UNIDENTIFIED PERSON, BYLINE: NPR.
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STACEY VANEK SMITH, HOST:
This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith.
CARDIFF GARCIA, HOST:
And I'm Cardiff Garcia. The coronavirus pandemic and recession and the employment crisis that it brought did not hit everyone in the U.S. economy equally. And one of the clearest places we can see that is in the retail sector.
VANEK SMITH: Yeah. So last year, even as unemployment levels were the highest we'd seen since the Great Depression, retail sales took off. They hit an all-time high - a record.
GARCIA: Yeah. And that's partly because a lot of people who were able to keep their jobs but weren't necessarily able to travel or eat out or spend their money on those kinds of things, started spending their money on stuff instead.
VANEK SMITH: Yes. Home sales spiked and also exercise equipment, home office furniture, electronics.
GARCIA: Yeah. Outdoor furniture also took off, and fire pits were selling out. Also, food and cookware were selling huge - you know, stuff for the kitchen. And on a related note, athleisure clothing saw a big bump. You know, people buying stretchy pants, those kinds of things.
VANEK SMITH: I bought stretchy pants. I have more stretchy pants than I used to.
GARCIA: They're comfortable.
VANEK SMITH: They're comfortable, and they accommodate all the extra food. And, you know, our changing lifestyle has changed what we buy. Like, skincare products have done really well, I think, because we're all staring at our faces on Zoom all the time and...
GARCIA: Yeah, it's not healthy (laughter).
VANEK SMITH: No, it's not healthy. And so then you end up spending, like, $200 on, like, makeup and face cream to try to, like, improve that experience.
GARCIA: (Laughter) Yeah. Not every retailer was flying high, though. It's been really lean times for some of them. A lot of small businesses closed their doors, for example, or have just really struggled. But some big businesses have also struggled. J.Crew, Neiman Marcus, Guitar Center, JCPenney, GNC - I'm running out of breath - they all filed for bankruptcy.
VANEK SMITH: And also, last month, all of that spending everyone had been doing? All that seemed to be kind of running out of steam. Retail sales started to dip a bit. Now though, stimulus checks are arriving, and a lot of retailers could see a boost. Fourteen-hundred-dollar stimulus checks are coming to most Americans. And that will put really desperately needed money into the hands of people to do things like pay rent, buy food, pay bills, but also maybe buy some things they've been waiting to get, like, for their home office, for online school, or maybe just for fun.
GARCIA: And this is a big deal because consumer spending - you know, people buying goods and services - that makes up three-quarters of the U.S. economy. You might say, so goes shopping, so goes the economy.
VANEK SMITH: Yes, that's fair.
GARCIA: (Laughter) So the big economic question of the hour is, will the stimulus checks give an extra boost to retailers?
VANEK SMITH: To answer that question, we called up Sucharita Kodali. She's an analyst at Forrester. And we asked her to break down pandemic retail and look at what effect the stimulus money could have. That conversation after the break.
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VANEK SMITH: Sucharita Kodali, retail analyst at Forrester, thank you for joining us.
SUCHARITA KODALI: Thank you. It's always great to be on.
VANEK SMITH: So Sucharita, I wanted to talk with you about the retail sector and specifically, what's about to happen to that sector as stimulus money goes out across the economy. I mean, it's interesting because retailers know exactly how much money a lot of people are going to be getting, and that could be an opportunity to kind of market or target that amount.
For instance, our editor, Jolie Myers, got an ad from an online retailer for 1,400 items that were $1,400 or less. And I feel like we might start to see a lot of these kinds of ads surfacing soon. So I guess what does this round of stimulus checks mean for the retail sector?
KODALI: Well, so there were two previous stimulus checks in 2020 prior to this one that's going out now. And this one is bigger than either of the previous two. So there was the one that was the $1,200 one in - early in the pandemic. There was the $600 one in December. And now, this one is a $1,400 one. So it's bigger than the previous ones.
So even with the $1,200 stimulus, people, for the most part, spent it on essential things. They spent it on rent, or they would pay down debt, or they were paying off their credit card bills. You did have, like, number, you know, six or seven down on the list of things that people would do is they would buy discretionary items. And as soon as that stimulus check - that first stimulus check dropped in April - when, I would argue, it was, you know, at the height of uncertainty, and it was at the peak of lockdowns - within days, you did see a lift in consumer spending at retail.
We heard similar things after the second stimulus check. So it would stand to reason that absolutely this third stimulus check will help retail. And especially as companies seem to be rebounding and we are seeing improvements in some of the unemployment numbers, what we may see is even a greater percent of that stimulus, not only because it's bigger, but because people may feel - some people, some portion of people may feel more financially secure, that it will absolutely go to discretionary and retail.
VANEK SMITH: Well, as you said, Sucharita, things are really different now than they were when the $1,200 stimulus checks came out. I mean, back then, there was just an incredible amount of uncertainty. Like, we had no idea how long any of this would last. Now, I mean, we've got vaccines. Things are starting to open back up again. It seems like maybe there's just less overall uncertainty right now.
KODALI: You're absolutely right. I mean, the end is not only in sight, but, you know, there's this sense of returning to normalcy. And when you have that, some of that money that would have gone into savings is now going into discretionary spending. And you may also even have, you know, less of a need to spend as much on things like rent or paying down your debt because you have other sources of income to supplement you.
VANEK SMITH: Is there any category that's just, you think, still going to really struggle - like, that is just not even close to coming back?
KODALI: Travel, especially business travel. And that may never come back to the degree that was pre-pandemic because people have discovered that you can host a significant percent of meetings virtually and still achieve a fair amount of success. So that, I think, will be the sector in retail that will be very, very challenged probably for a couple of years.
VANEK SMITH: And what about business clothes? What about, like, professional suits, jackets?
KODALI: That has struggled. I mean, I've had retailers being like, when is this going to come back? When are people going to go back to the offices? And it's like, if they go back, it's probably going to be, like, four days a week. And even if they go back, it may be more of a business casual, you know, kind of dress code anyway. So, you know, kind of if people aren't back in the office and they're not traveling, they're certainly not going to be buying the clothes and the accoutrements they need for those meetings.
On the other hand, we did hear - I think, like, Urban Outfitters said, that, you know, kind of the best-selling items in a long time were finally dresses. So that could be a little bit of an indicator that some of those, you know, kind of pre-pandemic outfits may be coming back, if for nothing else, maybe, you know, because people are scheduling, like, graduations and weddings and, you know, kind of other things they would have normally done in the spring, they are doing in some parts of the country, at least in 2021. So you need, you know, you need clothes for those things.
VANEK SMITH: And finally, Sucharita, I'm wondering, like, is there anything that you spent money on over the last year that you didn't spend money on before? Like - I don't know - outdoor furniture or anything that kind of was kind of a new expense?
KODALI: We probably spent money - and I shouldn't say this on national radio - but probably more on alcohol than I ever have.
VANEK SMITH: (Laughter) Same. Same. A lot more alcohol, a lot more, like, comfort food, which of course, led to the feedback loop of needing stretchy pants (laughter).
KODALI: (Laughter) Needing stretchy pants - exactly.
VANEK SMITH: Sucharita, thank you so much for talking with me.
KODALI: Thanks, Stacy. It was great to talk to you again.
VANEK SMITH: This episode of THE INDICATOR was produced by Jamila Huxtable and fact-checked by Sam Tsai (ph). It was edited by Jolie Myers, and THE INDICATOR is a production of NPR.
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