After having the worst quarter in history in 2020, the retail industry is beginning to leave the pandemic behind and expects a more balanced recovery this year. The expectation is for a recovery in household spending, with higher demand for clothing and vehicles and lower demand for hygiene items, food and construction materials.
A study by the Federation of Commerce of Goods, Services and Tourism of the State of São Paulo (FecomercioSP) on the value of the Average Monthly Family Ticket (TMF) with retail products in the state of São Paulo shows that retail sales grew 1.9% year over year in 2020, driven by renovation and construction goods and supermarket items. The sector is expected to see an increase of around 10% this year.
“In the second quarter of last year, retail saw a 11% decline in real terms. In the second half of the year, we had a recovery, but in a disorganized way. This spending was channeled to consumption by households that were more at home and started to invest in small renovations, as well as furniture. In other words, housing needs started to account for a bigger chunk of family spending, whose expenses with services, restaurants and trips were curtailed,” said Altamiro Carvalho, an economist with Fecomercio. “This was due to the pent-up demand from the previous semester and the emergency aid. Without it, we would have closed 2020 down 4% and not up nearly 2%.”
The study shows that the pandemic redirected the focus of the consumption habits of São Paulo consumers, giving greater emphasis to purchases in supermarkets, pharmacies and building materials.
Spending in building material stores accounted for 7.4% of retail spending in 2018, increased to 7.5% in 2019, and rose to 8.7% in 2020, Mr. Carvalho said. Spending on home renovation and construction advanced 16.9% last year. With food and hygiene and cleaning products, they rose 12.1%. Statewide, spending on furniture and household items grew 4.5%.
Among the sectors that were most impacted are clothing and vehicles, which find barriers to expand in e-commerce. When looking at the household ticket, on average each household in the state spent R$276.87 per month on clothing and footwear in 2020, 21.5% less than in 2019. Spending on vehicles fell 19%, which makes it clear how the health crisis has affected consumer confidence for the purchase of durable goods, according to the study.
The trend for 2021 is that the losses from sales of items such as clothing and vehicles will be partially recovered. “In this semester, with the resumption of activities such as restaurants and travel, there should be a reduction in the growth of retail consumption. Until now, [money saved because of] travel restrictions ended up being redirected to retail, but there should be a reduction in retail growth as people are traveling more,” said Mr. Carvalho, estimating that growth of supermarket sales will slow down to around 30% from 38% and clothing sales will rise to 8.5% from 6%.
The economist foresees growth for all areas, due to the still pent-up demand, but in a more decelerated and balanced way. “The forecast is for much more balanced growth, barring any unforeseen health conditions,” he said, citing double-digit growth for the clothing and vehicle sectors and a drop in materials for home renovation.
Source: Valor international
