holiday shopping

According to Deloitte’s annual holiday retail forecast, 2020 could be a “tale of two holiday seasons.”

Marked by continued uncertainty, the Deloitte retail and distribution team has predicted that holiday sales will play out in two possible scenarios, a 0-to-1 percent increase or a more significant 2.5-to-3.5 percent increase. Both are notably lower than years prior and will be driven by a K-shaped recovery.

“This year, one of two holiday scenarios will play out. Regardless of the scenario, however, the consumer’s focus on health, financial concerns and safety will result in a shift in the way they spend their holiday budget,” said Rod Sides, vice chairman, Deloitte LLP and U.S. retail and distribution sector leader. “For retailers, this holiday season will continue to push the boundaries on the importance of online, convenience, the role of the store, and the criticalness of safe and speedy fulfillment.”

“The lower projected holiday growth this season is not surprising given the state of the economy,” said Daniel Bachman, Deloitte’s U.S. economic forecaster. “While high unemployment and economic anxiety will weigh on overall retail sales this holiday season, reduced spending on pandemic-sensitive services such as restaurants and travel may help bolster retail holiday sales somewhat.”

According to Bachman, K-shape is very significant to this year’s holiday season. Beyond usual uncertainty, this year’s economic forecast also brings elements of epidemiology and an unusual recession pattern.

“Typical recessions occur through the financial system and hit businesses that are interest-sensitive or sensitive to the financial system, which is more likely to be things like manufacturing,” said Bachman. “In this case, what we did was we just shut down a large chunk of the services sector. Normally services are not as sensitive to recessions as manufacturing this recession is the opposite. And it happens that people who work in the services sector are at a lower-than-average wages so what we are seeing is a kind of bifurcation, or a division, in how the economy is being affected.”

The K-shape, therefore, shows the separation of consumers who are likely to have a strong holiday and those who were more strongly disadvantaged by the pandemic.

In the first scenario, which forecasts 0-to-1 percent year-over-year sales growth, to come true consumers would continue to experience heightened anxieties related to finances and health. This lack of confidence would reinforce trends of consumers reserving funds for nondiscretionary items and less likely to spend on holiday purchases.

At the same time, for scenario two to occur, which predicts 2.5-to-3.5 percent growth, consumers will need to experience increased confidence. According to Deloitte, this confidence could come to life in a number of ways including an effective federal pandemic relief bill with unemployment insurance benefit supplement and the creation of an effective vaccine.

Moreover, with consumers spending dramatically less on experience, travel, and services this holiday season, funds are expected to be redirected to spending on holiday gifts. And e-commerce is predicted to come out on top as consumers continue to show movement toward buying online during the pandemic.

The company predicts e-commerce holiday sales will experience a surge of 25 to 35 percent, year-over-year, while overall the forecast for 2020 holiday sales is just 1 to 1.5 percent.

For More WWD Business News:

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