The Covid Effect on US Apparel Sales May2021

The Covid Effect on US Apparel Sales

Introduction

As the battle against the corona virus enters second year, US apparel sales are struggling to revive and the mix of offline v/s online is changing very rapidly. Wazir Advisors present an analysis of US Apparel sales over the last 3 years to gauge the impact.
The first American COVID-19 case was reported on Jan. 20, 2020 and US declared outbreak a public health emergency on Jan. 31. From early Feb. various levels of restrictions were placed till Mar 13, 2020 when national emergency was declared and all non-essential activities came to a standstill. Traditionally, March to May is second highest apparel sale period in US (Oct to Dec being the highest one). And the lockdown struck right at the beginning of this period! Brick-and-mortar store sales dipped by approx. US$ 60 bn. in 2020 compared to 2019, while online format added US$ 13 bn. in sales [1].
US Apparel Sale – Stores and Online
Let us deep dive to explore quarterly sales of both the formats and understand the emerging trends.
[1] Online sales of apparel and accessories

Estimates for First Quarter 2021 show retail store sales recovery to pre-covid level

US apparel store sales stood at US$ 134 bn. in 2020, a sharp decline of 31% compared to 2019. Observing quarterly, the sales in 2020 declined in all the four quarters. The highest dip was observed in Q2, during which the sales were just US$ 18 bn. compared to US$ 48 bn. in Q2 2019, a glaring decline of 62%.
Quarterly Apparel Retail Store Sales of in the US
Q3 2020 onwards the store sales started recovering gradually though still in negative growth zone. Holiday season also could not lead to higher purchases in stores. Q3 and Q4 2020 ended with lower sales of 23% and 21%, respectively over 2019.
After almost a year, the pandemic in US seems to be under control. Tension among masses is easing up, markets are opening up and the wheel of economy is returning to its usual pace. The store sales are benefitting from this return to normalcy. In Q1, 2021 the store sales have recorded a growth of 12% over the last year. Although the sales are still 10% lower than Q1 2019 but given the improving scenario and vaccination drive it is expected that Q2 2021 store sales will be back to the pre-covid level of approx. US$ 48 bn.

Online sales registered significant growth amid Covid-19

In 2018, online sales were 22% of the store sales in the US. The percentage increased to 23% in 2019. But thanks to the retail apocalypse caused by the coronavirus in 2020, the online sales became 44% of the physical store sales. In absolute terms, online stores sales increased by 28% in 2020 compared to 2019. Last three quarters posted impressive double digit growth rates.
Quarterly Clothing & Accessories Online sales in the US
Q3 growth was, however, marginally lower than previous two quarters. The reason was that as the markets started opening up people became less dependent of online shopping and their urge to go out and shop for items in person took over. However, in Q1 2021 again, the online sales recorded a significant increase of 27% over last year.
An interesting relation is observed when we compare quarterly change percentage in both the retail formats. The chart is almost a mirror image in 2020, with physical store sales in the negative zone while online sales in the positive zone. In Q1 2021 both the formats registered positive growth though the store sales were lower than pre-covid levels.

Quarterly Online vs Apparel Store Sales Change
The two biggest questions that arise are - will total apparel consumption in 2021 recover to pre-covid levels; and will online sales be able to maintain its high market share that it attained in 2020?
The answer to former question will be no and that to later will be yes if, god forbid, there is another wave of Covid. Otherwise there is a strong chance of near pre-covid level recovery in total apparel consumption. However, higher share of online sales is here to stay. It might have been exceptionally higher in 2020 but the ease of shopping though online channels will ultimately get consumers hooked for long time.

The article has been authored by Varun Vaid, Business Director and Aditya Rajyan, Associate Consultant.