It’s very possible we will see a dramatic – even seismic – shift in September 2021 retail performance, as the following aspects of reopening and reemergence converge, along with many other factors that will have an effect on the consumer and retail overall:
Back to school – The new school year is slated to bring kids back in-person, after more than a year of restrictions and uncertainty. The excitement surrounding this return to normalcy will make for a big back-to-school shopping season.
Return to offices – More offices are preparing to bring employees back from virtual work. Hybrid-work models, as well as office workspace changes and concerns will bring new needs – and additional spending.
Pandemic restrictions lift – As restrictions continue to be lifted across the country, consumers are returning to the experiences they have been missing. Their spending will reflect that return, whether it is redirected to the experiences themselves, or to products that complement their participation in the activities.
Of course, as we watch the latest unsettling news about the spike in Delta variant COVID cases, it’s clear that the pandemic is far from over. Rising cases could once again cause schools to close, and businesses could hold off on bringing employees back to the office, which could again impede sales of all types of products.
Average Weekly Dollar Sales by Month
Structural Changes Powering Seismic September
Certain retail channels experienced continued growth fortified by the pandemic, some benefited from pent-up demand, while others faced inescapable challenges. Below are examples of the structural shifts in the retail industry that NPD analysts are keeping a close eye on.
Growth fortified by the pandemic
Mass merchants, warehouse clubs, pure-play e-commerce, home hardware, and other channels have experienced growth over the past few years. This trend continued, solidified by habits formed and consumer relationships were strengthened during the pandemic, as these retailers met the consumer’s needs when it mattered most.
The off-price, sporting goods, specialty beauty, and manufacturer-owned retail channels have bounced back, after challenges at the height of the pandemic. The rebound of these kinds of retailers reflects how consumers are approaching shopping – showing what they are most eager to regain, as they emerge from restricted living.
Reopening and the lifting of pandemic restrictions has given a boost to department stores, national chains, apparel specialty, and restaurants, following a difficult year, but not enough to get them back to normal levels. These segments had declining performance before the pandemic hit, and the trials of the past year only intensified their struggles.
As September approaches, we are moving from Stage 2 into Stage 3, following the four-stage cadence of retail repositioning since the pandemic began. With one caveat: Rising COVID cases in the U.S. and around the world could once again close classrooms, dissuade businesses from bringing employees back to the office, and close some businesses to in-person traffic, which could keep the retail market firmly in Stage 2 for some time yet.
However, as the U.S. progresses through the various stages of the reopening period, consumer needs will continue to change. Successful brands and retailers are already preparing to handle volatile swings in consumer behavior.
|Stage 3||Fall / September|
|Vaccines reach||180 million adults and 10 million kids|
|Back to school||In classroom activity returns|
|Travel||International business begins; tourism returns|
|Back to work||Unrestricted|
|Work-from-home (WFH) recedes||NPD WFH indicator stabilizes at hybrid or split shifts|
|Business function||Large events resume|
|False positives||Some industries drop back from early surge|
Click the boxes below for a look at some of the other considerations that will affect retail for the remainder of this year and beyond.
Stages: ■ Completed ■ Current ■ Future
Stage 1 | Reemergence Begins
In Stage 1, travel will be important to watch as many consumers gear up for trips after a yearlong break. Discretionary general merchandise industries should monitor how this impacts adjacent segments. For instance, declines in the luggage business have softened so far this year compared to much steeper declines throughout late 2020, our Retail Tracking Service data shows. This will accelerate as travel begins to pick up. Additionally, we expect an upward trend in service industries, such as restaurants, as consumers begin to feel safer going out, though it will be a while until pre-pandemic levels are reached.
Key milestones to watch: About 100 M U.S. adults fully vaccinated, decline in work-from-home rate, live events and other gatherings take place with reduced capacity.
Stage 2 | Reemergence Accelerates
This is when to expect more of a return to in-person activities, events, and experiences. We expect consumers will purchase products to facilitate those experiences. Family gatherings and an increased physical presence at work (perhaps with hybrid arrangements and decreased office capacity) will mean many consumers will invest in new wardrobes as they reemerge into the public sphere. The return to commuting will be important to watch. Even a partial return to work will impact the auto aftermarket as auto consumers shift their spend from discretionary DIY items to maintenance-focused items. Additionally, watch for growth in accessories, such as backpacks, and technology, like headphones, that consumers rely on as they commute to and from work.
Key milestones to watch: Approximately 150 M U.S. adults fully vaccinated, further acceleration of workplace return, increases in commutes to/from work.
Stage 3 | Shifts in Purchasing as Lifestyles begin to Adjust
In Stage 3, we expect a stabilization period in the work-from-home, learn from-home, and entertain-from-home landscape. As consumers adjust to a new lifestyle, and reallocate their spending to facilitate in-person experiences, watch for bigger swings in retail performance. Industries that surged in 2020 due to stay-at-home advisories, such as tech and small appliances, may return to a more moderated growth rate compared to pre-pandemic levels. The trajectory for many of the industries that benefited in the stay-at-home environment look bright for the long term.
Key milestones to watch: About 180 M U.S. adults and 10 M kids fully vaccinated, stabilization in work-from-home-rate, larger events begin.
Stage 4 | The New Normal Approaches
In the last stage of the road to retail repositioning, retail sales will normalize. Brands and retailers across industries will need to consider how consumer behavior has been fundamentally altered during the COVID-19 period. Many consumers invested time and money in purchasing and learning to use equipment to facilitate fitness, cooking, working, and entertaining at home. That means many of the industries that thrived in 2020 could remain elevated above pre-pandemic levels. At the same time, industries that struggled last year may find their industries have been changed permanently. Increased remote work may lead to more travel and mobility, and business travel may ramp up, benefiting accessories like luggage and backpacks. The casualization trend that took hold in apparel and footwear last year is likely to remain.
This final stage will offer valuable indicators for how consumer purchasing will evolve throughout the rest of the decade. Brands and retailers must be tuned into the changing dynamics of the consumer spending evolution.
Key milestones to watch: Vaccines readily available, business travel returns.
A Retail Minute with Marshal
Chief Industry Advisor, Marshal Cohen, outlines the important and dramatic changes that are expected to cause a seismic shift in the retail market in September.
Take a look at all the factors facing retail leading up to September and beyond...
- Back to school — Supplies early, apparel later (extended BTS ‘21)
- Back to college — Two “Freshman years” on campus campuses
- Work from home — 10 million to 25 million new workers working from home
- Experiences come back — this has started with limited impact to retail (watch for false positives)
- Airports — Daily (6/11/21) 74% of 2019 levels
- Vaccines — Could reach 70% in September (kids)
- Pandemic emergency assistance funds expire — $1 billion In aid expires
- Leisure activities resume — Bowling leagues, card games, in-person book clubs
- Shopping routines return — Driven by back to work lifestyle & social shopping
- Extra-curricular activities — Sports, dance class, clubs
- Market timing — Seasonal shifts, Fall spending, outdoor prep
- Urban renewal — Work, live, tourist
- Online level-set — New water mark
Deconstructing Recent Retail Growth
Since the start of 2021, retail spending has exceeded results of the previous three years. The trend has differed slightly, but the trajectory is similar. Within this trend, each industry has had its own unique set of peaks and valleys. Focusing on footwear, home improvement, and foodservice, each recently has experienced positive performance that reflects the formation of an evolving retail environment, guided by the consumer’s new way of thinking.
Online shopping has lost its pandemic luster; consumers are more focused on getting what they want, when they want it. Attention has turned to from e-commerce to mass merchants, off-price and specialty retailers, and others.
The pandemic focus on home projects has shifted, but industry sales remain strong. E-commerce has not yet slipped back to pre-pandemic levels.
Revenue growth is coming from larger party sizes and higher-priced entrees, as consumers continue to look for at-home meal solutions. People are returning to experiences, but they are also approaching restaurants differently. Fast-casual concepts, drive-thru, delivery, and digitally ordered occasions lead the way.
Outlook From Our Industry Experts
Industry Advisor, Home
We can expect to see a dramatic shift for the home industry this fall. Time is always one of the biggest disruptors to our eating habits, so as we return to working in offices – and resume kids sports and other evening activities – the importance of convenience will return.
When it comes to meals, we will be looking for ways to make the “path to consumption” process of shopping, preparing, serving, storage, and clean-up better, faster, and more convenient. The preparation and cooking phases will be greatly affected so multi-cookers and other time-reducing product will have an opportunity to grow after declining during the pandemic. At breakfast, we will want our coffee faster, so automated espresso machines might gain in importance. To accommodate more frozen foods, sales of toaster ovens and microwaves could rise, as will air fryers and electric grills for cooking dinner.
There is one big headwind though: with the return to evening activities, and working the office, there will be fewer meals prepared in the home than during the pandemic, which could impact sales of kitchen electrics and housewares.
Industry Analyst, Accessories and Footwear
Back-to-school will be the biggest driver of footwear and accessories sales in September – particularly for the sneaker and backpack markets. While back-to-school sales will likely peak in early August, September could grow in importance for the following three reasons:
1. Many school districts won’t begin classes until after Labor Day, which is later than it was two years ago.
2. Supply chain challenges might push product deliveries later and lead to less of the promotional activity that tends to entice consumers to buy early.
3. Uncertainty is starting to bubble up about the trajectory of COVID-19 cases and how that will impact school-age children, particularly those too young to be eligible for vaccination. Parents may again take a wait-and-see approach.
Returning to working in offices will be another factor for fashion footwear and some categories of bags, in particular. However, the potential for a seismic impact in September could be waning there, as 40% of those that plan to return to working in offices have already done so, and another quarter plan to do so in July and August, according to NPD’s July Omnibus survey. In addition, only about half of those that plan to return to the workplace, after having worked at home during the pandemic, expect to do so for more than three days a week.
Industry Analyst, Automotive
The “seismic September shift” will greatly affect consumer behavior in many ways, including how long and frequently we drive relative to our summer 2021 driving behaviors. Today, gasoline consumption is on par with 2019, but the type of driving that is making those miles looks different right now. While many people are driving “normally” – going to work, running errands, and so on – the work-from-home culture is here to stay for millions of workers, which is, and will continue to, negatively affect miles driven and vehicle-related product demand.
However, there are other major factors influencing the story, including the record sales levels of new boats, RVs, and other motorized recreational equipment. These trends point to what the many driving consumers are up to this summer: road trips. And, new equipment aside, many Americans are hitting the road for vacations, instead of taking a cruise or traveling by air.
The automotive aftermarket experienced record growth and sales volumes over the last 15 months, so September will be an interesting month to watch. As schools start back up, those vacations and road trips will slow dramatically, becoming a detractor to miles driven instead of building it up. Coupled with the fact the work-from-home environment has been a miles-driven detractor for more than a year, offset by road-trip behavior, the “seismic September shift” will deliver a double hit to the miles driven story, and we expect trends in the retail automotive aftermarket to follow suit.
Industry Advisor, Beauty
September traditionally makes up less than 10% of prestige beauty sales, making it one of the smallest volume months of the year. When it comes to back-to-school shopping categories, beauty products don’t typically make it to the top of the list. This September may look different, however. Not only are students and staff returning to classrooms, but also many adults will be returning to offices. These moves back to normalcy could help beauty sales gain momentum, led by makeup, a category that has been challenged by the pandemic. We expect that, as more people return to more normal lifestyles, beauty sales will continue to recover.
Toys Industry Advisor
The COVID-19 pandemic has taught us that there is a lot of value in spending time with our families and our children, which includes playing together with toys and games. Even as we make our way toward normalcy, signs point to the toy industry continuing to outperform pre-pandemic time periods – in “seismic September” and beyond.
That said, there are several headwinds facing the industry right now:
- One by one, pandemic relief programs that financially supported millions of Americans are going away. The result will be fewer discretionary dollars to spend on toys and other goods.
- Kids are going back to school and getting back to playing sports and having playdates, which is not ideal for the toy industry, but most of us welcome it anyway.
- The specter of inflation and supply chain issues must also be watched carefully. The Federal Government maintains that both are short term, transitory issues. However, several toy industry executives have said that both of these headwinds will impact the toy industry for the remainder of the year.
On the tailwinds side, while most school districts are scheduled to be back to classrooms in the fall, many are making provisions for remote learning. And if kids stay home, toy sales rise.
In addition, the adult collector trend has been phenomenal for the toy industry. There will be a segment of the population that will want to keep up with this hobby and there is room for more collectibles that the industry hasn’t thought of yet.
Finally, although many parents are headed back to work, only 47% reported that they are going back to the office three or more days per week, according to a recent NPD survey. So parents will still need toys to keep their kids busy after school, while they wrap up their workday, which bodes well for toy sales during the rest of the year.