Apr 12, 2020 - Economy

Survival of the biggest: Coronavirus transforms retail

Animated illustration of a neon sign with the Amazon smile growing larger

Illustration: Aïda Amer/Axios

The titans of the retail industry — Amazon, Walmart, Target and Costco — are poised to come out of the coronavirus crisis even stronger and more formidable than they were before, as smaller rivals suffer and wither.

Why it matters: The pandemic will permanently reshape America's retail landscape — accelerating a winner-take-all race that started taking shape before stores were forced to close.

What's happening: With piles of cash, extensive delivery networks and massive physical footprints to navigate the pandemic, America’s biggest retailers are raking in sales.

  • They're proving impervious to the effects of the retail shutdown that has hobbled smaller rivals.
  • Even midsized store chains — the nation's mall anchors — are running out of time to survive.
  • Per CNN: "Sears, JCPenney, Neiman Marcus and J. Crew were some of the most distressed companies prior to the outbreak" and they "may not be able to survive the coronavirus crisis."

Amazon has "essentially become infrastructure," says Sally Hubbard, a director at the Open Markets Institute and a former assistant attorney general in New York's antitrust bureau. As the country stays home and observes social distancing guidelines, its reliance on Amazon is becoming increasingly apparent.

  • Sales of certain products on Amazon have spiked, according to CommerceIQ, a company that helps businesses handle sales, advertising and operations on Amazon.com.
    • Cold and flu medicine sales are up 861%
    • Hand soap: 512%
    • Dog food: 947%
    • Chips: 376%.
  • Customer spending on Amazon is up 35% compared with the same period last year, per Recode.
  • Grocery delivery — a big investment for Amazon that had been slow to take off — is suddenly wildly popular, with shoppers fighting to grab open delivery windows.
  • Amazon is even profiting from our heightened dependence on internet connectivity and streaming entertainment, through Amazon Web Services and Prime Video.

"The growth of e-commerce is going to accelerate by at least five years, if not 10 years," says Guru Hariharan, CEO of CommerceIQ. "Brick and mortar stores are losing big right now."

  • Bricks have ceded market share to clicks — and Amazon is around 40% of U.S. e-commerce.

Even when Americans are going to stores, they're choosing the giants.

  • Walmart saw its in-store sales jump 20% in March, while online sales surged by 30%.
  • Costco's sales went up by 12%.
  • Target's overall sales surged 25%.

The other side: Smaller stores are bleeding out. Mom-and-pop retailers are lining up for federally backed loans through the Paycheck Protection Program, and last week, the Federal Reserve said it would backstop loans for midsized companies as well — up to 10,000 workers.

  • U.S. retail saw a 60% decline in foot traffic in March, a gut punch that hit all businesses except the giants, according to Coresight Research.
  • Amazon and Walmart are hiring a combined 250,000 workers to keep up with demand.
  • But millions of Americans who work for smaller or struggling retailers — even Macy's and Gap — have been furloughed.
  • Not all of them will get their jobs back when the economy opens again, says Sucharita Kodali, a retail analyst at Forrester research.

The bottom line: "The strong are getting stronger," Kodali says. "If the questions around Amazon and antitrust were not strong enough before this crisis, they're going to be very, very front and center after this."

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