U.S. Retail Sector Recovers Faster Than Expected, Says National League of Cities
WASHINGTON, D.C. — In 2020, the retail sector suffered due to shutdowns and pandemic restrictions on businesses. Additionally, in April 2020, the U.S. unemployment rate reached 14.7 percent, which is the highest it’s been since the Great Depression, according to CNBC.
However, the COVID-19 pandemic influenced the retail industry in a positive way by speeding up some pre-existing retail trends, according to the National League of Cities’ (NLC) new report, The Future of Cities: Re-envisioning Retail. The report shows the key trends in the retail industry and explains how local governmental officials can continue to facilitate positive change in the retail sector.
The NLC report found that even though retail industry jobs declined fast last year, now the industry has bounced back more quickly than expected. The Bureau of Labor Statistics reported that the U.S. economy added 850,000 jobs in June, including a 194,000 increase in bar and restaurant jobs and an increase of 67,000 jobs in the retail sector.
Many retailers struggled last year due to lockdowns and less income for consumers to spend. The NLC reported that in 2020, more than 12,200 major retail chain stores closed permanently, which equals to 159 million square feet of emptied retail space. Even though there were a lot of store closures in 2020, this year retailers are opening more stores than they are closing with an approximately 40 percent increase in year-over-year store opening announcements.
Many retailers grew their ability to make a portion of their sales online through e-commerce, which became more important during the pandemic with everyone stuck inside their houses. In 2019, e-commerce only made-up 11 percent of retail sales, but in 2020, it made up 14 percent. Jobs in warehousing and storage also rose 8 percent from January 2020 to January 2021 due to growth in e-commerce.
The NLC analysis found that people who lost their jobs in the retail industry were working in sectors that were already struggling pre-pandemic. For example, clothing, sporting goods, hobby, books, music and electronic stores saw a 15 to 25 percent decrease in jobs in the last year. In-store jobs like cashiers are on the decline but jobs related to e-commerce such as delivery drivers and order fillers are on the rise.
The key trends that the NLC believes will change the future of retail are the following:
• Experience-based retail is on the rise. Consumers would rather spend money on experiences than physical goods, most likely because COVID-19 stopped people from being able to travel or go out anywhere for a whole year. There is now a pent-up demand to make memories, rather than just buy physical items. The shift towards experience-based retail will change the type of retail jobs there are.
• The retail industry is evolving to use new technologies. The NLC believes that local governments and retailers will have to work together to figure out the proper use of these emerging technologies and how it could affect the community.
• The demand for mixed-use retail spaces have increased.
According to the NLC, local governments stepped up during the pandemic to meet the needs of the retail sector. Government officials allowed for curbside pickup and outside dining so retailers and businesses could still make revenue despite pandemic restrictions. For example, the local government of Charlotte, North Carolina arranged funding from the CARES Act to help more than 3,000 local businesses operate in a COVID-conscious way.
The NLC report also includes eight recommendations for city leaders to continue positive change and recovery for the retail industry:
1. Put more emphasis on flexible land use codes;
2. Prepare to have the type and amount of physical space to meet consumers’ needs and to allow for retailers to run both physical and virtual businesses;
3. Create community hubs to provide residents the products they need to live, work and play outside of the business center of their cities;
4. Ensure wage and workplace fairness by supporting living wages and increasing benefits so that retailers will have enough employees working;
5. Promote workforce development programs to address changes in labor demand, focusing on soft skills that are less likely to become automated;
6. Promote a diverse local business economy by fostering independent retail growth;
7. Speed up solutions for digital access by mapping the digital divide across the community and focus on the expansion of affordable broadband access;
8. Embrace the use of technology and data to serve the needs of the residents by reaching out to the public to figure out what emerging technologies are right for communities and how they should be used.
— Julia Sanders