Lessons learned from consumer behavior
In early March of 2020, Americans were largely enjoying life as usual. Restaurants and stores were full, movie theaters were open, children were in school, and Spring Break planning was in full swing. Few people could’ve predicted the dramatic shift that would bring the world to a stop nearly overnight.
Now, one year later, we’re seeing signs of recovery as the speed of vaccinations increases and states begin loosening restrictions. As marketers prepare for a post-Covid life, we use Cardlytics’ first-party data to help them determine:
- industries that are recovering quickest
- pandemic behaviors that are here to stay
- areas of the country where we’re seeing the most improvement in spend
As an advertising platform in banks’ digital channels, Cardlytics has insight into one out of every two U.S. card transactions. Cardlytics helps marketers understand current trends that are impacting their industries and importantly, activate against those insights to drive real business outcomes. The data in this report highlights important shifts in consumer spend between January 2020 and February 2021 and tracks signs of recovery. To isolate the impact of COVID-19, recent changes in spend are compared to the prior year.
Overall Spend Climbs Back
The good news: overall spend continues to recover in all industries, down just 4% year-over-year (YoY) in the first quarter of 2021, after falling as low as -12% in the second quarter of 2020. The overall numbers were boosted by skyrocketing grocery spend, tempering the travel free fall of more than -60% at its lowest point in Q2 2020. We take a closer look at individual categories later in this State of Spend.
Who is Recovering Fastest?
Our Recovery Leading Indicator (RLI) tracks spend in select discretionary categories to help brands measure consumer confidence during the recovery. It compares weekly spend in categories such as salons, apparel retailers, casual dining, and QSR restaurants, among others.
Looking at state-by-state recovery YoY as of Feb. 2021, Florida (-5%), Georgia (-6%), and Alabama (-7%) are closest to pre-pandemic levels, while Oregon (-37%), Washington (-36%), and Vermont (-35%) lag behind. This reflects the pace at which states opened back up following pandemic closures.
Retail: Sporting Goods and Home & Garden Enjoy Continued Boost
Since March 2020, retail sales are up 10% driven by strong growth in direct to consumer (+45%), sporting goods (+21%), and home and garden (+20%) retailers. Apparel saw the biggest negative impact, with YoY sales down more than 20%. Big box general retailers saw +8% YoY and have continued this growth in recent months. Overall retail online sales have grown over 46% since the pandemic began and have seen YoY growth every week in 2020, which has continued into 2021. In-store sales rebounded during the summer but have been flat since, excluding a small decline YoY during the December 2020 holiday season. On a positive note, apparel is showing signs of recovery, driven by states loosening restrictions and buy-online-pick-up-in-store buying options, which we expect to continue to grow in a big way in 2021.
Online is maintaining its pandemic boom, and we believe that customer adoption will likely continue, albeit at diminishing growth rates. Who wouldn’t want to skip a few hours a month in line at the store (despite not being able to squeeze those avocados)? Grocery delivery and in-store pick up increased 91% YoY in February 2021 after being up over 100% in January. Despite this staggering YoY growth, online grocery sales are below levels reached during the height of the pandemic, and overall grocery sales have remained flat since April 2020. To retain their fair share of customer spend, grocers will not only need to address online demand and service expectations, they’ll also need to provide customers a reason to leverage their store footprint to retain/ recapture customer share of wallet.
Restaurant Customers Hungry for In-Person Dining
If you filled up on take-out in 2020, you were not alone, and our data shows that restaurant delivery and take-out is still winning. Purchasing via technology accounted for 25% of all 2020 restaurant purchases. At the start of 2020, third-party delivery represented less than 5% of overall restaurant spend. It peaked in April at approximately 15% but has remained a popular choice, leveling out recently around 12% of all restaurant spend in January 2021. Interestingly, Brand-specific online and app ordering accounts for another 14% of delivery and take-out, showing the importance of owning the customer experience in this channel.
Customers, however, rapidly shift back to in-person dining as states begin to allow it. For example, New Mexico, Colorado, and Illinois all reopened in-person dining from August to October and then closed back down in November. During the time that restaurants were open, restaurant spend overtook grocery spend for the first and only time during the pandemic. Expect to see those numbers rise again as more people return to restaurants across the country this Spring.
If you’re a restaurant marketer, you need to take an omni-channel approach to your customers. Cardlytics sees that customers who purchase both online and in-restaurant spend more annually compared to those who only purchase online OR in-restaurant. In fact, Cardlytics data shows that omni shoppers spend $122 per customer, but that drops to $47 per customer when in-store only. That translates to a 260% increase in sales with omni, a HUGE opportunity for revenue.
The Return to Travel
While business travel was never as glamorous as our partners might have imagined, I speak for many of us when I say that I’m looking forward to getting back to (some) business travel this year. That’s clearly true for personal travel, as well, as we see the industry continue to slowly recover. In the first eight weeks of 2021, trip volume recovered to approximately 50% of volume compared to 2019 and 2020. But the speed of industry recovery fluctuated throughout the pandemic. In May and June 2020, for example, trip volume increased 15% week-over-week (WoW) but then plateaued quickly. From July through December 2020, the recovery was volatile with periods of moderate increase and decline. The good news for travel marketers is that recovery is picking back up with average WoW increase of 5.7%, the highest average gains we've seen since June 2020.
In 2020, alternative lodging benefited the most from the shifts in consumer spend behavior, and this has continued for the first 8 weeks of 2021 with strong YOY growth again of +18%. However, a closer look shows this lift continues to be driven by the average transaction size, rather than the volume of trips, which remains in decline. This is likely due to consumers making longer-term stays due to the pandemic. So, while alternative lodging captured spend share, particularly from luxury and upscale hotels chains, it remains to be seen if they will retain that share of high spending customers in 2021 as the broader hotel market recovers, and consumers shift back to shorter stays.
Another positive sign of recovery is that travelers are now venturing farther from home. Our hotel insights show that in 2019, the average distance from home zip code to hotel zip code was 606 miles. When the pandemic hit, the average distance decreased 33% to 409 miles. During the first 8 weeks of 2021, average distance increased slightly to 483 miles, now just a 20% decrease from 2019.
Cardlytics is an advertising platform that works directly with leading banks such as Bank of America, Wells Fargo, and Chase to serve offers to an audience of more than 163 million monthly active users. Leading marketers including Walmart, GAP, Dunkin’, Hilton, Sephora, and Wayfair work with Cardlytics to better reach and convert customers with relevant advertising. While analysis is representative of purchase behavior, it does not include every customer or every financial institution on the Cardlytics platform.
Cardlytics can help marketers create targeted campaigns that help answer:
• When and where are customers starting to make in-store purchases?
• How quickly am I gaining or losing share vs. my industry?
• How is my eCommerce channel performing against my category?
• Are my newly acquired customers likely to churn?
Whether marketers are experiencing ups or downs in consumer spend, Cardlytics is focused on helping clients navigate the times and drive measurable sales. Contact us today for an analysis and a campaign strategy customized for your brand.