The crisis caused by the COVID-19 pandemic created a wide range of challenges, both personal and corporate, writes Paul Mitchell, Senior Client Insight Director at retail analyst GfK.
Its impact has been profound, with the onset of the virus and the subsequent lock down changing consumer behaviour and leaving the retail environment unrecognisable.
People have had to adapt to strict social distancing, work from home or been put on furlough, manage home-schooling and prepare as best they can for the future. Speculation on what the post-crisis landscape will look like remains open-ended.
When the crisis began it stimulated panic-buying of groceries and once lockdown was established this behviour shifted to items needed to ensure a comfortable working at home and living at home lifestyle. Thus, we saw strong growth in sales for goods such as freezers (to increase food storage capacity) alongside notebooks, computing tablets, mice, headsets, monitors and other work-related peripherals.
Latterly, small kitchen appliances to help with cooking, games consoles for entertainment, home improvement to take advantage of the time at home and garden living have all seen strong growth.
Notable in its absence are wristwatches. With lock down hitting hard, sales of watches and connected watches dropped dramatically. Year on year value fell by -24% in March, -83% in April and -79% in May. The re-opening of stores in mid-June helped, but sales still declined -18% in this most recent month.
Furthermore, there was also a notable difference between value and volume, whilst the former may have been down -18%, volume sales fell -43% in June, perhaps reflecting customer collections of previously ordered high value watches.
As with other categories, sales necessarily shifted online. There were some relative share gains for entry level models, spearheaded by children’s watches, but absolute numbers were understandably much lower during the quarter. London also continued to fare worse than the rest of the country; value in the capital was down -40% in June, compared to -18% elsewhere.
Another key dynamic of importance for the watch industry is what happened with wearables. After the initial panic-buying came the realisation that the majority of the population would be at home for the immediate future.
The need to stay fit and healthy, both mentally and physically, led to a growth in sales of smartwatches and health and fitness trackers, perhaps somewhat accelerating the previously recorded trend of consumers adopting these products and offering a reason for the continued strong decline in wrist watch volume sales.
Tracking sales in the year to date (up to week 27), smartwatches (as tracked by GfK, excluding Apple stores and Apple direct sales) have already sold the same total value as was reached in week 38 last year, evidence of very strong growth this year.
Health and fitness trackers & wrist sport computers combined are only 1 week ahead in terms of year on year value sales; thus consumer focus and preference has clearly been on smartwatches.
How watches perform for the rest of this year will be interesting to see. There will be some pent-up demand, particularly at the higher end of the market, but there is a balance between consumers
making use of the money they would normally have spent on travelling or leisure activities (amongst other things), and the fear of a widespread recession.
This latter consideration may change consumer behavior towards saving for a possible difficult financial year ahead. Nonetheless, it is certain that postponed, yet necessary purchases will revive, and consumers are likely to make in-store purchases in a need-based manner.
These include traditional retail dominant products such as large electrical appliances, products that require sales staff consultation such as built-in appliances and high-ticket wrist watches, particularly where people are keen to handle the product before they decide whether to purchase.
Further store reopening could usher in demand and opportunities for many categories which lost due to the postponement of purchases or the consideration that they were non-essential in recent weeks, watches included. For manufacturers and retailers, this will be a critical time to encourage sales through carefully pitched promotions and new model launches.
As we witness another channel switch and offline sales slowly inch back, the hope remains that sales will rebound, but any such recovery may be limited to the luxury end of the market; the indications for the mass market are that sales will be even more challenging in the face of economic disruption, low consumer confidence and spend being focused on smartwatches and other products. A long road to recovery may lie ahead.