“Holiday spending has the potential to shatter previous records,” announced the National Retail Federation, which forecasts that November and December holiday sales will grow between 8.5% and 10.5% over 2020, to a total between $843.4 billion and $859 billion.
This year’s numbers (which, as usual, exclude sales from automobile dealers, gasoline stations and restaurants) compare with a previous high of 8.2% in 2020 to $777.3 billion and an average rise of 4.4% over the past five years, according to the forecast.
Making matters a bit confusing, is the fact that six days previously NRF issued a completely different report predicting that retail sales figures would actually be pretty much unchanged from last year’s holiday season.
“There is considerable momentum heading into the holiday shopping season,” NRF President Matthew Shay decalred when he announced the more recent numbers. “Consumers are in a very favorable position going into the last few months of the year as income is rising and household balance sheets have never been stronger.”
Shay stresses that retailers are making significant investments in their supply chains and spending heavily to ensure they have products on their shelves to meet the needs created by this time of exceptional consumer demand.
NRF expects that online and other non-store sales, which are included in the total, will increase between 11% and 15% to a total of between $218.3 billion and $226.2 billion driven by online purchases. In comparison, that number is up from $196.7 billion in 2020.
Last year saw extraordinary growth in digital channels as consumers turned to online shopping to meet their holiday needs during the pandemic. However, the federation says that while ecommerce will remain important, households also are expected to shift back to in-store shopping to seek out a more traditional holiday shopping experience.
“The outlook for the holiday season looks very bright,” NRF Chief Economist Jack Kleinhenz says. “The unusual and beneficial position we find ourselves in is that households have increased spending vigorously throughout most of 2021 and remain with plenty of holiday purchasing power.”
“Pandemic-related supply chain disruptions have caused shortages of merchandise and most of this year’s inflationary pressure,” Kleinhenz explains.
“With the prospect of consumers seeking to shop early, inventories may be pulled down sooner and shortages may develop in the later weeks of the shopping season.” However, if retailers can keep merchandise shelves stocked, it could be a stellar holiday sales season, he adds.
With new Covid 19 infections and hospitalizations are down, a variant surge could potentially sidetrack the current trajectory of spending. Kleinhenz said strong household fundamentals provide optimism amid the uncertainty.
“Income is growing from wage compensation, and household wealth has reached another record high. These together support strong spending this holiday season,” Kleinhenz observes.
NRF also says it also expects retailers will hire between 500,000 and 665,000 seasonal workers. That compares with 486,000 such hires in 2020.
Some hiring may have happened in October when retailers encouraged households to shop early to avoid a lack of inventory and shipping delays. With the earlier start, retailers sought to fill thousands of open positions in bricks-and-mortar stores and warehouse and distribution centers.
Weather also will play a role, NRF notes. The forecast is for a high likelihood of a La Niña pattern of cooler and wetter weather in the north and warmer and drier weather in the south. This climate phenomenon in the past has correlated with stronger retail sales and could be a factor in 2021.