Category: Podcast

It’s Tuesday, June 16, 2020. In the news today we learned that retail sales were up 17.7% in May compared to April, and only down 6.1% from May 2019. This increase was driven by a 44.1% month to month rise in motor vehicle spending, but non-auto and food sales still beat expectations, including strong gains from apparel and furniture, with clothing store sales rising 188% and furniture 90% from April. 

We also learned that U.S. industrial production increased 1.4% in May, and home builder’s confidence also returned to positive territory in June.

While restaurant and bar sales increased 30% from April, they were still off by 40% year over year. Local governments are getting more active with authorization for restaurants to use sidewalks, parking spaces and even traffic lanes, so expect additional, albeit slow increases to continue as interior occupancy levels are allowed to increase from 25 to 50%. Expect hotel sales to fare even worse, even though today’s report does not track travel or health care spending. 

May is also where unemployment dropped to 13.3% from 14.7% in April, and employers added 2.5 million jobs to payrolls. 

May’s retail sales increase followed three straight months of declining retail sales, and offered a fresh sign that the worst of the economic shock from the pandemic likely occurred in late March and April. 

Consumer spending is the main driver of the U.S. economy, accounting for more than two-thirds of economic output, and retail sales account for about a quarter of all consumer spending. 

Government assistance has provided a boost especially for workers who remained employed, especially since the options on where to spend money were limited by the lockdown. This drove spending especially on hard goods at the house – sales at home improvement stores, car dealerships, and furniture stores especially. Home fitness equipment also saw a surge.

The purchasing power that exists is directed largely at home based activities, entertainment and comfort.

It is still unclear what shape the recovery will take. While one or two months of positive economic news does not make a trend, and there are many workers still unemployed and businesses shut down that will never reopen, it is important for cities to understand what all of this means for them as the lockdown continues to ease.

There is a lot of pent up demand right now. Going forward, many consumers will want to venture out and begin to resocialize but will be very aware of their surroundings and look to maintain control of their personal space. They will look for opportunities to play and stay local, near their homes, where they will have a stronger sense of trust in their surroundings, neighbors, and favorite businesses.

The desire to maintain control of their space will be a benefit for urban revitalization, especially in places with public parks and gathering spaces where there is plenty of room for social distancing and easy opportunities to avoid, or leave crowds. This will be more of a problem for enclosed malls, at least in the near term. Cities should work with their business community to take advantage of the situation and capitalize on the challenges facing traditional malls at the moment and draw customers back downtown.

Local businesses are hungry for customers to return, and many will begin to offer the value that consumers seek, which will help counter the ‘wal mart and dollar store’ effect that has such a negative impact on small businesses. The hyper-local trend by consumers in the near future, especially those that remained employed and have seen an increase in purchasing power, will benefit downtown areas and small businesses that understand it and work to grow their share, hopefully building a long term customer base through trust, credibility and customer service.

The key will be value in what both the private and public sectors offer to their customers. Leave the luxury indulgences to other places and continue to provide the thing that online retail and manufactured, inauthentic shopping centers cannot provide: quality experience in a quality environment.

Connecting people to their place (community) has never been more important, and the lesson that we always teach our clients about is to focus on the three things that strengthen that connection: Aesthetics, Activities, and Openness. The communities that double down on these three items, in a Post-COVID context, will likely prosper and recover much better when compared to those that don’t.

This will create an environment of growth as new businesses and entrepreneurs seek out those places and markets that have adjusted and built trust and credibility with their customers and residents. Economic downturns are the best time to start a new business or entrepreneurial venture. In addition, many unemployed people will decide that launching a new business is better than an endless job search and reloading the state unemployment website. So remember, this is the time that new ideas and products get launched, and those entrepreneurs are watching you.