Welcome to the Corona Correction series in association with Refinitiv.
I'm your host Roger Hirst.
Over a month ago, I interviewed Refinitiv's Director of Consumer Research Jharonne Martis
about the outlook for her sector.
Back then, China was already providing a framework in which lockdowns and supply chain disruption
would start to leave shop shelves empty.
One month on I asked Jharonne if any clear patterns are beginning to emerge both on the
US high street and in China.
So we're definitely seeing a strong transition to digital.
The Coronavirus has definitely underlined the importance for retailers to have a very
strong online presence and good digital marketing strategy.
Retailers are now reopening their stores in China and are telling us that there is a good
amount of traffic in their stores at the same levels seen before the pandemic started.
But despite the traffic, a lot of the consumers are still gravitating and going online to
fulfill these purchases.
So as a result, we are already seeing that online luxury retailer Farfetch has ramped
up their hiring, and are hiring technicians and software engineers.
Positions that can be completed as working from home, in order to try to meet the strong
online demand that we are already seeing for spending.
And this Refinitiv discovered in a partnership with Link-Up, our alternative data partner.
Retailers are sitting on excess inventory.
Nike alone just saw a spike of 7% in inventory levels, and as a result were already seeing
that about 50% of their merchandise is on sale online.
Refinitiv discovered in a partnership with StyleSage.
And this is worrisome because the amount of merchandise that is on sale has been going
up since the beginning of March and also the average percentage discount, which can be
troublesome for for profits in the near term.
As a result, our StarMine models are already suggesting that analysts polled by Refinitiv
are getting significantly bearish on the retailers as they've been hit in a very vulnerable time.
U.S. mall stores traffic has been weak for some time and same store sales have been very
low.
So as a result, their probability of default have gone up, and it doesn't look very promising
as the Coronavirus pandemic continues.
Our Refinitiv Consumer Confidence Index has dropped to an eight year low, and this is
because over six million Americans have now filed for unemployment.
And this is troublesome because over two thirds of the U.S GDP is dependent on consumer spending.
Our research at Refinitiv shows that when the unemployment rate goes up, consumers tend
to put their hands in their pockets and hold back on spending.
And our report already shows that the consumers that are employed, are holding back on major
purchases on houses and cars in fear that they may actually lose their job in the near
future as well.
Health and wellness are at the forefront of the U.S consumer right now as they're at home
and doing a lot of workouts.
As they go on the Nike app and try to take these classes, they are also motivated to
shop online for activewear and sportswear.
We're also seeing that this is causing consumers to shift their spending more online and it's
underlined the importance of having a strong digital presence.
Nike, for example, recently just reported earnings and saw very healthy numbers, despite
the fact that they are strongly dependent on the Chinese consumer, which underlines
why it's important for retailers to have a strong omni channel presence.
Whilst many people remain skeptical about the speed of recovery in China, Jharonne has
seen some clear signs of demand picking up in the luxury sector and store volumes beginning
to normalise.
Although footfall has picked up into the shops that have reopened, shoppers are however,
still preferring to make their purchases online, resulting in a shift in retail hiring towards
I.T. personnel.
Whilst the shift in online sales is not surprising, the speed with which Chinese consumers have
returned to their high street is perhaps reassuring.
But this may simply be a burst of energy ahead of a period of global rolling outages that
could plague the high street for months to come.
We'll see you later with another update.