Wish to spend amid virus could boost holiday sales
The National Retail Federation, the nation’s largest retail trade group, expects that holiday sales could actually exceed growth seen in prior seasons, despite all the uncertainty surrounding the pandemic.
The reason? Shoppers are looking for opportunities to spend and celebrate the holidays during tough times.
The trade group said Monday that it predicts that sales for the November and December period will increase between 3.6 percent and 5.2 percent over 2019 to a total ranging between $755.3 billion and $766.7 billion.
The numbers, which exclude automobile dealers, gas stations and restaurants, compare with a gain of 4 percent to $729.1 billion last year. Holiday sales have averaged gains of 3.5 percent over the past five years.
“After all they’ve been through, we think there’s going to be a psychological factor that they owe it to themselves and their families to have a better-than-normal holiday,” NRF Chief Economist Jack Kleinhenz said in a statement. “There are risks to the economy if the virus continues to spread, but as long as consumers remain confident and upbeat, they will spend for the holiday season.”
Kleinhenz cited households having strong balance sheets buoyed by a strong stock market, rising home values and record savings boosted by government stimulus payments issued this year. Jobs and wages are increasing, energy costs are low and reduced spending on personal services, travel and entertainment because of the virus has freed up money for retail spending, he added.
The NRF expects that online and other nonstore sales, which are included in the total, will increase between 20 percent and 30 percent to between $202.5 billion and $218.4 billion, up from $168.7 billion last year. Not included in total sales figure are sales from restaurants, gas stations and auto dealers.
The NRF delayed the release of its forecast by about a month, citing the uncertainty around the pandemic.
Still, the group warns that any further shutdowns of stores as virus cases surge could derail sales. And it emphasized that any renewal of a government stimulus package would help the holidays.
When the pandemic was declared in mid-March, essential retailers such as Target and Walmart were able to stay open while nonessential stores such as department stores were forced to close. That further increased the dominance of big-box stores, while mall-based clothing stores faced further peril. The temporary closures accelerated bankruptcy filings of a slew of chains such as J.C. Penney and Neiman Marcus that were already struggling.
Many mall-based stores and other small and midsize businesses are still struggling to recover heading into the heart of the holiday season.
When nonessential retailers are forced to shut down, their ecommerce business can’t expand enough to keep them whole, according to Nick Mangiapane, chief marketing officer at Verisk Financial’s Commerce Signals unit, which captures credit and debit spending from 40 million U.S. households.
In the firstwave COVID-induced shutdowns, the gap in yearover-year sales trends was 57 percentage points between essential and nonessential, with essential store sales posting a 6.4 percent gain while the rest suffered a 51.3 percent drop. During the second spike, which took place during the summer, the gap was smaller, with few shutdowns, but it was still substantial.
So far, in this third wave, the sales performance gap is still sizable, but any shutdowns will hurt sales for nonessential businesses dramatically, according to Mangiapane.
Still, the NRF cited that the aggregate retail sales have seen a Vshaped recovery, growing both month over month and year over year each month since June. As calculated by the NRF, sales rose 10.6 percent in October when compared with the same month a year ago, likely fueled in part by early holiday shopping. For the first 10 months of this year, retail sales rose 6.4 percent when compared with the first 10 months of 2019.