☕️ Covid and the consumer

How did the coronavirus affect shopping? [Morning Brew] [Read in Browser]( TOGETHER WITH [Manscaped]( Good morning and welcome to Summer 2020. No idea what's in store for us over the next three months, but...it's gotta be better than the spring, right? Saturday means another edition of the New Normal, Morning Brew's series that explores the pandemic's long-term effects on various industries. This edition is all about consumer spending: What we're buying, how we're buying it, and why it matters. It's a fun one—enjoy! MARKETS NASDAQ 9,946.12 + 0.03% S&P 3,097.74 - 0.56% DJIA 25,871.46 - 0.80% GOLD 1,754.20 + 1.33% 10-YR 0.700% - 1.00 bps OIL 39.29 + 1.16% *As of market close - Nation: The country will be [laser-focused]( on Tulsa, OK, today, where President Trump will hold a campaign rally despite concerns over public health. Up to 100,000 Trump supporters and Black Lives Matter protesters are expected to be in the area around the BOK Center, the site of the rally. - Markets: Despite concern over rising coronavirus cases in certain states, the three major indexes [closed out the week]( in the green. SAVINGS [The United States of Hoarders]( [Napoleon Dynamite] Giphy We know we were supposed to write a story about consumer spending during the pandemic, but...that’d just be lying to y’all. Here’s the reality: Americans aren’t spending squat during the pandemic. The U.S. savings rate [rose to 33%]( in April, the highest level on record and it’s not even close. At the same time, consumer spending fell 13.6% (also a record). There are a few reasons why this happened: - There’s nothing to spend money on. Office work, events, sports, conferences, vacations, weddings, birthday parties, and more were all canceled. - Stimulus checks of up to $1,200 hit millions of households, driving up personal income to record levels. - With unemployment at 13.3%, Americans are feeling nervous about their job prospects. But not all Americans saved equally Findings from a Harvard-based research group show that high-income Americans are responsible for [most of the reduction]( in consumer spending. Lower-income Americans, on the other hand, are now spending nearly as much as they did pre-pandemic—but they’re suffering as the rich hoard their wealth. - Almost 70% of low-wage workers working in the highest-rent ZIP codes lost their jobs, the researchers note. Why it matters: It further confirms that this recession is one of the weirdest ever. In past downturns people stopped spending on big-ticket items like cars, while keeping up their spending on basic services. That’s flipped this time around, because many of those services (like haircuts) require in-person interactions that can lead to the spread of the virus. Looking ahead The research is telling us something very important: even if government restrictions were lifted, Americans still wouldn't be spending at pre-pandemic levels out of fear for their health. Which means the NFL could announce tomorrow it’s allowing fans to attend games this season and not many would bite. Bottom line: Consumer spending drives nearly 70% of U.S. GDP, so an elevated savings rate could be [detrimental]( to the economy in the long-run. After all, writes the Carnegie Endowment, one person’s spending is another person’s income. �  �  �  mailto:?subject=Check%20out%20this%20story%20from%20Morning%20Brew!&body=The%20U.S.%20Savings%20Rate%20Is%20Highest%20on%20Record%E2%80%94Why%20That's%20Not%20Necessarily%20a%20Good%20Thing:%200A%0AWant%20more%20great%20content%3F%20Subscribe%20to%20Daily%20Brew%E2%80%94Delivering%20the%20latest%20business%20news%20from%20Wall%20St.%20to%20Silicon%20Valley,%20daily.%20 GROCERY [Can Grocery Delivery's Growth Spurt Last?]( [Grocery delivery worker] Rob Kim/Getty Images Online grocery sales [rose 200%]( year-over-year in March, according to Earnest Research, with Walmart, Amazon, and Instacart all reporting dramatic increases in demand. - “The customer demand we expected over the next two-to-four years on the Instacart platform has happened in the last two-to-four weeks,” said Instacart’s CEO in early April. Some results of that surge: 1) Instacart nabbed a [$13.7 billion]( valuation in a recent funding round and 2) Whole Foods and others [rushed]( to transition some locations to “dark stores,” micro-fulfillment centers intended exclusively for delivery orders, not in-person shopping. As COVID-19 restrictions ease... Many shoppers want to resume playing ripe-avocado roulette in person. CivicScience and Bloomberg found that over one-third of shoppers plan to order groceries online less often as restrictions ease up. But even as shoppers head back to stores, more have discovered online delivery for the first time and now have the apps on their phones. Kroger CEO Rodney McMullen said this week he thinks habits around home cooking have [permanently changed]( because of the coronavirus. And after hiring 40,000 new employees exclusively for online shopping, his company now has the infrastructure necessary to handle more digital orders. �  �  �  mailto:?subject=Check%20out%20this%20story%20from%20Morning%20Brew!&body=Can%20Grocery%20Delivery's%20Growth%20Spurt%20Last?%C2%A0:%200A%0AWant%20more%20great%20content%3F%20Subscribe%20to%20Daily%20Brew%E2%80%94Delivering%20the%20latest%20business%20news%20from%20Wall%20St.%20to%20Silicon%20Valley,%20daily.%20 LUXURY [Luxury Market on Its Manolo Heels]( [The RealReal luxury bags in a pyramid] Francis Scialabba Remember we wrote how rich people drove the U.S. savings rate to record highs? Well, that's a pretty terrible sign for the luxury industry. - Consulting giant [Bain predicted]( global sales of personal luxury goods would fall as much as 60% in the three months ending in June. For the full year, the industry could shrink 20%–35%. What’s causing the plunge? The luxury sector hinges on three key high-thread-count seams: - Personalized service, which social distancing measures have rendered...[much less personal](. One tailor on London’s Savile Row told Bloomberg he had to ask customers to button and pin their own suits, while he took notes and photos from a few feet away. - Tourist traffic in shopping meccas like New York, Paris, and Milan has been reduced to a trickle. All eyes will be on the fast-growing Chinese market, which has shown signs of rebounding. - Experience. If you’ve ever been to Harrods, you know that luxury shopping is about being swallowed in an alligator-skin fantasy...until you wake up the next morning down $785. It’s hard to replicate that online. Looking ahead...luxury sales will take a few years to return to 2019 levels, Bain projects, and even that depends on the usual variables: consumer confidence, tourism trends, and overall economic growth. �  �  �  mailto:?subject=Check%20out%20this%20story%20from%20Morning%20Brew!&body=Luxury%20Retail%20Sector%20Struggles%20to%20Absorb%20Pandemic%20Blow:%200A%0AWant%20more%20great%20content%3F%20Subscribe%20to%20Daily%20Brew%E2%80%94Delivering%20the%20latest%20business%20news%20from%20Wall%20St.%20to%20Silicon%20Valley,%20daily.%20 SPONSORED BY MANSCAPED [It’s Time to Start Whackin’ Your Weeds](#) [Manscaped]( Confession: The “weeds” are, well, they’re in your nose. And your ears. We’re talking about ear and nose hair, okay? We initially shrouded our intentions in metaphor because we’re self-conscious writers, okay? MANSCAPED just released [the Weed Whacker ear and nose hair trimmer](. Featuring their famous SkinSafeTM tech, this bad boy will let you confidently trim that pesky hair with a 23-degree, intelligently-contoured design to match the natural curves of your nose and ear. Let’s get in the weeds of its weed-whacking features: - [The Weed Wacker]( holds charge for up to 90 mins from a rechargeable lithium-ion battery. - It’s powered by a 9,000 RPM motor with a 360-degree dual-blade system. - It’s rated IP54 waterproof. - It utilizes a replaceable SkinSafeTM blade for optimal hygiene. Brew readers, you can experience [the Weed Whacker plus MANSCAPED’s Peak Hygiene Plan for 25% off and free shipping](. PAYMENTS [A Digital Revolution Comes for the Cash King]( [Apple Pay demonstration] Apple As the coronavirus changed our perception of cash from "boo-ya I've got money" to "why am I carrying around this germ-infested piece of paper?" many shoppers started leaving their cash at home, and some retailers stopped accepting it altogether. Is this the death of cash? The pandemic has [fundamentally changed]( how consumers pay for items, Visa’s European chief told the FT. And it's not just that shoppers are using debit and credit cards more: Contactless payments, which use radio-frequency tech or QR codes to pay with taps or scans, are [gaining traction](. - Dozens of countries raised their cap on the size of contactless payments allowed. - Walmart and Publix said they’d implement contactless payment options, joining Costco, Target, 7-Eleven, and Amazon Go. So what's preventing the cashless revolution? Installing contactless systems is expensive, especially for small businesses. Consumers also need smartphones to use the tech. Plus, 6% of U.S. adults are “[unbanked](,” meaning they do not have a checking, savings, or money market account. And access to banking falls unevenly across racial lines: 4% of white adults are unbanked, compared to 14% of Blacks and 11% of Hispanics, according to data from the Fed. If stores drop cash entirely, millions could get shut out. Bottom line: The coronavirus has not only transformed what we buy, but how we buy. The transition to digital payments just got a dose of jet fuel. �  �  �  mailto:?subject=Check%20out%20this%20story%20from%20Morning%20Brew!&body=Consumers,%20Retailers%20Move%20Away%20from%20Cash%20Payments%20During%20the%20Pandemic:%200A%0AWant%20more%20great%20content%3F%20Subscribe%20to%20Daily%20Brew%E2%80%94Delivering%20the%20latest%20business%20news%20from%20Wall%20St.%20to%20Silicon%20Valley,%20daily.%20 HOME IMPROVEMENT [It’s a Bad Time to Be a Squeaky Floorboard]( [Hammer flipping] Giphy Despite a global retail slowdown, the home improvement sector has been...improving. Stay-at-home orders have prompted bored Americans to level up everything from the duvet to the driveway. - Lowe's [smashed]( Q1 earnings expectations, reporting a 28% increase in net income. - Home Depot described “triple-digit” growth in its online business in early April, on top of a 6.4% bump in same-store sales. But home improvement has made its way past the foyer and into the great outdoors. Lawns are the place to be - Inflatable pools, egg-laying chickens, patio furniture, and trampolines are all [enjoying noticeable sales bumps](. - Americans are discovering gardening like the hunter-gatherers: W. Atlee Burpee & Co., a seed company, had the [highest sales]( of any month in its 144-year history in March. - Pool sharing service Swimply (it’s a real thing) reported a 1,200% increase in bookings between February and March. Zoom out: Even before the pandemic, home improvement was proving resistant to retail malaise: Last year, sales were growing at almost [twice the rate]( of the broader retail sector. That’s likely due to 1) rising home values 2) millennial homeowners' purchasing power and 3) the country's aging housing stock. �  �  �  mailto:?subject=Check%20out%20this%20story%20from%20Morning%20Brew!&body=The%20Home%20Improvement%20Sector%20is%20Doing%20Surprisingly%20Well:%200A%0AWant%20more%20great%20content%3F%20Subscribe%20to%20Daily%20Brew%E2%80%94Delivering%20the%20latest%20business%20news%20from%20Wall%20St.%20to%20Silicon%20Valley,%20daily.%20 WHAT ELSE IS BREWING - [The CEO of Wirecard](, a huge German fintech, resigned after auditors couldn’t find more than $2.1 billion in cash. - [AMC]( will now require guests to wear masks when it reopens theaters, a reversal of its previous proposal. - [Apple]( is re-closing some stores in several U.S. states with higher coronavirus case numbers. - [Robinhood]( is putting up more guardrails around options trading on its platform following a customer’s suicide last week. BREW'S BETS Today’s the longest day of the year. You’re gonna need some strong coffee to make it through. Thankfully, Wandering Bear’s cold brew is extra strong, coffee shop-delicious, organic, and on-tap in your fridge...after you [order it here for 20% off](.* Biometrics are the future. By 2023, $2T in mobile and in-store payments will be authenticated by biometrics (like your thumbprint), and [Trust Stamp]( is at the forefront of that evolution. Your chance to invest ends July 17th—[probably time to get in](.* Get inspired: Read the MIT Technology Review’s [35 Innovators Under 35]( and make a plan to get on the list next year.  Weekend conversation starters: - What’s the [weirdest thing]( you’re snobby about? - How to become the [#1 movie in America]( during a pandemic. - Is this the [next Google](? - Name a dad joke more iconic than “Hi hungry. I’m dad.” *This is sponsored advertising content FROM THE CREW Got a few minutes? We're running a short survey about our readers' social media habits, which means it's one of the most fun surveys you can possibly take. [You can fill it out here](. Thanks! SATURDAY HEADLINES Air travel has dropped off a cliff, but that hasn't stopped some head-scratching headlines from emerging out of airports. Three of these high-flying stories are real, but one is too weird to be true. Can you spot the fake? - "This airport in Taiwan is opening for [pretend vacations]( and flights to nowhere" - "British Airways to [sell artworks worth millions]( by major British stars in bid to save costs during covid meltdown" - "Pilots from four different airlines coordinate epic ['Mario Kart' race]( through deserted Dubai terminal" - "Plane ends up [wedged underneath another airplane]( after collision at Scottish airport" SHARE THE BREW It only takes 3 referrals to earn access to Light Roast, our exclusive Sunday newsletter. It’s the soothing, weighted blanket of newsletters that’ll fight off your scaries and prepare you for the week ahead. [Click here to get free swag.]( Hit the button below to start sharing the Brew. [Click to Share]( Or copy & paste your referral link to others: [morningbrew.com/daily/r/?kid=4904f90a]( SATURDAY HEADLINES ANSWER No Mario Kart race occured. But if it had, Southwest would have won.             Written by [Eliza Carter](, [Jamie Wilde](, [Alex Hickey](, [Toby Howell](, and [Neal Freyman]( Was this email forwarded to you? Sign up [here](. WANT MORE BREW? Quarantine newsletter → [The Essentials](  Retail newsletter → [Retail Brew](  Tech newsletter → [Emerging Tech Brew](  Business podcast → [Business Casual]( [ADVERTISE]( // [CAREERS]( // [SHOP]( Update your email preferences or unsubscribe [here](. Change your email address [here](. View our privacy policy [here](. Copyright ©2020 Morning Brew. All rights reserved. 40 Exchange Pl., Suite #300, New York, NY 10005