2021: The return of the store

© All data in the article is from the US Census Bureau

Who could have forecasted such a rebound for the bricks and mortar retailing?

A year ago there were a lot of forecasts about what would define the year 2021 in retailing. Many experts gave various predictions, but none of them was able to assess the scale of the recovery that the store based retailing would have.

How could someone have foreseen that the bricks and mortar retailing would leap a staggering 18,6 % against the 2020 numbers?

Rebound after a tough 2020

2020 was a difficult year for store based retailing. The closings of stores and huge growth in online sales gave rise to a discussion about a “new normal” with significantly less store based retailing and more online.

Despite a turbulent spring, the year 2020 did reach almost the same level of sales as 2019. This was especially thanks to a solid end of the year.

Even though 2020 is remembered as a challenging year for retailers, it turned out to be much better year than the 2008 financial crisis, when the industry declined by almost 10%

The year 2021 has been a spectacular success for the store based retailers. The store retailing has flourished throughout the year clearly outpacing both 2020 as well as pre-pandemic 2019.

Strong Christmas

For retailers Christmas is the peak sales month of the year. Christmas sales are so high that normally the same level is achieved only during the next Christmas. Last year was an outlier in terms of this.

Since March 2021 the store based revenues have been significantly higher than the previous Christmas.

And the Christmas trade was significantly higher in revenues than in the years before. In the image below one can see how much the Christmas revenues have grown over the last 10 years.

Online share over time

As the store based retailing had a stellar year, the share of online retailing of all retailing declined.

This was first time since the dot com boom in 2000 when the share of online decreased.

In 2020 the share of online jumped from 11,3% to 14,9%. This was partly due to the difficult struggle of the bricks and mortar stores and partly due to the rapid rise in online sales. Online sales grew by a whopping +31% in 2020, fastest rise in the history.

Despite the extremely high comparison numbers from 2020, online retailing was still able to grow from that very high base. The online retailing market grew last year by 13,6%. Regardless of that growth, the share of online declined slightly to 14,2%, because of the very big rebounding of the bricks and mortar businesses. 

One can see from the image above that online is returning to a longer time trend of gradual increase in the share of all retailing. Thus, one should not make hasty conclusions about the decline of online’s share of retailing. As the economy and retailing normalises, online share of all retailing will continue to increase.

Most likely online share of all retailing will increase on a historical trajectory of 0,5-1,0%-points per year.

Online as the biggest sub sector of US retailing

Even though the share of online out of all retailing declined slightly, online has become clearly the biggest single category within the retailing in the United States. The rise of online is illustrated in the image above as one can see that online was a big fifth biggest category in 2009. During the 2010s online jumped from fifth to first. In 2020s it might be sensible to remove online form the category perspective as it includes sales from all of those categories. Online is not a category, it is a sales channel.

Different categories succeed differently

When looking at the retail growth from the perspective of different retail categories, one can see how unevenly the growth has been distributed. Those categories, which suffered during the pandemic have been the big winners of 2021.

In the image above the winners of 2021 can be seen as the ones with high Year on Year (YoY) growth, but less growth for Year on two Years (Yo2Y) growth.

The biggest winners of 2021 include Clothing and Electronics retailers as well as Department stores and Restaurants. On the other hand, Grocery stores and General merchandise stores flourished during the pandemic.

All but one above the 2019 levels

It is notable that only one category, Electronics retailers, have not been able to grow above the pre-pandemic levels. Even Department stores and Clothing stores, which suffered seriously during the early lockdowns, were able to bounce back above the 2019 levels. In many other countries (such as Sweden and the UK), some non-food categories have not been able to do that.

One reason for this could be that Electronics is one of the biggest categories for online retailing. Big part of the growth of the Electronics category has most probably went to the online channel.

The image above illustrates how severe the pandemic drop was for those categories during the early 2020. Clothing stores were hit especially hard during the early lockdowns, but they have also been very successful in recovering during the last year.

Food: “share of stomach” returning to normal levels

Food is an interesting part of retailing as it had both some of the biggest beneficiaries (grocery stores) and biggest sufferers (restaurants) of the pandemic.

Grocery retailing had a spectacular pandemic year as the restaurants were forced to close doors and rely on deliveries. This is illustrated when one looks into the distribution of money spent on food in general.

Over time the share of food spend has gradually transitioned from restaurants (65% in 1992) to restaurants (46,6% in 2019). The pandemic disrupted this trend.

The trend has gradually been transitioning back to more normal levels. During the peak lockdowns grocery stores had even higher "shares of stomach" than they had even in the early 1990s.

For 2021 restaurants recorded a highest "share of stomach" since the start of the statistics in 1992.

It will be interesting to see how the balance between restaurants and grocery stores develops in the coming years. It would be easy to forecast that during the next few years restaurants will take half of the total money spent in food.