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Coronavirus Crisis Reveals Retail Haves and Have-Nots

By Suzanne Kapner 

The coronavirus pandemic has led many retailers to close stores temporarily and millions of Americans to do nearly all their shopping online. It's a digital future that many have predicted -- but one that isn't working at the moment for some chains.

Particularly crippled have been retailers that haven't embraced e-commerce or sell nonessential items such as fashion. Online sales for apparel and footwear retailers plunged in the first two weeks of March, compared with the same period a year ago, falling 37% on March 11 alone, according to Rakuten Intelligence, which tracks electronic receipts.

By contrast, online sales at general-merchandise retailers have soared, jumping 50% in one day, March 13, compared with a year ago. Giant sellers such as Amazon.com Inc. and Walmart Inc. have struggled to keep up with the surge in demand, and those two companies are among about a dozen large retailers looking to hire roughly 500,000 people in coming weeks.

The reliance on e-commerce is poised to grow as efforts to stem the virus have darkened stores and limited travel. Foot traffic to U.S. stores fell 58.4% in the third week of March, according to ShopperTrak, which uses cameras to count traffic, and Citigroup analysts. For apparel, the decline was 78.9%.

The pandemic is the biggest shock to the retail economy since the 9/11 terrorist attacks, with one big difference: In 2001, e-commerce accounted for about 1.5% of retail sales. As of the beginning of March, it was about 16% of sales and has jumped to 20% recently, said Craig Johnson, president of Customer Growth Partners, a consulting firm.

Roughly one-third of 300 households surveyed by Gordon Haskett Research Advisors said they used online grocery pickup or delivery during the week that ended March 13. Of that group, more than 40% tried it for the first time. The biggest beneficiaries were Walmart, Whole Foods, its parent, Amazon, and Target Corp., according to the survey.

Analysts and retail executives said the bump in online orders won't replace all the lost sales.

"Impulse purchases will be lost," said Allen Questrom, the former chief executive of J.C. Penney Co., Neiman Marcus Group and other retail chains. "Walmart and Target will do well as people stock up on supplies. But fashion retailers will be hurt."

One exception is lounge wear. As more people work from home, they are stocking up on comfy clothes including sweatpants and robes, according to Edited, which tracks more than two billion items on the websites of U.S. and U.K. retailers.

The number of sold-out tracksuits rose 36% from Jan. 1 through March 16, compared with the same period a year ago. The number of sold-out sweatpants is up 39%, while the number of bathrobes that are out of stock increased 29%.

Even retailers that have fledgling e-commerce businesses are seeing huge growth. Rite Aid Corp. Chief Executive Heyward Donigan said the drugstore chain's online sales have grown tenfold in recent weeks.

The company, which is just building out its online operations, put limits on high-demand items such as face masks and hand sanitizer after single buyers snapped up thousands of dollars of the products.

"We're trying to build up our capabilities," Ms. Donigan said. "We want everyone to have the opportunity to get at least something."

Some retailers that appear to have well-oiled e-commerce machines have been overwhelmed by rising demand. Grocery delivery time slots are hard to find at Walmart and Amazon in many markets, and home delivery of nongrocery items has slowed, as the companies struggle to keep products in stock and meet demand.

Walmart is making more deliveries than usual in the midst of a leap in demand, said a company spokesman. Delivery time slots have filled up regularly in many areas, including parts of Georgia, Iowa, Tennessee, Pennsylvania, Nevada and North Carolina, according to checks of Walmart's grocery website. The retailer has limited the available delivery window to two days instead of the usual seven because Walmart wants to be sure it has stock to match orders.

Amazon has said it would prioritize shipments from its warehouses of essential items. It aims to hire 100,000 people to fill warehouse and delivery roles to meet demand.

Some nonfood retailers have started discounting products to clear out excess goods. In the 10 days to March 18, there were 43% more discounted items offered online by a range of chains, compared with the same period a year ago, according to LovetheSales.com, which scrapes the websites of more than 1,000 retailers daily. There were 41% more women's jeans on sale and 29% more men's polo shirts. For luxury items, the number of discounted products jumped 123% from a year ago.

That is bad news for retailers that have a small online presence or, in the case of Burlington Stores Inc., have decided to pull the plug on e-commerce all together.

Burlington Chief Executive Michael O'Sullivan told analysts earlier this month that the discount chain decided to wind down e-commerce operations because it represented just 0.5% of sales and the experience of hunting for bargains is hard to replace on the web.

The company, which has closed all of its stores to contain the virus, is still running its e-commerce site. A Burlington spokeswoman said the company has yet to determine when it will stop selling online.

For now, most shoppers are staying away from stores unless they are buying groceries or other essential items.

"Shopping is the last thing on my mind, unless it's for basic necessities," said Cindy Lai, a 34-year-old physical therapist. The Manhattan resident said that she still prefers to go to stores and that once the virus is contained she plans to resume her normal shopping habits, which don't include many online purchases.

--Sarah Nassauer and Sharon Terlep contributed to this article.

Write to Suzanne Kapner at Suzanne.Kapner@wsj.com

 

(END) Dow Jones Newswires

March 24, 2020 07:14 ET (11:14 GMT)

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