Santa is going to make his rounds this year, but instead of down the chimney, the gifts are coming via e-commerce delivery — and don’t look for lots of high-priced fashions under the tree.
The National Retail Federation released its much-watched holiday forecast Monday, predicting overall sales this season would grow between 3.6 percent and 5.2 percent to a range of $755.3 billion to $766.7 billion.
But all of that growth — which tops the five-year average of 3.5 percent — is coming from the web as people continue to shy away from stores amid the coronavirus pandemic.
Nonstore sales, dominated by the web, are expected to increase between 20 percent and 30 percent, for a total haul of $202.5 billion to $218.4 billion.
Without the web, brick-and-mortar sales are seen falling 1.4 percent to 2.2 percent.
A separate outlook from Customer Growth Partners was even more bullish overall, seeing a 5.8 percent gain, but weakness in apparel-related categories with less costly “comfy and casual” styles ruling the work from home world. The Customer Growth Partners’ crystal ball has apparel specialty store sales falling 13.5 percent while department stores will drop 11 percent. The categories perking up include home improvement (up 8.9 percent), sporting goods/toys (8.5 percent), consumer electronics (8.1 percent) and food and beverage (3.5 percent).
There are also concerns all around about just how long the spending will continue into the New Year as consumers hunker down for the winter and try to wait out the pandemic without the motivations of the holiday season.
The NRF forecast, which covers all of retail outside of automobiles, gasoline and restaurants, comes a month late this year given myriad uncertainties for both retailers and consumers — from rules on which stores can stay open where to when and if additional fiscal stimulus will be coming to shoppers from Washington.
Matthew Shay, president and chief executive officer of the NRF, told reporters on a conference call on Monday that this would be “a holiday season like no other,” but that retailers are prepared to operate safely in the pandemic, in many cases exceeding local regulations.
Shay noted that consumers have responded “very positively” to holidays during the pandemic — from Mother’s Day to the Fourth of July — with many looking for “opportunities to celebrate.”
He also reiterated his pitch to keep stores open through the pandemic, with the appropriate safety measures and pointed to the mammoth retail workforce.
“Those 52 million jobs, they’re all essential,” Shay said.
The NRF’s projection factors in both psychological and economic foundations that should support growth, but also comes with a big COVID-19 caveat.
Jack Kleinhenz, the trade group’s chief economist, made the case for why consumer will keep spending.
He pointed to the record savings; less spending on travel, dining and entertainment; the wealth effect from rising home prices; lower debt loads; cooler weather in the north, and a general desire to make up for a bad year.
“We owe it to our family to have a better than normal holiday season,” Kleinhenz said, summing up the attitude of at least some consumers.
And there’s light at the end of the tunnel. Kleinhenz pointed to optimism around the growing number of vaccines nearing approval.
But he also noted, “There’s a long shadow over many of the positive elements…that includes the surging virus and the expiring government support. This could pump the brakes on momentum and have a consequence to spending. We do believe that there is energy in spending throughout the end of the year. Rising cases could set the recovery into reverse.”
Customer Growth Partners also pointed to solid economic fundamentals, despite the epic pandemic recession and crushing unemployment that is clamping down on so many.
The group singled out solid disposable income, up 5.4 percent year-over-year; healthy household balance sheets; strong personal savings for many, and the renewed focus on goods over services during the pandemic.
“After the COVID-19 store closures crushed sales by 12 percent in April, traffic and sales have rebounded ever since, culminating in the most recent actual data from the six mega-retailers that account for almost 30 percent of all U.S. retail sales,” said Johnson, president of Customer Growth Partners. “The steep 18.5 percent jump in combined third-quarter sales of these retailers (Amazon, Costco, Home Depot, Lowe’s, Target, Walmart) shows that consumers are out and buying — like they haven’t been in over a year.”
Even if that does continue through the holidays, 2021 is still a question mark.
“The key question is how sustainable the growth will be going forward, given the remarkable strength of household finances — and the uncertain pace of COVID-19, particularly on employment growth,” Johnson said. “But if the economy can generate at least the current monthly rate of 660,000 new jobs — retail spending is poised to expand in 2021 at about a healthy 5-plus percent.”
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