September 29, 2020
Despite considerable economic uncertainty, the U.S general merchandise landscape has performed remarkably well over the last several months. As of mid-September, weekly general merchandise dollar sales were higher than the prior year in 14 out of the 16 preceding weeks, our point-of-sale early indicator data shows.
Industries connected to the home have contributed to this strong performance as consumers have shifted spend from going out to staying in. For instance, our Retail Tracking Service reported sales of small appliances were up 24% and housewares were up 28% in the three months ending August 2020 versus the prior year.
Looking ahead to the Holiday 2020 shopping season, limitations on experiences (e.g., spas, classes, and travel), coupled with consumers’ hesitation to go out like they did before COVID-19, means more tangible gift items will be favored this holiday Chief Industry Advisor Marshal Cohen said.
In this article, we take a look at four driving factors that have influenced in-home spending this year: indulgence, changes to work and play, convenience, and value. Additionally, we explore the underlying shifts taking place to help brands and retailers contextualize recent consumption trends as they brace for Holiday 2020 and beyond.
Cakes, frozen treats, and adult beverages were among the top food and beverage items with increased consumption during the COVID-19 stay-at-home period, our June 2020 National Eating Trends® (NET®) data shows.
While these treats may taste good, consumers are are also using food and drink as a way to take part in a number of activities, like baking, for example. Our Retail Tracking Service data shows sales of bakeware products climbed 44% year over year in the three months ending August 2020. Once the timer is set and cookies are baking, the next activity for some is a Zoom Happy Hour. To help make in-home happy hours more enjoyable — and reminiscent of the more traditional out-of-home happy hour — many people purchased beverageware products. Sales of margarita (+191%), martini (+59%), and pilsner/pub (+29%) glasses rose in the three months ending August 2020 versus the prior year.
“As we get into the colder months and holiday season, consumers will be even more eager to participate in activities that take place in the home as spending time outdoors won’t be as much of an option. This presents the food and home industries an opportunity to meet this new set of consumer needs,” Home Industry Advisor Joe Derochowski said.
Baking, eating, and drinking are expected to be common ways to pass time over the next several months, especially given that many have put a pause on healthy eating. This pause is expected to be temporary, however, given that weight loss and overall wellness concerns remain strong, Food Consumption Industry Analyst Darren Seifer explained. Moving forward then, it will be critical for brands to tailor product offerings or increase marketing efforts that support a balanced relationship between fun and health.
2. Changes to Work and Play
People have relied on consumer technology products to help them stay productive, educated, connected, and entertained at home. Although the rise of remote work and learning fueled the consumer tech market since March, the upcoming holiday season is expected to cause continued change in an already altered market landscape.
Consumer technology sales grew double-digits year over year in the three months ending August 2020 as consumers adjusted to the rise of remote work. During that period, productivity-oriented items like keyboards (+66%) and monitors (+82%) were among the fastest-growing tech categories. For Q4 2020, we forecast continued strong performance for tech, but with more of a shift toward tech products used for leisure.
“Sales of items we need to get through the school day and workday took priority in the first half of this year. As we head into Q4 and the holidays, we expect many of these needs will have been satisfied and consumers will begin to purchase items they consider to be wants, or gifts for the holiday season, such as TVs and noise-canceling headphones,” said Consumer Electronics Industry Analyst Ben Arnold.
Though many now use their downtime to cook up new creations, there are still situations where people must prepare meals in a time crunch as they simultaneously juggle work, childcare, schooling, and other commitments.
“Even at home, the lunch rush hasn’t disappeared,” Food Consumption Industry Analyst Darren Seifer said.
The share of lunch and dinner occasions prepared in-home jumped 9 and 11 percentage points, respectively, between March and July 2020 versus the same period in 2019. In June, over 60% of consumers said their last meal occasion was atypical compared to what they ate before COVID-19, our NET data shows.
The increasing number of meals prepared in-home means consumers are adopting a number of small appliances that make meal preparation easier. Sales of electric grills (+99%), air fryers (+81%), and sandwich makers (+65%) surged in the three months ending August 2020 compared to the prior year.
While the current situation has added to the need for time-saving kitchen appliances, convenience was a trend well before COVID-19.
In 2019, over 10% of consumers said convenience was the most important aspect of the foods they ate — a trend that gained momentum in preceding years. This was largely driven by increased responsibilities among a large Millennial population that “grew up,” entering the peak career and family-formation life stage, Food Industry Advisor David Portalatin explained. This need for convenience bolstered sales for a number of small appliance categories. These products were widely given as holiday gifts in recent years.
Increased interest in new appliances may mean new opportunities for food manufacturers. Darren Seifer pointed out that few food items today include on their packaging how to use the product with appliances like air fryers, This could be an opportunity as household penetration of new types of appliances rapidly increases.
Many looked to stretch their dollars in recent months. When we asked consumers to describe their meal-planning strategies due to COVID-19, two out of the top three most common strategies pertained to food waste avoidance, our June 2020 NET data shows.
To cut down on food waste, consumers adopted storage items like vacuum sealers. Year-over-year sales in this category more than doubled in the three months ending August 2020.
“Packaging, containers, and storage will be especially important for food manufacturers and kitchen brands to consider, especially as family meals become even more commonplace over the holiday season,” Food Industry Advisor David Portalatin said.
As some consumers look for opportunities to cut costs, the restaurant industry will need to monitor the impact on business moving forward. Much of the recent decline in restaurant spending was the direct result of stay-at-home advisories. It’s unclear when spending will return to normal levels as consumers increasingly adjust to in-home consumption.
Trends in the coffee industry illustrate the divergence between in-home and out-of-home consumption. Our CREST® data reports visits to quick service coffee outlets were down 23% year over year in July 2020. During that period, single-serve coffeemakers for at-home use grew 18%, shown by our Retail Tracking Service data.
For appliance brands, it will be critical to consider ways particular products can help consumers save money over the long run. Where applicable, these brands can double down on their efforts to articulate that message, Home Industry Advisor Joe Derochowski said.
At the same time, foodservice operators will need to work extra hard to overcome hurdles in reigniting consumer spending.
“The industry is focused on COVID-19’s impact, but it’s still important to remember that the product is front-and-center, as it always is. Food quality, food innovation, and new items are still necessary to drive business. Let’s not forget last year’s chicken sandwich wars,” Portalatin said, referring to Popeye’s 2019 chicken sandwich launch and a related ”social media war” with a competitor.
“The ‘chicken sandwich wars’ lifted chicken sandwich sales across the board. Innovation and creative marketing strategies that drive traffic will be more important than ever going forward,” he added
Although uncertainty may remain over the next several months, our relationship with the home has been fundamentally altered. COVID-19 has reshaped attitudes toward remote working and learning, and our analysts expect this to continue well into the future. Additionally, consumers have adapted to increased leisure time at home, exploring new activities and buying products that facilitate in-home recreation.
In the near term, companies that help people navigate this stressful time, whether by helping them stay entertained or by alleviating burdens on time and finances, will be poised for success. Looking further ahead, companies must assess how COVID-19 has accelerated or changed purchasing dynamics in their respective industries. As consumers become accustomed to new lifestyles, winning companies will develop new product offerings and tailor their marketing messages to position themselves as a helping hand in building better in-home experiences in the new retail landscape.