What our data has to say about COVID-19’s impact on consumer spending in March
- May 5, 2020 | Jonathan Parramore
The global spread of COVID-19 has had a significant impact on the global economy. Many industries have been hit with a steady decline in sales since the onset of the global pandemic, while others have experienced an uptick in customer traffic. Avalara sees transaction data for thousands of customers around the world. We started exploring our data to better understand the impact of COVID-19 on our customers, and unearthed some other interesting insights along the way.
We wanted to evaluate what changes took place when most of the world’s population went under stay-at-home orders, starting mid-March. To measure the impact, we compared the usage of our systems in the last two weeks of March to the average of the last two weeks in January and February of this year. After calculating the percent change between those two data sets for each Avalara customer, we created two lists categorized by industry grouping:
- The accounts with the highest increase in traffic
- The accounts with the highest decrease in traffic
As a result of stay-at-home orders, some of what we found in the data was expected, while other findings were surprising. For example, our data showed that consumers were still regularly buying boats and golf equipment despite a decline in other leisure-centric purchases. Perhaps social distancing is easier on the golf course or open water, or maybe folks are just optimistic about summertime. At a high level, our data found that the most in-demand products and services were those that can be digitally sourced to help consumers navigate their new normal at home, with most industries supporting key home activities, like exercise and learning, seeing a 100% increase or more in customer traffic. A full summary of our findings is included below.
Key takeaways and insights
Online selling capabilities are required to meet demand
All data points in the following sections represent the percentage of change in transaction rates in March 2020 when compared to January and February 2020.
We found that businesses selling online experienced an increase in traffic, while those without online selling capabilities did not. Businesses from industry segments otherwise experiencing high traffic growth, like home improvement stores and specialty foods, with no online presence or capability during this time have experienced a significant decrease in transactions (74% on average in March 2020) when compared to those in the industry able to sell online.
For businesses looking to bring their offering online due to closures and stay-at-home orders, Avalara has put together a guide that outlines the steps you can take to get your store online quickly and efficiently.
Industries with an increase in online discretionary consumer spending
Despite business closures and stay-at-home orders, we found that discretionary consumer spending hasn’t declined across the board. Instead, of the Avalara customers across industries that saw significant growth, the products consumers purchased were those that are helpful to adjust to life at home. This includes products that provide consumers with a sense of control during the pandemic, help them fill free time, and fill a gap left by essential services that are otherwise closed. From survival equipment to products that can be used to keep kids busy, many industries saw an uptick during our new normal at home.
Products that give consumers the perceived ability to respond to and manage the pandemic
- Survival supplies. The rate of transactions for businesses selling survival products, like water purification systems, preserved food, camp stoves, and solar panels, increased by 163%.
- Guns/ammunition. The rate of transactions for gun and ammunition purchases increased by 123%.
Products that help fill free time at home
- Hobby supplies. The rate of transactions for hobby supplies, like arts and crafts, collectible car parts, and drones rose by 188%.
- Home improvement supplies. The rate of transactions for home improvement supplies grew by 118%.
- Kids entertainment/distractions. The rate of transactions for things like games, pools, bikes, and playground equipment (really anything to entertain and distract kids for a bit) increased by 155%.
Products that re-create services that are otherwise unavailable
- Home learning. The rate of transactions for home learning equipment and supplies increased by 209%.
- Home fitness. The rate of transactions for home fitness programs and equipment grew by 210%. We have no knowledge of the use of said programs and equipment once installed, though we assume that minutes spent on fitness are not up 210%.
- Specialty food delivery. The rate of transactions for the delivery of specialty food items like desserts, meat, baked goods, coffee, and gluten-free foods rose by 154%.
Industries experiencing a decrease in online discretionary consumer spending
Our data also showed that discretionary spending on products no longer useful for consumers staying at home took a nosedive. Of the Avalara customers that saw a decline, businesses that sell products primarily used in public or social gatherings outside of the home have seen a downward trend.
- Shoes. The rate of transactions for shoes decreased by 71%.
- Jewelry. The rate of transactions for jewelry products declined by 71%.
- Formal wear. The rate of transactions for formal wear products decreased by 69%.
- Outdoor and adventure gear. The rate of transactions for outdoor clothing and adventure gear decreased by 73% and 75% respectively. We found this interesting given the rise in survival gear transactions.
Stay-at-home orders also had a significant impact on the automotive sector. With less traffic on roadways, the rate of transactions for car products declined in March 2020 by 79%.
Businesses appear to deprioritize nonessential or closed vendors
As expected, many vendors with no online presence that were deemed “nonessential” or otherwise closed due to stay-at-home orders took a major hit in March. From construction to manufacturing suppliers, a decline could be found at points throughout the business supply chain.
- Commercial equipment. The rate of transactions for commercial equipment decreased by 78%.
- Promotional products. The rate of transactions for promotional products decreased by 71%.
- Events. The rate of transactions for in-person events decreased by 75%.
The decline in transactions for primarily in-person businesses was felt across industries. Businesses in the manufacturing, construction, and lodging industries all saw a decline in March 2020. Other brick-and-mortar organizations like offices, spas, martial arts studios, and tanning salons, were also significantly impacted. Interestingly, niche industries like mail-order houses and book publishers saw some of the highest rates of decline.
Businesses appear to be increasing online marketing spend
While our data showed that businesses are reducing immediate spend on in-person events and associated products, it also showed a significant increase in investments in online marketing tactics. Likely because businesses are currently unable to be physically in the same place as customers and prospects, they’re spending budgets on creative ways to reach them online. We were interested to see how much transactions for online marketing efforts increased in correlation to the decline in in-person event spending.
- Online marketing agencies and solutions. The rate of transactions for online marketing agencies and the like grew by 201%.
Businesses bought products and services that enable remote work
Our data also showed that most businesses have increased their investment in digital solutions and at-home office supplies in an effort to equip employees for remote work. While most businesses continued to spend money, the majority of spending focused on adapting to and enabling home-based business operations.
- Home office supplies. The rate of transactions for home office supplies increased by 163%. Everything from stand-up desks and office chairs to headphones, headsets, monitors, keyboards, device mounting, and general office supplies saw an uptick in transactions in March 2020.
We also saw an upward trend among providers of remote work services and solutions, such as virtual real estate tours, temporary building rentals, and medical testing and screening providers. The trend saw an increase in transactions of 102% in March 2020.
State-by-state impact on traffic
Our team also wanted to learn more about the impact on consumer spending at the state level. Because several “hot spots” have popped up around the country during the pandemic, did higher numbers of COVID-19 cases have an impact on consumer spending?
We first looked at the impact on overall spending traffic at the state level. Unsurprisingly, the majority of states saw a decline in overall traffic of at least -17%. Some of the hardest-hit states blanketed the midsection and western portions of the country. However, the state with the largest decline in overall traffic was Massachusetts with a -17.05% decrease in March 2020.
On the other hand, our data showed that some states saw an uptick in consumer spending in March 2020 when compared to January and February. Delaware saw the largest increase at 18% with other states like Maine, Missouri, and Mississippi seeing increases.
We found it interesting that while many of the hardest-hit states in terms of COVID-19 cases, like New York, Michigan, and California saw a decline in overall traffic, Louisiana, which has been a hot spot for the virus, saw an increase.
State-by-state impact on services traffic
While overall spending traffic at the state level offered some interesting takeaways, our team wanted to take a closer look at specific tax code types to see how the impact varied across the country. We decided to look at transactions under the “services” tax code, which includes a wide range of services from tree trimming and pool cleaning to flying lessons and sign painting.
Interestingly enough, we found that every state except for Delaware saw a decline in traffic for services in March (transactions for services in Delaware were up 55% in March). On the other hand, hard-hit states like Arkansas and Nebraska saw a decline in transaction rates for services of 25% and 30% respectively.
Avalara serves businesses across the United States and around the world. Additional resources for businesses to help understand and navigate this crisis can be found on our COVID-19 resources hub.