'Even Low End' of Holiday Forecast Would Set Records, Says NRF

Despite “complex mechanics and forces at work,” the outlook is favorable for strong retail sales growth this holiday season,” said National Retail Federation Chief Economist Jack Kleinhenz Tuesday in a holiday season forecast follow-up. Kleinhenz repeated NRF's optimistic forecast last week (see 2110270035) of Nov. 1-Dec. 31 sales growing 8.5%-10.5% to $843.4 billion-$859 billion, excluding sales of autos, gasoline and restaurants. "Even at the low end of the forecast, that would be both the largest growth rate -- topping last year’s 8.2 percent -- and the largest total amount -- beating last year’s $777.3 billion -- on record," he said.

COVID-19's impact on "the nation’s economy will be a key factor in retail sales during the 2021 holiday season, but the National Retail Federation is nonetheless confident in its forecast for record growth," Kleinhenz said Tuesday. Despite several factors coming together to have a "major impact on the holiday outlook,” said Kleinhenz, “household fundamentals are a bright spot in the uncertain present." Consumers are in a "favorable position" and are “spending because they can.”

Questions remain whether COVID-19 cases will continue their downward trend, and whether that will boost consumer confidence and lead to more spending, Kleinhenz said. And if consumers spend more, it’s not certain whether they will continue to spend on retail goods or shift spending to restaurants, events or travel. NRF’s model looks at those factors along with disposable income, past retail sales, employment, wages, weather, energy prices and other variables, he said.

Kleinhenz said the strong growth in income and U.S. consumers' “stockpiled savings” of about $2.5 trillion should help spending overcome inflation that has been driven by consumer demand and supply chain disruptions. A concern when, "and if," sales begin to fall will be whether the drop is caused by weaker demand or reduced product availability, he said.

Spending has continued “at a brisk pace,” up 14.5% for the first nine months of 2021, returning to pre-pandemic levels for many retail categories, said the economist. He cited Harvard University data saying spending by low-income consumers was up 22.3% as of Sept. 30 vs. January 2020, reflecting enhanced unemployment benefits, stimulus and the new child tax credit.

Meanwhile, eMarketer analysts forecast total U.S. retail sales will grow 15.5% to $6.5 trillion this year, including auto and gasoline sales but not restaurants. Challenges loom, though, since strong consumer demand will likely outweigh the availability of goods due to “massive supply chain disruption,” said analyst Suzy Davidkhanian on a Friday webcast. Growth will fall to more normalized pre-pandemic levels in 2022, growing to $6.6 trillion, said eMarketer data.

After being hit hard by lockdown trends during the COVID-19 pandemic, retail isn’t dead, “it’s transforming,” said Davidkhanian. Vaccine rollouts in 2021, positive macroeconomic trends, stimulus checks and increased consumer confidence led to “revenge spending,” with retailers capitalizing on the momentum, she said.

But Davidkhanian called current retail and inflation news “mixed,” saying the delta variant in the summer tempered the “spending euphoria” from earlier in the year. “The uncertainty continues now,” she said, noting reports of unemployment amid a labor shortage. EMarketer expects retail spending to go back to pre-pandemic levels, around 3%, in 2025. She called 2020 “an anomaly,” and 2021 had a “huge bump.” The market researcher predicts U.S. retail will pass $7 trillion in spending in 2024.

Amid the uncertainty, consumers are showing less brand loyalty, Davidkhanian said, saying they're more willing than previously to pick up another brand if they can’t find their favorite in store. That’s putting pressure on retailers and brands to create new options and experiences to drive traffic and sales. Home Depot began a rent online, pick up in store offering, and Sam’s Club piloted a buy in store, send to home option. Though neither was a new concept, they showed retailers’ willingness to experiment “now that consumers are open to trying new things,” said the analyst.

Social commerce, an up-and-coming area in retail, will produce $37 billion in volume this year, expected to double by 2025, said Davidkhanian. Social commerce is meant to be a “fun and curated” experience, she said, and a way for retailers to inspire customers to try new brands and products. It can also bring back the emotional connection with customers that was lost in a competitive rush to offer convenience and fast delivery.

EMarketer analyst Blake Droesch cited livestreaming as an emerging trend: “Think about QVC but with everything included in the platform,” he said, citing video, chat and purchasing “all in one.” The market is still “very, very small,” said Davidkhanian, “but there’s definitely a lot of hype around this shopping mechanism.” A Harris Poll said 40% of consumers had watched a video online with the intent to purchase, but only 7% actually made a purchase, she said. She cited Coresight research saying U.S. livestream shopping could reach $11 billion this year, up from $6 billion in 2020. Livestreaming shopping is popular in China, she noted, saying trends popular there often wind their way to the U.S.

Droesch noted Google is making inroads into livestream shopping, building off its capabilities with long-form video on YouTube, a popular platform globally for watching livestreams. “That’s the platform I’m going to be watching as they unveil larger live shopping initiatives,” he said. Droesch referenced a weeklong live shopping event beginning Nov. 15, “YouTube Holiday Stream and Shop,” that will go “way beyond social media.”

Voice commerce has been slow to gain steam, said Davidkhanian, calling the adoption of shopping via smart speaker still “very nascent.” Eight percent of U.S. consumers who own a smart speaker say they have shopped using it; 16% have reordered items; and 18% have “thrown things in a cart but checked out on a different device,” she said. Though a small segment of the retail market, voice commerce is "worth having on your radar if you’re a retailer or brand, especially if you’re more of a commodity or replenishment item business," she said.