February 2021
Winning Consumer Spend in the New Normal
Business leaders are tasked with managing through COVID-19 while also ensuring their brands are optimally positioned to meet consumer needs once a new normal fully emerges. The question on many minds is: To what degree is the COVID-19 period an accelerant or an anomaly?
Here, we provide data and expert perspectives from our industry advisors and analysts to explore the recent performance drivers that may stick and those that are likely to change when we reach the new normal. While there is still much uncertainty in the short term, preparing for longer-term consumer behavior changes now is critical if companies are to capitalize on future opportunities.
Maintaining Momentum as Consumer Needs Evolve
Several industries experienced strong growth in 2020 as consumer purchasing shifted due to COVID-19. For some, that growth came as a surprise. For others, it was an acceleration of existing industry trends. As these industries look ahead, product innovation, heightened consumer engagement, and investment in emerging categories is essential for continued momentum.
Joe Derochowski
Industry Advisor, Home
“As the year progresses, vaccinations expand, and confidence builds, there will be an increasing focus on these kinds of pent up cravings. What role do our products play in the realization of these cravings? As 2021 unfolds, we need to be prepared to respond to shifts in the marketplace, and that kind of thinking should be part of our demand planning. However, we must also be precise, and maintain our focus when it comes to pricing, promotion, and positioning – mindful to not undermine our core value with reaction. More than ever, it is urgent that we take lessons from 2020 in order to be effective in 2021 and beyond. Ultimately, home products will always be relevant, but the way consumers use them will continue to change. If we are smart, prepared, and manage the change effectively, the home industry will continue to thrive.”
Juli Lennett
Industry Advisor, Toys
“Lately I’ve been asking myself, ‘What word might I be using to describe the U.S. toy industry at the end of 2021?’ I imagine that word is going to be somewhere along the lines of metamorphosis—there will be a profound, yet gradual, change from the beginning of the year to the end of the year. The catalyst of this change will be the COVID-19 vaccines….However, that doesn’t mean we will continue with the unprecedented year-over-year growth trends [seen in 2020] especially as we approach the one year anniversary of the lockdowns in mid-March when toy sales skyrocketed. What we can expect is that toy sales will be elevated above 2019 for likely the next six months or more. Because of the elevated sales in 2020, this might be recorded as declines despite the fact that sales will be strong. The one thing that the pandemic has reinforced is that the U.S. toy industry is extremely resilient to outside negative factors—parents put their children’s happiness above all else and toys is a big part of the happiness equation.”
Stephen Baker
Industry Advisor, Technology & Mobile
“Consumers are replacing older, outgrown, and technologically obsolete devices with more modern devices that better support the new productivity realities of working and learning at home and the entertainment shifts into streaming and gaming, all of which need to be supported by a robust home technology infrastructure. On top of those use cases, the technology industry is at the cusp of a considerable wave of product innovation. Such innovation has traditionally provided a boost to technology demand irrespective of broader economic trends.
Propelled by pandemic needs, 2020 consumer tech sales saw the strongest growth in at least seven years. It is important to recognize that despite [forecasted] year-over-year declines in 2021, these results when compared to 2019, pre-pandemic, represent double-digit growth. The pandemic has renewed recognition of the critical value of technology to consumers, so while sales comparisons may stagnate, demand on an overall basis for consumer electronics will be higher for the next two years than it would have been without the events of 2020.”
Mat Piscatella
Video Games Analyst
“In 2020, video games was one of the most consistent growth categories in terms of overall participation and investment relative to 2019. This may simply reflect an acceleration of trends that were in effect prior to the pandemic. If this is the case, then the gaming market could experience continued growth without a post-pandemic pullback. If not, however, we may see a post-pandemic valley before returning to growth. It all rests on engagement.”
Nathan Shipley
Industry Analyst, Automotive
“At NPD, we are of the belief that a massive opportunity exists right now to deeply understand who the people are that have been driving up sales, particularly those who are new to the auto aftermarket customer base. What makes them tick? What do they drive? How can we keep them engaged with our industry once the COVID-19 dust settles down? Do we have a way of recontacting them down the road to remind them that their hobbies await them in the garage? Are we continuing to support future DIY behavior by encouraging parents to include their kids in these projects when appropriate to do so? As we look at the opportunities that lie ahead, taking time to deeply understand what is happening right now will pay very nice dividends in the years ahead.”
Matt Powell
Senior Industry Advisor, Sports
“The sports categories that support social distancing—namely cycling, golf, and racquet sports—will continue to do well against 2019 levels, though the peaks in 2020 will be tough to offset. New opportunities lie in add-ons, including accessories to support purchases already made. Home fitness will follow a similar trend. If schools are open and scholastic sports played, categories such as baseball and soccer should see strong sales results in 2021.”
“Consumers stocked up on kitchen appliances and those won’t go away… They were purchased for convenience and consumers will continue to expect that.”
Charting a Path to Rebound
Industries that declined in 2020 must keep their pulse on consumer purchasing trends to determine how the market landscape will evolve in the new normal. Brands will need to decide whether to double-down on the value propositions that made them successful in years past, reinvigorate their offerings, or refresh their messaging to align with new consumer needs.
70% of consumers said they plan to dress more casually when they return to work and other activities, our September 2020 omnibus study revealed.
Although total foodservice transactions were down throughout 2020, digital ordering was a major bright spot, growing 145% in December 2020 vs. the same time in 2019.
Beth Goldstein
Industry Analyst, Accessories and Footwear
“A year ago, I wrote that in 2020 I expected to see more initiatives further connecting the offline and online worlds, but it turned out that this alignment became a necessary retail survival tool beginning in March. The proliferation of shopping, pickup, and delivery options initiated digitally was a key driver for many of the successful retailers during the year. Online penetration jumped 12 points to 40% of total fashion footwear sales and 8 points to 34% of accessories sales as consumers embraced shopping online due to safety concerns and store closures, but the percentage of online purchases picked up in-store remains among the lowest of the industries we track. To start 2021, brick-and-mortar retail will continue to be more transactional rather than experiential – and even as shopping in-store becomes less of a health concern, the dependence on digital will likely remain. As an industry, we should accelerate efforts to bring that experiential element to the digital world via enhanced technology and imagery. This does not, however, mean we should abandon progress in the physical world; while store closures will continue, there will be unique opportunities in the brick-and-mortar space as well. Plenty of real estate will be available for pop-ups and temporary installments – allowing brands and retailers to reach new consumer groups without long-term commitments.”
Maria Rugolo
Industry Analyst, Apparel
“Comfort and active category growth alone is not recouping the magnitude of losses coming from the other apparel categories. It is important to plan accordingly to offer the right mix of comfort and active, as well as to determine what elements of comfort can be infused across all apparel categories to grow your business.
Despite all the unknowns around us, I can say with certainty that the comfort movement will continue! Consumers have become accustomed to casual dressing since even before the pandemic, and we have been talking a lot about athleisure’s growing popularity for quite some time. Given the culmination of all these factors, I anticipate this casualization shift to remain in place even post-pandemic. What will change is how this behavior evolves and begins to take shape on the broader apparel scale. That is why I expect a blurring of the lines for product offerings and attributes, as all eyes will be watching these comfort-driven categories to see what traits can be infused into other areas of the apparel industry.”
David Portalatin
Industry Advisor, Food
“There’s no doubt that many independent restaurants have permanently closed during the pandemic and, unfortunately, there will be more. The fact is that we see thousands of independent restaurants fail in any normal year, and in any normal year, we see thousands of new independent restaurants open. The restaurant industry is a vibrant, creative community of entrepreneurs, and they will take advantage of empty spaces, buy a food truck, or leverage technology to launch a virtual brand. We’ll likely have a net reduction in total restaurant unit counts in 2021, but the next superstar concept is already well into the planning phase.”
Tamara Szames
Industry Analyst (Canada), Fashion & Footwear
“In a recent study by The NPD Group, we asked Canadians ‘what influenced your decision to purchase clothing or footwear during the past 3 months?’ The number one response among 18-44-year olds was ‘the need for something new.’ We also asked ‘what best describes how you currently purchase clothing or footwear?’ The second top answer among the same age cohort was ‘something trendy that makes me feel good.’ Since Gen Z and Millennials represent 56% of sales in the women’s market this suggests to me that we should have positive outlook on where fashion in Canada may be headed…There is no doubt that comfort remains king. And yes, athleisure is very much still around but has now transformed into ‘lounge’. But what we cannot miss is the need for newness. The consumer is ready and wants to feel good again. The question will be can the market support the consumer demand? And how fast can we adapt to the new fashion market?”
Leen Nsouli
Industry Analyst, Office Supplies
“To boost productivity, consumers purchased technology, office furniture, and key office supplies products. Increased reliance on technology to work combined with more flexible work environments has hit some office supplies categories harder than others and these declines are expected to continue to accelerate as consumers opt for digital alternatives in communication, notetaking, and document storage/file sharing in the future. Overall, U.S. adults have indicated they are becoming more productive while working from home, which may lead to more permanent changes in how we learn and work. This will undoubtedly have a profound impact on the future of office supplies sales…Critical trends to monitor in the coming year that will positively impact sales of supplies will revolve around schooling, the workplace, home office and study station setup, home organization, small business and marketplace seller shipping activity, personalization, CIY and DIY, and moving trends as 20% more Americans indicate planning to move in 2021 than 2020.”
Larissa Jensen
Industry Advisor, Beauty
“As restrictions continue to be lifted throughout the country and people feel more comfortable going to social gatherings, we’re going to see a boost for prestige beauty, and specifically for makeup. With c”As was the case for many other industries, prestige beauty faced several challenges in 2020 from temporary store closures to reduced demand. Although we cannot deny the numbers, we also cannot overlook the fact that our industry is still holding its ground and, in some cases, flourishing. While online sales penetration grew across all categories as brick-and-mortar drove declines, the latter still remains beauty’s largest sales channel and a key factor in its recovery. Leveraging the strength of each channel, recognizing the opportunities of the changed beauty consumer, and owning this transformation are important action items for retailers, brands, and manufacturers as we enter the recovery phase.”
Digital Transformation
As e-commerce penetration increases across industries, brands and retailers will need to be increasingly proactive in developing enhanced digital touchpoints with customers. This may mean identifying and targeting new segments of online shoppers and investing more in enhanced fulfillment capabilities for digital orders.
Marshal Cohen
Chief Industry Advisor
Driving Growth Amidst Uncertainty
“Retail can expect changes in consumer demand over the course of 2021, which will come with opportunity and challenges. As experiential spending returns, those categories that support it (i.e. luggage) will prosper yet again. Pent up demand will appear to drive a lot of repressed industries to growth again, but only against soft comparable 2020 sales in the 2nd, 3rd, and 4th quarters. Some of these shifts in spending also means many of the stay-at home investments consumers made in 2020 and early 2021 will slide back. Every industry needs to figure out how to continuously fit into the consumer’s life in the current moment in order to be able to better drive healthy growth amidst the uncertain times ahead.”
COVID-19’s Impact on Consumer Spending
For the latest sales results, commentary, and news about COVID-19’s impact on discretionary retail sales performance, visit our frequently updated Now in Retail content hub.
Understand the Shift from Bricks to Clicks
Our Checkout omnichannel tracking solution offers an unprecedented view of what consumers are buying and where — across all traditional retail channels, marketplace platforms, and direct-to-consumer outlets. Based on an industry-leading methodology, it transforms purchase details from receipts into market data and insights.