Sectors Buoyed by COVID-19: Which Will Plateau Post-Pandemic?

The COVID-19 pandemic has caused dramatic shifts in consumer demand and behaviour across the globe. In our previous article, we explored the sectors that are forecast to grow post-pandemic. Many of the sectors which are expected to see continued growth centre around technology. SaaS, digital health, mental health or wellbeing apps, eCommerce and digital marketing platforms are all expected to grow significantly.

In contrast, the sectors expected to plateau are primarily material products that were artificially inflated by the pandemic due to dramatic lifestyle shifts. This includes garden furniture, DIY and homeware products, apparel and retail.

So, what does the future hold for these sectors post-pandemic?

COVID-19 and Garden Furniture and Home Renovations/DIY

Despite an increase in demand for certain products such as DIY materials, garden furniture and other homewares, the global home and garden product retail market shrank by 3.4% in 2020 due to operational difficulties and rising expenses.

home and garden retail

United States

When coronavirus cases started to soar in the United States, many states issued stay-at-home orders to reduce virus transmission. As a result, many Americans purchased outdoor furniture, seeing as they were going to be spending more time in their gardens. Joe Hartsig, Executive Vice President and Chief Merchandising Officer of Bed, Bath and Beyond explained that “customers want to get outside and embrace the outdoor spaces they have in every way possible”.

The United States is the largest furniture market in the world. The COVID-19 pandemic saw the overall value of the market increase significantly. In 2021, the U.S. outdoor furniture market is valued at approximately $9.06 billion. During the pandemic, the top outdoor furniture brands saw website visits skyrocket. Between March 2020 and January 2021 Ikea saw website visits increase by 77.37%, Ashley Home Store by 70.96%, and Williams Sonoma by 84.84%.

Similarly, home improvement is the largest segment of the home and garden product retail market in the United States, accounting for 67.2% of the market’s total value. The market benefitted from a surge in 2020 as consumers took COVID-19 stay at home measures as an opportunity to make home improvements. However, the same growth which was experienced in 2020 is not expected to continue into 2021. Many Americans have resumed the ‘normal’ way of living and leave their homes more often for leisure pursuits.

United Kingdom

In the UK, a similar situation to the United States occurred. Sales of paint and wallpaper soared during lockdown as people focused on DIY and home improvement. In 2020, there was a 47.1% increase in online paint sales across a range of retailers. Kingfisher, B&Q’s parent company, said that online sales surged more than 200% in both May and June.

DIY stores such as B&Q, ScrewFix and Wickes saw visits to their websites increase from March 2020 to September 2020. In that time period, B&Q saw website visits increase by 14.9%, Screwfix by 37.25%, and Wickes by 48.63%. Since September, growth has slowed significantly. B&Q only saw a 0.27% increase in website visits between September 2020 and January 2021. Screwfix and Wickes saw a 4.39% and 16.1% decline respectively. The lockdowns certainly spurred demand for home improvement products.

A similar trend occurred in furniture sales during the first wave of the virus. Furniture retailers such as Ikea, Argos, Made.com and Wayfair saw visits to their websites increase dramatically between March and September 2020. Visits to IKEA’s website increased by 80.71%, Argos by 59.63% and Made.com by 81.88%. While online demand grew, the closure of physical stores was damaging to revenue. For example, Ikea’s UK sales fell more than 10% in the year to 31st August, while online sales increased by nearly a third. Online demand for desks, garden furniture and other homeware items could not make up for the loss of revenue from showrooms.

Europe

The situation is similar in Europe. A string of lockdowns across European nations such as France, Germany, Italy and Spain boosted demand for outdoor furniture, DIY materials and homeware. However, the home and garden product retail market shrank in several European countries due to operational difficulties and increased costs. For example, the market shrank by 3.5% in France to reach a value of $48.5 due to a difficult operating environment. The Spanish home and garden product retail market experienced a more dramatic decline, shrinking by 12.2% in 2020 to reach a value of $9,685.3 million. The German market faired very well in comparison, growing by 6.8% in 2020 to reach a value of $85.2 billion. 

In many markets, the financial impact of store closures was softened by an increase in demand for DIY products, homeware and garden furniture. However, increased operating costs and large sums of investment in eCommerce capabilities demand revenues. As the world becomes free of coronavirus-related restrictions, the home improvement and homeware markets will return to their old ways: slow, incremental growth.

COVID-19 and Fashion and Loungewear

Lockdowns in the United States, United Kingdom and Europe are damaging clothing and apparel brands that rely on physical stores. Unfortunately, the shift to eCommerce cannot compensate entirely for the loss of store sales. The news of the vaccine and lockdown exit plans is certainly welcome for the industry. However, significant demand for occasionwear will not return until the end of 2021. Instead, consumers are purchasing more loungewear.

fashion and apparel

United States

In the United States, clothing and accessory retail stores saw a devastating 87% decline in sales in April. However, certain clothing categories have surged in demand. For example, pyjama sales increased by 143% in April 2020 when compared to March of the same year. Apparel stores that rely on physical stores are losing out to eCommerce apparel retailers such as Amazon, which is the United States top fashion retailer. Loungewear helped to dampen losses for some retailers, as loungewear brands such as Aerie and American Eagle saw digital sales increase by 142% and 47% respectively. 

United Kingdom

In the UK, the outlook for fashion retailers was already bleak pre-pandemic. Since 2018, 1,875 fashion retailers had already closed their doors. The pandemic intensified the industry’s decline; the volume of clothing sales in April 2020 plummeted by 50.2% when compared with March 2020, which had already fallen by 34.9% on the previous month. Many clothing household names fell into administration during the pandemic such as The Arcadia Group, which contained Topshop, Burton, Evans, Miss Selfridge, Dorothy Perkins and more. Despite this, brands such as ASOS honed in on the sudden demand for loungewear, resulting in a 329% rise in annual profits. In the West, the pandemic has led to what some commentators are calling the ‘casualisation of clothing’. Comfortable clothing has become the name of the game as millions of people worldwide spend more time at home. This trend helped to keep some retailers from complete financial devastation. In the case of ASOS, it helped to increase sales significantly.

Europe

The fashion industry is also struggling in Europe. Similar to the UK, the European clothing market was struggling pre-pandemic. France, Spain and Italy all saw their apparel industry market value shrink between 0.2 and 2.6% in 2018. The pandemic exacerbated the decline further. Production fell in the European clothing sector by 37.4% between April and June 2020 compared to the same period in 2019. Retail sales of clothing saw the most dramatic decline, with a devastating 43.5% drop in sales. As European nations come out of lockdown, clothing retailers will need to focus more heavily on eCommerce if they hope to grow.

COVID-19 and Retail

When the coronavirus pandemic hit, many retailers across the world had to close their doors to reduce transmission. Luckily, many could continue selling their products online as they had established eCommerce operations. However, the abrupt store closures had a clear effect on revenue across markets. Q4, sometimes known as ‘the golden quarter’ was significantly dampened by coronavirus restrictions when compared to previous years. Apparel retailers will need to follow Amazon Fashion’s lead and focus their efforts on eCommerce to increase revenue. You can learn more about COVID-19’s effect on the clothing industry here.

retail

United States

In the United States, retail sales plunged 20% from February to April. Even before the COVID-19 crisis began, Deloitte found that retail was facing several financial challenges that could make it difficult for some retailers to weather a recession. Unfortunately, many businesses were not prepared for the sudden acceleration of digital retail. As a result, many lost customers that they had spent years attracting. Once life goes back to ‘normal’, retailers will not be able to rely on their previous strategies to increase sales. The retail landscape has changed forever.

The situation for eCommerce retailers in the United States is far more positive than in Europe. eCommerce sales hit $245.28 billion in Q4, up from $185.70 billion during Q4 of 2019, a 32% increase in 12 months. However, growth at this level will not continue into 2021. Many consumers turned to eCommerce retailers such as Amazon in the wake of the pandemic because physical retailers temporarily closed their doors. Between February and April, eCommerce retailers saw visits to their websites increase significantly. Notably, Amazon saw an increase of 29.44%, and Target saw an increase of 104.09% as more Americans shopped online.

United Kingdom

In the UK, the retail industry has had a rollercoaster of a year. It is an integral part of the UK economy which comprises 5.1% of the UK GDP. The shock of the pandemic was felt In April 2020 when retail sales fell by a record 18.1% as thousands of non-essential shops closed to reduce virus transmission. In 2020, total retail sales volumes fell by 1.9% compared with 2019, which is the largest annual fall on record. When non-essential retail reopened in June, the volume of retail sales increased by 13.9% compared to the previous month as retail recovered from the sharp falls experienced since the start of the COVID-19 pandemic. Slow recovery continued until November when many stores had to close once again due to the second lockdown.

Europe

The retail industry in Europe saw dramatic change in 2020. Similar to the United States and the UK, retail sales decreased by 15% in April. Retail sales only started to increase in June when non-essential retail was allowed to reopen. When the second wave hit in November, retail sales decreased by 1.5% before increasing by 0.5% in December when compared to the previous year. As the vaccine rollout continues in Europe, retail should see revenue slowly increase. However, the retail industry in Europe has been forever changed by the pandemic.

Across all markets, the COVID-19 pandemic has accelerated new habits, the most prominent being eCommerce purchases. If retailers wish to succeed in 2021 and beyond, they must improve their eCommerce capabilities. The world is embracing all things digital at breakneck speed, and brands across all industries must be ready to meet the digital challenge.

We’ve explored the sectors that will likely plateau after the COVID-19 pandemic. But which sectors will grow? Find out here.