SAVINGS

The United States of Hoarders

We know we were supposed to write a story about consumer spending during the pandemic, but...that’d just be lying to y’all. Here’s the reality: Americans aren’t spending squat during the pandemic. 

The U.S. savings rate rose to 33% in April, the highest level on record and it’s not even close. At the same time, consumer spending fell 13.6% (also a record). There are a few reasons why this happened:

1. There’s nothing to spend money on. Office work, events, sports, conferences, vacations, weddings, birthday parties, and more were all canceled.
2. Stimulus checks of up to $1,200 hit millions of households, driving up personal income to record levels.
3. With unemployment at 13.3%, Americans are feeling nervous about their job prospects.

But not all Americans saved equally

Findings from a Harvard-based research group show that high-income Americans are responsible for most of the reduction in consumer spending. Lower-income Americans, on the other hand, are now spending nearly as much as they did pre-pandemic—but they’re suffering as the rich hoard their wealth.

• Almost 70% of low-wage workers working in the highest-rent ZIP codes lost their jobs, the researchers note.

Why it matters: It further confirms that this recession is one of the weirdest ever. In past downturns people stopped spending on big-ticket items like cars, while keeping up their spending on basic services. That’s flipped this time around, because many of those services (like haircuts) require in-person interactions that can lead to the spread of the virus.

Looking ahead

The research is telling us something very important: even if government restrictions were lifted, Americans still wouldn't be spending at pre-pandemic levels out of fear for their health. Which means the NFL could announce tomorrow it’s allowing fans to attend games this season and not many would bite. 

Bottom line: Consumer spending drives nearly 70% of U.S. GDP, so an elevated savings rate could be detrimental to the economy in the long-run. After all, writes the Carnegie Endowment, one person’s spending is another person’s income. 

GROCERY

Can Grocery Delivery's Growth Spurt Last?

Online grocery sales rose 200% year-over-year in March, according to Earnest Research, with Walmart, Amazon, and Instacart all reporting dramatic increases in demand. 

• “The customer demand we expected over the next two-to-four years on the Instacart platform has happened in the last two-to-four weeks,” said Instacart’s CEO in early April.

Some results of that surge: 1) Instacart nabbed a $13.7 billion valuation in a recent funding round and 2) Whole Foods and others rushed to transition some locations to “dark stores,” micro-fulfillment centers intended exclusively for delivery orders, not in-person shopping. 

As COVID-19 restrictions ease...

Many shoppers want to resume playing ripe-avocado roulette in person. CivicScience and Bloomberg found that over one-third of shoppers plan to order groceries online less often as restrictions ease up. 

But even as shoppers head back to stores, more have discovered online delivery for the first time and now have the apps on their phones. Kroger CEO Rodney McMullen said this week he thinks habits around home cooking have permanently changed because of the coronavirus. And after hiring 40,000 new employees exclusively for online shopping, his company now has the infrastructure necessary to handle more digital orders. 

LUXURY

Luxury Market on Its Manolo Heels

Remember we wrote how rich people drove the U.S. savings rate to record highs? Well, that's a pretty terrible sign for the luxury industry.

• Consulting giant Bain predicted global sales of personal luxury goods would fall as much as 60% in the three months ending in June. For the full year, the industry could shrink 20%–35%. 

What’s causing the plunge? The luxury sector hinges on three key high-thread-count seams: 

1. Personalized service, which social distancing measures have rendered...much less personal. One tailor on London’s Savile Row told Bloomberg he had to ask customers to button and pin their own suits, while he took notes and photos from a few feet away. 
2. Tourist traffic in shopping meccas like New York, Paris, and Milan has been reduced to a trickle. All eyes will be on the fast-growing Chinese market, which has shown signs of rebounding. 
3. Experience. If you’ve ever been to Harrods, you know that luxury shopping is about being swallowed in an alligator-skin fantasy...until you wake up the next morning down $785. It’s hard to replicate that online.

Looking ahead...luxury sales will take a few years to return to 2019 levels, Bain projects, and even that depends on the usual variables: consumer confidence, tourism trends, and overall economic growth.

SPONSORED BY MANSCAPED

It’s Time to Start Whackin’ Your Weeds

Confession: The “weeds” are, well, they’re in your nose. And your ears. We’re talking about ear and nose hair, okay? We initially shrouded our intentions in metaphor because we’re self-conscious writers, okay?

MANSCAPED just released the Weed Whacker ear and nose hair trimmer. Featuring their famous SkinSafeTM tech, this bad boy will let you confidently trim that pesky hair with a 23-degree, intelligently-contoured design to match the natural curves of your nose and ear.

Let’s get in the weeds of its weed-whacking features:

• The Weed Wacker holds charge for up to 90 mins from a rechargeable lithium-ion battery.
• It’s powered by a 9,000 RPM motor with a 360-degree dual-blade system.
• It’s rated IP54 waterproof.
• It utilizes a replaceable SkinSafeTM blade for optimal hygiene.

Brew readers, you can experience the Weed Whacker plus MANSCAPED’s Peak Hygiene Plan for 25% off and free shipping.

PAYMENTS

A Digital Revolution Comes for the Cash King

As the coronavirus changed our perception of cash from "boo-ya I've got money" to "why am I carrying around this germ-infested piece of paper?" many shoppers started leaving their cash at home, and some retailers stopped accepting it altogether. 

Is this the death of cash? 

The pandemic has fundamentally changed how consumers pay for items, Visa’s European chief told the FT. And it's not just that shoppers are using debit and credit cards more: Contactless payments, which use radio-frequency tech or QR codes to pay with taps or scans, are gaining traction.

• Dozens of countries raised their cap on the size of contactless payments allowed.
• Walmart and Publix said they’d implement contactless payment options, joining Costco, Target, 7-Eleven, and Amazon Go.

So what's preventing the cashless revolution? Installing contactless systems is expensive, especially for small businesses. Consumers also need smartphones to use the tech. 

Plus, 6% of U.S. adults are “unbanked,” meaning they do not have a checking, savings, or money market account. And access to banking falls unevenly across racial lines: 4% of white adults are unbanked, compared to 14% of Blacks and 11% of Hispanics, according to data from the Fed. If stores drop cash entirely, millions could get shut out.

Bottom line: The coronavirus has not only transformed what we buy, but how we buy. The transition to digital payments just got a dose of jet fuel. 

HOME IMPROVEMENT

It’s a Bad Time to Be a Squeaky Floorboard

Despite a global retail slowdown, the home improvement sector has been...improving. Stay-at-home orders have prompted bored Americans to level up everything from the duvet to the driveway.

• Lowe's smashed Q1 earnings expectations, reporting a 28% increase in net income.
• Home Depot described “triple-digit” growth in its online business in early April, on top of a 6.4% bump in same-store sales. 

But home improvement has made its way past the foyer and into the great outdoors.

Lawns are the place to be

• Inflatable pools, egg-laying chickens, patio furniture, and trampolines are all enjoying noticeable sales bumps.
• Americans are discovering gardening like the hunter-gatherers: W. Atlee Burpee & Co., a seed company, had the highest sales of any month in its 144-year history in March.
• Pool sharing service Swimply (it’s a real thing) reported a 1,200% increase in bookings between February and March. 

Zoom out: Even before the pandemic, home improvement was proving resistant to retail malaise: Last year, sales were growing at almost twice the rate of the broader retail sector. That’s likely due to 1) rising home values 2) millennial homeowners' purchasing power and 3) the country's aging housing stock.

WHAT ELSE IS BREWING

• The CEO of Wirecard, a huge German fintech, resigned after auditors couldn’t find more than $2.1 billion in cash.
• AMC will now require guests to wear masks when it reopens theaters, a reversal of its previous proposal.
• Apple is re-closing some stores in several U.S. states with higher coronavirus case numbers.
• Robinhood is putting up more guardrails around options trading on its platform following a customer’s suicide last week.

BREW'S BETS

Today’s the longest day of the year. You’re gonna need some strong coffee to make it through. Thankfully, Wandering Bear’s cold brew is extra strong, coffee shop-delicious, organic, and on-tap in your fridge...after you .*

Biometrics are the future. By 2023, $2T in mobile and in-store payments will be authenticated by biometrics (like your thumbprint), and Trust Stamp is at the forefront of that evolution. Your chance to invest ends July 17th—probably time to get in.*

Get inspired: Read the MIT Technology Review’s 35 Innovators Under 35 and make a plan to get on the list next year.  

Weekend conversation starters:

• What’s the weirdest thing you’re snobby about? 
• Is this the next Google? 
• How to become the #1 movie in America during a pandemic.
• Name a dad joke more iconic than “Hi hungry. I’m dad.” We’ll wait.

^{*This is sponsored advertising content}

FROM THE CREW

Got a few minutes? We're running a short survey about our readers' social media habits, which means it's one of the most fun surveys you can possibly take. . Thanks!

SATURDAY HEADLINES

Air travel has dropped off a cliff, but that hasn't stopped some head-scratching headlines from emerging out of airports. Three of these high-flying stories are real, but one is too weird to be true. Can you spot the fake?

1. "This airport in Taiwan is opening for pretend vacations and flights to nowhere"
2. "British Airways to sell artworks worth millions by major British stars in bid to save costs during covid meltdown"
3. "Pilots from four different airlines coordinate epic 'Mario Kart' race through deserted Dubai terminal"
4. "Plane ends up wedged underneath another airplane after collision at Scottish airport"

SATURDAY HEADLINES ANSWER

No Mario Kart race occured. But if it had, Southwest would have won.