-19 crisis ramped up.

Consumer spending at brick and mortar retailers was on shaky ground well before the coronavirus pandemic forced stores in the U.S. to shutter doors and alter operating hours to curb the outbreak.  

The Commerce Department’s latest retail sales report spotlights the weakening sector as shoppers were reluctant to open their wallets for the second month in a row. Overall retail sales fell 0.5% in February, the greatest drop since December 2018, after showing modest growth in January. 

The pullback was broad and extensive. Tuesday’s numbers showed a sharp 0.4% drop at retail stores coupled with soft auto and gas purchases.

Economists say consumer spending, which accounts for 70% of economic activity, will spike temporarily in March due to stockpiling and panic buying. The hoarding hysteria will mask lackluster purchases at retail stores, which will see sales plunge in April as people face layoffs, focus more on discounts and order online. 

“Disruptions from the coronavirus will bring the economy’s main engine to a halt,” said Gregory Daco, chief economist at Oxford Economics. “Discretionary spending and social consumption will take a significant hit.”

More jobs will be lost and doors will remain closed as consumers focus primarily on essentials and grocery store spending.

“You can’t shop at a store that’s closed,” said Mark Hamrick, senior economic analyst for “A good part of consumer activity has ground to a halt.”

The retail numbers only cover consumer expenditures in February, so it doesn’t show shopping was jolted by a wave of temporary retail store closures.

But the report in March will. 

“Expect this month’s retail sales to show a severe drop based on the closing of retailers and people staying at home and avoiding crowds,” said Robert Frick, corporate economist with Navy Federal Credit Union.

Online shopping was on the rise in January, while retail store sales sank.

Retail sales were also brought down last month by unseasonably mild weather and shifting purchasing behaviors. The first two months of the year were some of the warmest on record in the U.S.

“We had warm winter weather in many parts of the country which put a damper on some parts of retail sales,” Hamrick said. “While we are in this hunkering down mode, the economy will contract.”

Ambika Srivastava, 26, began cutting back on retail spending months ago. She was on the job hunt, but entry-level dentistry positions were hard to come by, she said. So she saved more and went out less.

“It was a warm winter so it was easy to avoid shopping,” Srivastava, a Jackson, Mississippi resident, said. “I could basically wear my summer clothes all season. Who needs a new coat when it’s 70 degrees outside?”

If she needed to purchase something important, she’d hop on Amazon, she said.

Shoppers have discovered that they can find compelling prices on items by going to clearance-oriented outlets like T.J. Maxx, fast fashion brands like Zara or budget-friendly online retailers like ASOS, economists say. 

As a result, discount retailers like Walmart and Target have been cleared out by hordes of shoppers in recent days, while mall shops have struggled to maintain foot traffic. 

Retail sales, which include spending on appliances, food services and home supplies, will get a boost in March as an onslaught of consumers stockpiled goods like toilet paper and snacks amidst calls for self-quarantines. 

“I ran to a local grocer to buy more food than I normally would in case things shut down here,” Shrivastava said. Still, the temporary sales boost won’t be enough to lift the retail sales outlook in the first quarter.

“Even if you’re pantry building, you’re only going to eat so many cans of soup,” Hamrick said. 

Economists project a greater demand for online shopping as Americans spend more time at home to avoid contagion. 

Amazon, a market leader, recently announced plans to hire 100,000 workers to help it deliver packages in the wake of the spreading respiratory illness, which has killed thousands of people, mostly in China. 

Online retail sales continue to climb steadily.

Ecommerce sales jumped 0.7% in February and 7.5% over 2019.

“Sure, some of Amazon’s categories are getting boosts,” Hamrick said. “But the other parts discretionary spending like apparel are languishing.”

In the months ahead, market forces will put the viability of brick and mortar stores to the test as they face weeks, possibly months, without income. But economists are optimistic about shopping behaviors returning to normal once the virus has passed.

“There is going to be an eagerness at some point to resume some kind of near-normal activity,” Hamrick said. “Whether it’s celebrating when malls becoming safe again or going to movie theaters, theme parks, bars and restaurants, it’ll be significant.”

Comments are closed.