The Impact of the U.S. Election on the Consumer Market and Retailers' Responses

Retailers' performance dilemma against the backdrop of the election

This year's U.S. election has been a tumultuous one, attracting countless eyes. However, it has not been good for US retailers. In the current earnings season, US online retailer Etsy reported lower-than-expected net income for the second quarter and a third consecutive quarterly decline in gross merchandise sales. The results caused the company's shares to plummet more than 7% on the day of the earnings report.

Etsy CEO Josh Silverman partly blamed the election for the company's poor revenue, which he said was overly draining on consumers, and expects the situation to worsen. Etsy has withdrawn its outlook for fourth-quarter results due to the unstable macro environment.

Similar encounters for other retailers

Amazon's earnings report was not encouraging either, as its online sales grew 4.6% in the second quarter, which was lower than expected, mainly due to consumers becoming more cautious in their behavior. Brian Olsavsky, Amazon's chief financial officer, pointed to the news cycle as another factor influencing consumer spending. For example, when a high-profile event occurs, such as an assassination, people's attention is focused on the news, which distracts them from spending on spending.

Brick-and-mortar retailer Tractor Supply similarly believes that while elections don't usually move earnings too much, this year's election has made the company's fourth-quarter results unpredictable.

Analysts' Views and Warnings

The dire situation has not only put the retail industry itself on high alert for the impact of the election, but has also caused analysts to be wary.

Nick Jones, managing director of internet equity research at investment bank Citizen JMP, said that while it is difficult to accurately quantify the impact of the news cycle and political developments on consumer spending, the overall environment is certainly dampening consumer spending.

Simeon Siegel, senior analyst of e-commerce at BMO Capital Markets, also noted that the macro environment is certainly dominating the market and people's attention. In addition to factors such as unemployment, inflation and geopolitics, election news is a key aspect of shopper sentiment.

Future outlook and coping strategies for the consumer market

However, analysts also believe that spending will not come to a complete halt and that the potential for improvement still exists. jones emphasized that consumers will definitely be distracted at some point, but they will also definitely spend. It's just that they may become more picky when they're emotionally charged, which creates more opportunities for relatively reliable platforms, such as Amazon.

Siegel adds that distracted consumers will become increasingly budget savvy, and retailers will need to put in more effort. Simply scaling up is no longer the key to success; they need to work on product, experience or value.