As a senior analytics strategist working in an agency with clients from different industries, I saw very different performances throughout the pandemic. Certain online dealerships and auto websites far outperformed any historical achievement while others had to cut budgets significantly. The variations in sales performance also empirically correlated with the time frames over which the public received more support in the form of stimulus testing.
My team at Portent conducted the study described below to test our hypotheses that the pandemic led to increased sales for online retailers and the auto industry, and that these spikes correlated with the distribution of stimuli. We discovered some specific factors that increase the likelihood of our hypothesis being confirmed in this way.
“Unparalleled” was undoubtedly the word of the year and it touched all aspects of life and business. Consumer behavior has changed in all industries. Unfortunately, we have seen numerous stalls in certain markets while others have been sustained or even flourished. This post provides some observations on online behavior as well as some consumer data that should be used as predictive indicators for the rest of the pandemic.
The observations of changes in online behavior were accessed and anonymized by 16 of our customers in 8 different industries. For this analysis, we have narrowed these 8 industries down to three categories defined by Google Analytics: Shopping (10), Travel (3) and Cars & Vehicles (3).
The websites included in this analysis were restricted to the United States whenever possible, with monthly revenues of $ 16,000 to $ 103,000 and monthly sessions of $ 4,000 to $ 44,000.
Observation # 1: Stimulus testing resulted in an increase in online behavior
Stimulus checks sparked the first revival in spending since the pandemic began. Granted, it only took about a month between the initial notice of a lockdown and the start of stimulus payments. That spike in spending stayed at a higher level, however, after most of the stimulus tests were distributed for most of the locations in this analysis – with the exception of travel websites, of course.
The first round of stimulus checks offered some relief to individual Americans who made less than $ 99,000 a year, and those who made less than $ 75,000 received the full $ 1,200. There were differences in the limits depending on whether you have children or how you filed your taxes.
In the (1) week of April 13th, there was a noticeable spike in both meetings and revenues when $ 80 million in stimulus payments were deposited for taxpayers who had established direct deposits. By (2) week of April 20th, additional rounds of deposits have been made for those who have manually set up direct deposits through the IRS. And by (3) week of June 3rd, the IRS had provided Americans with $ 270 billion in stimulus checks. At that point, earnings and sessions normalized below this period of stimulus distributions until the undeniable Black Friday sales hit.
Observation # 2: The impact depends on the market
There were obvious industries that were hardest hit by the changes in consumer behavior and are barely recovering: travel, retail, and restaurants, to name just those that were hardest hit. On the flip side, some industries are actually doing better than before, such as online retail and grocery and beverage stores.
The analyzes by S&P Global and the US Census Bureau were also precisely reflected in our study. Through the end of November, the average revenue for the shopping sites in our analysis was 27.5% higher than our March decline, while the sessions were 24.4% higher.
What was surprising, however, was that the Autos & Vehicles websites actually had higher averages than the Shopping websites. The locations in this industry saw 26.8% more meetings and 36.8% more sales than at the start of the pandemic, and were also well above previous levels at the start of the year.
The sharp increase in sessions and revenues also coincided with the start of the distribution of stimulus checks. In hindsight, the increase in consumer spending in this industry could have been expected given the limitations and fears associated with traveling by air. Online behavior is also higher in the summer months, as those who became restless from quarantine took road trips to satisfy their wanderlust.
There were some other predictable trends that we identified in our study:
- There has been a rapid surge in sportswear purchases, with averages above pre-pandemic levels.
- There has been a sustained surge in revenue, and in particular traffic, for baked goods and flour purchases, which has remained at much higher levels compared to previous numbers. Then there was the seasonal influx of interest during the holidays. Interestingly, the conversion rate during the holidays was 123% higher than when the pandemic started.
- With parents and families stuck at home, online behavior for children's toys has increased exponentially and slowly. Although the growth has tapered, it continues to show an upward trend.
- As expected, travel sites had the biggest hit from our study with a significant decrease that resulted in little to no recovery. The summer revenue and meetings surge is almost entirely due to a resort where the Autos & Vehicles locations' wanderlust has similarly increased.
Observation No. 3: There is a positive correlation between AOV and percentage change in turnover
There was a pretty strong 0.76 correlation between Average Order Value (AOV) and the percentage change in sales year over year * for shopping sites only. Consumer behavior on Autos & Vehicles websites was more dependent on stimulus checks and weather, while behavior on Travel websites was more dependent on the feeling of security.
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* The data in this table was obtained with the following notices:
- The year-to-year comparison was for November 2019 and November 2020 (November is the month with the highest performance, based on seasonality)
- Two anomalies were excluded from this data: (1) a flour company and (2) a company with an AOV of nearly $ 2,000
This makes intuitive sense when you think about who is disproportionately affected by the pandemic. Industries that are still thriving were those that could more easily move to 100% remote work and those that had enough resources to survive some decline in customers. Those lucky enough to work in these industries during this time are also more likely to be paid higher than the median. In fact, only 30% of parents earning $ 200,000 or more have lost their jobs since the pandemic, compared to 65% of parents earning less than $ 25,000. Those who lost their jobs in higher income brackets were more likely to find work again.
Aside from the first few months, when the change in consumer spending was due to uncertainty, high-income consumers were not significantly affected by the pandemic. Although both the high-income and low-income brackets saw a significant decrease in spending initially, high-income consumers returned to levels comparable to January 2020, while low-income consumers still averaged about 10% below average through September 2020 lay.
Considerations for forecasting future performance
In all honesty, there's nothing new in this analysis that hasn't emerged through market research, and those observations have been corroborated by economic data. The key takeaways here are to pay attention to the trends we see, think about how they relate to your target audience or customers, and to be aware of new developments that may shift back into. When you re-enter the digital world The marketplace signals direction normality.
Stay up to date on economic trends
Keep up to date with the economic research published by S&P and monitor press releases from the Bureau of Economic Analysis to identify trends in personal income, disposable personal income (DPI), gross domestic product (GDP) and personal consumption expenditure (PCE) . . The PCE began immersion in July, which correlates with the changes in consumer behavior we saw in our study. While the reports are not made public immediately, it can affect your efforts to stay current on the direction of these trends.
Look at your target audience
It is important that you narrow your research down to your target audience. If your business is international, you probably won't be as badly affected by future US economic reviews. However, different international markets will recover at different rates.
It is also important to keep an eye on your industry. S&P already estimates that the industries most affected may not fully recover until 2022. This means industries like retail, travel, and in-store service will need to find alternative ways to get back to normal levels during this time.
Once you've considered your market and industry, weigh the risks based on your AOV and the income level of your average consumer. The higher the average income level, the more likely it is that your market has already recovered, or the higher your chances of being able to adapt successfully.
Additional federal support
While U.S. government support during the pandemic has been poor at best, additional support is possible. The most recent round of stimulus testing was more limited than the first, meaning the impact on consumer behavior may be less noticeable. Economists suggest that consumers would rather save that smaller amount than bring it back into the economy. However, these bills should be taken into account when making forecasts with the hopeful potential of additional (and more significant) federal support.
It will likely take at least a few months for vaccination distribution to be effective and possibly even longer for herd immunity to be achieved. During this time of moving forward in the pandemic, we must all monitor and predict consumer behavior in unprecedented ways until we see normality again.