U.S. business-to-business (B2B) activity has staged an impressive recovery from the troughs of April and May. However, due to the impact of the COVID-19 pandemic, the rebound had a dramatically different tenor about it.
American consumers spent differently in 2020 than ever before. They spent more time at home and less time in stores and restaurants. They traveled infrequently at best, and had few concerts, plays or ballgames to attend. They conducted an unprecedented amount of business with e-merchants, a trend that, while not expected in coming years to be as frenetic as it was in 2020, still has sturdy secular legs to it.
In a report published last Thursday, Cortera, a firm that collects and analyzes $1.7 trillion in annual B2B spending based on supplier invoices and receivables across 45 categories, reported that spending in December was the highest it’s been all year. Spending surged 10.7% over December 2019 levels. Spending by large consignees jumped 13.8% as the “supply chain continued to be consumed by the monsters,” said Greg Johnson, chief operating officer of the Boca Raton, Florida-based firm. Small to midsize businesses’ (SMB) spend patterns, which as recently as October were flashing negative, ended the year up 6.4% as November and December spending went into overdrive.
It was a far cry from May, when B2B spending fell 13.6% year-over-year as virtually everything outside the home shut down and consignees pivoted rapidly to support e-commerce and not the traditional in-location environment, the firm said. Spending by SMBs dropped 17.1%, while large-company spending fell 11%.
Everyone who was awake and on Earth in 2020 knew, at least anecdotally, that a massive shift in consumer behavior had taken place. But what surprised the Cortera folks, and virtually everyone else in the data-collection and analysis field, was how quickly spending in the B2B sector recovered. “No one expected it,” said Johnson.
December was strong for B2B spending across the board as retail spending surged 16.2% year-on-year, according to Cortera data. Building materials purchasing showed the largest year-over-year gains at 16.6% as the construction and retail industries spent freely last month. Although consumers had an aversion to in-store shopping, many saw no reluctance to look for and buy homes as the pandemic wore on. In addition, demand remained strong to develop and erect online fulfillment facilities of all types.
Even the struggling industries whose fates have been heavily tied to government stay-at-home measures perked up last month, Cortera said. So-called reopen industries showed their first year-over-year spending gains since the pandemic began, according to the data. The two exceptions were “miscellaneous store” retailers such as office supply stores, where B2B spend declined sharply, and sporting goods stores, where spend fell modestly, according to Cortera data. Not surprisingly, segments such as “non-store” retailers, electronics stores, and health and personal care products posted very strong gains last month.
Johnson wouldn’t comment on whether the gains of the past half-year are sustainable or can be chalked up to seasonality patterns. Yet strong December activity from the U.S. supply chain’s four major components — manufacturing, transportation, wholesale and retail — demonstrates a “diversity of spending strength” that suggests a positive 2021 outlook, the report said. Transportation B2B spending in December rose 14.9% year-over-year, the data showed.
Another question is whether B2B spending will continue to firm among the industries most affected by changing consumer behavior during 2020. Spending by segments such as food and beverage stores, food services and drinking places (research lingo for bars and restaurants that serve alocohol), and gasoline stations are still in the red year-over-year, although well off the end-of-days levels of the spring, Cortera said.