A month later than usual, the National Retail Federation announced Monday its sales estimate in this environment affected by social unrest, a heated Presidential election and a pandemic, consumers are feeling safe to spend, boosting its industry forecast up over 2019.
With retail sales rebounding strongly due to continued consumer resilience, the well-known industry group’s CEO and chief economist say they believe holiday sales during November and December will increase between 3.6 percent and 5.2 percent over 2019 to a total between $755.3 billion and $766.7 billion.
The numbers, which exclude automobile dealers, gasoline stations and restaurants, compare with a 4 percent increase to $729.1 billion last year and an average holiday sales increase of 3.5 percent over the past five years.
“We know we have momentum heading into this season,” NRF President and CEO Matthew Shay said in a Monday call with media to go over the holiday-sales forcast.
“Retailers have responded since the start of the pandemic. … They’ve seen firsthand what works and what doesn’t work,” Shay added during the call. This work to protect customers and continuing to serve their communities are why people feel safe going both into stores as possible as well as shopping online across the board.
A better holiday
The National Retail Federation is the world’s largest retail trade association and is based in Washington, D.C. Retail is the nation’s largest private-sector employer, contributing $3.9 trillion to annual GDP and supporting one in four U.S. jobs or an estimated 52 million working Americans.
For hiring, NRF expects retailers to hire between 475,000 and 575,000 seasonal workers to help accommodate additional demand during the holiday season. That compares with 562,000 in 2019. Some of the hiring may have been pulled forward into October as many retailers have implemented holiday sales campaigns earlier than in the past.
NRF expects that online and other non-store 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.
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Consumers also want to give their friends and families a “better” holiday and will spend more as a result, noted NRF Chief Economist Jack Kleinhenz said. These shoppers have more discretionary income across the board, are seeing good economic signs in general and feel strongly that gifts and experiences can improve 2020 as it winds down.
“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,” Kleinhenz said. “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.”
However, he warns that unpredictability in the economy as well as consumer concerns about the lack of further stimulus from the federal government for individuals and businesses could hamper these sales forecasts.
“The forecast is part science, part judgement and part luck,” Kleinhenz said on the media call.
As a result of store shutdowns and stay-at-home orders last spring, not all retailers and categories have rebounded as quickly, including small and mid-sized retailers. However, in the aggregate retail sales have seen a V-shaped recovery, growing both month-over-month and year-over-year each month since June. As calculated by NRF, sales were up 10.6 percent in October versus October 2019, likely driven in part by early holiday shopping. For the first 10 months of this year, retail sales were up 6.4 percent versus the first 10 months of 2019.
With ecommerce sales up 36.7 percent year-over-year during the third quarter, many households are expected to depend on digital shopping to make many of their holiday purchases, just as they have for much of their everyday spending this year. The online spending includes websites operated by bricks-and-mortar retailers, which have become major players in the online market as retail channels have merged.
Weather traditionally plays a role in holiday sales, and while details vary by region, the National Weather Service is forecasting cooler and wetter weather in the north and warmer and drier weather in the south. Kleinhenz said that combination has correlated with stronger retail holiday spending in the past and could be a factor this year.
The NRF forecast is based on an economic model that takes into consideration a variety of indicators including employment, wages, consumer confidence, disposable income, consumer credit, previous retail sales and weather. NRF defines the holiday season as November 1 through December 31. Numbers forecast by NRF may differ from other organizations that define the holiday season as a longer period or include retail sectors not included by NRF, such as automobile dealers, gasoline stations and restaurants.