Pent-up Demand Affecting Retail Performance

Retailers’ store-closing and going-out-of-business sales are performing better than expected – especially in categories such as housewares and home improvement, says Michael McGrail, COO of Tiger Group. “As bad as COVID-19 has been and continues to be, I’ve been pleasantly surprised by the sales results we’ve been getting,” he says. “There’s strong, pent-up demand among consumers and the best retailers are adapting.” Shifts in consumer behaviour are affecting retail performance. The strong demand, for example, for home improvement merchandise is due to consumers passing the time by carrying out DIY projects. “Right now, the Home Depot and Lowe’s cannot keep any inventory on their shelves,” McGrail says. “In the past, when we liquidated sporting goods stores, we had very low recoveries historically on things like weights or other items that would be appropriate to a home gym. That has been totally flipped on its head.” As people prepare more meals at home, kitchenware also is in high demand. Apparel retailers, however, still face challenges, including the need to sell through a glut of seasonal inventory from this past spring. While some are offering huge discounts on that merchandise in their stores, this strategy carries a potential risk. “The customer gets used to those discounts; they get conditioned to expect it,” McGrail says. He has been encouraging larger retailers to launch pop-up stores where they can consolidate and clear inventory over the short term. “The pandemic event will almost certainly have lasting consequences for consumer behaviour – just look at online shopping,” he says. “As an industry, we’ll need to stay nimble and adapt to those shifts.”