Advertiser Disclosure

advertising disclaimer
Skip to main content
empty mall

Consumers Are Changing Their Buying Habits: Impact on Retailers?


Apr 25, 2021 by Maurie Backman
Get our 43-Page Guide to Real Estate Investing Today!

Real estate has long been the go-to investment for those looking to build long-term wealth for generations. Let us help you navigate this asset class by signing up for our comprehensive real estate investing guide.

*By submitting your email you consent to us keeping you informed about updates to our website and about other products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.

The coronavirus pandemic has changed the way a lot of people live, work, and shop. Earlier in the crisis, many people were afraid to so much as set foot in a grocery store and reverted to purchasing food online for home delivery or curbside pickup. That trend then extended to other retailers, many of which were quick to adapt to the pandemic by offering options such as same-day shipping and BOPIS (buy online, pick up in store).

But it's not just that consumers have shifted from in-store to online shopping. Many have also been spending less. And that could hurt retailers in the near term as well as the long run.

Financial concerns have shoppers spending more conservatively

In addition to favoring online shopping, consumers have also been shopping less. This trend has been observed at both the domestic and global level. But when we look at the way the U.S. economy has fared over the past 13 months, that pullback is easy to understand.

In April 2020, the U.S. jobless rate peaked at a record-high 14.7%, and while it's been slowly and steadily declining since, unemployment is still considerably higher than it was back in February 2020, before the pandemic began. Not only have many Americans lost their jobs or seen their income decline in the course of the coronavirus outbreak, but many have grappled with general income or economic insecurity -- which has prompted them to spend more conservatively.

In fact, in the U.S. alone, 43% of consumers acknowledge that they've changed their buying habits due to ongoing financial anxiety, according to AlixPartners. And the Conference Board reports that 62% of U.S. consumers cut back on spending during the first quarter of 2021. That's just a modest decrease from the peak of the pandemic, when 64% were cutting back.

Now the reality is that shoppers may loosen up on the spending front once the pandemic is long behind us. But that shift in attitude is unlikely to happen for quite some time, so retailers could be looking at several quarters, if not years, of sluggish revenue as the mental impact of the pandemic continues to rear its ugly head.

Impact on retailers

Of course, the less revenue retailers take in, the more likely they'll be to have to shutter stores. And that, of course, would be devastating to shopping center and mall REIT (real estate investment trust) investors, as the less revenue those REITs take in, the more their value is apt to sink.

A shift to online shopping could also result in store closures, even if revenue intake holds steady for retailers. That, too, would be a blow to malls and shopping centers, neither of which can afford to lose any more tenants, given the number of stores that have closed since the pandemic began.

It'll be interesting to see if and how consumer shopping habits shift as things truly improve with regard to the pandemic. Right now, we're at a bit of a midway point, where vaccines are offering some hope, but the virus itself is still doing a good job of circulating. That could change later this year or at some point in 2022, but shopping center and mall REIT investors will need to brace for the fact that conservative spending and online shopping are trends that hold steady even once the pandemic is a thing of the past.

Unfair Advantages: How Real Estate Became a Billionaire Factory

You probably know that real estate has long been the playground for the rich and well connected, and that according to recently published data it’s also been the best performing investment in modern history. And with a set of unfair advantages that are completely unheard of with other investments, it’s no surprise why.

But those barriers have come crashing down - and now it’s possible to build REAL wealth through real estate at a fraction of what it used to cost, meaning the unfair advantages are now available to individuals like you.

To get started, we’ve assembled a comprehensive guide that outlines everything you need to know about investing in real estate - and have made it available for FREE today. Simply click here to learn more and access your complimentary copy.

The Motley Fool has a disclosure policy.