June 24, 2020 2020: The Summer E-Commerce Economy that Kept on Churning?
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It’s pretty wild right now.
A lot of the current economic devastation is real. The world has no shortage of other problems, too.
To combat this, governments have injected fiscal stimulus into their economies. Central banks have invented new ways of expanding the money supply. The result has been an increase in asset prices (stocks) and even a rebound of oil prices.
Expanded money supply tends to bleed through to other asset classes, as well – primarily the housing market. “Low interest rates” and just “more money out there” (even in the midst of economic pain) have a history of pushing up housing prices in recognizably hot markets. This has been happening (periodically) now for decades.
So guess what? The housing market isn’t crashing. Fortunately for renters in some big cities, investment condos have taken a hit and more of the former Airbnb-style inventory is coming on stream for long-term lease. Also, there’s a strong movement afoot in “owner-focused” buildings to ban short-term rentals. That will help those looking for long-term leases too.
Meanwhile, those with means and “stuck at home” have adopted new shopping habits: of course, they’re buying online in droves. Seasonality patterns that were normally unassailable have been turned upside down. Consumers are buying toys in June.
To be “up close and personal” with data in a number of industries showing off-the-charts record results in some e-commerce and digital goods (eg. SaaS) verticals has truly been a surreal experience. It’s a little like checking the overnight stock market futures. Up, up, and up again?
A light example
For many years, we’ve had a client that focused solely on lighting. Their customer base is a mix of consumers and businesses. On top of that, they’re based in a region that happens to be of a northern latitude. Not giving away the location, but did you know that Belgium, for example, is as far north as central Quebec, and Newfoundland and Labrador (the Labrador part)? So, like clockwork, we came to expect strong sales as the weather got cooler – and notably, darker – starting in October and continuing through to March. The nice bright days, by contrast, seemed to convince people not to bother buying any lighting. The seasonality was firmly entrenched.
That logic usually applies to home décor here in the cooler and darker parts of North America, as far as I can tell. In the spring, people shop for their homes as part of an “awakening” process. But they begin to hang onto budget in the even nicer, brighter weather. Plus, they plan to “go away,” whatever that means for them.
Here’s the thing. Consumers are focused on their homes like never before, having been cooped up in them. They’re also going strong sprucing up their home offices.
There’s one more weird thing transpiring right now. In Toronto, the real estate market I know best, volume plummeted for obvious reasons during the height of the pandemic. Condos that are perceived to be Airbnb-related, or just too small in the “stuffy” downtown core, are piling up on the market. But this month, we’re seeing a record number of people moving from one home to another. Wherever the sellers are going is a matter of speculation. But small detached and semi-detached homes are selling like crazy. And the bidding wars have returned (although logistically, they can’t come all the way back as Open Houses and frequent showings are all but banned).
In large part, the housing market has been taken as synonymous with “the economy,” and for good reason. When housing values hold up, people feel richer. They count that as part of their net worth. No small number of people tap home equity for home repairs or even discretionary spending.
When young and mid-life adults move, a thing happens. They throw out their old junk. They declutter and downsize. And then they buy accessories and accents like lighting, wallpaper, and rugs. They buy a coveted modern lounge chair. They buy a new bed; sheets; pillows; and because they haven’t called me to inquire about my surplus of same, framed art. Uncharacteristically, they’re doing this now – it’s the second half of June. I expect them to continue doing it in July, August, and September.
We’ll never see another year like 2020.