A new report from Customer Growth Partners suggests that Americans — despite fatigue over the enduring COVID-19 pandemic — are poised to spend big throughout the holiday season.
The firm’s 19th annual Holiday Forecast anticipates a robust 5.8% year-over-year retail sales hike for the November-December holiday season, hitting a record $749 billion (excluding automobiles, gas and restaurants).
CGP says strong retail sales in September could be a harbinger of a healthy shopping season.
“After the COVID store closures crushed sales by 12% in April, traffic and sales have rebounded ever since, culminating in the blowout September retail sales data, up 8.8% from 2019,” said Craig Johnson, President, CGP. “After past calamities, the American shopper has shown that she is deeply resilient after even the worst disasters, such as 9/11, and that she will bounce back smartly — as long as her household has a job.”
The CGP report, whose findings were reported by Chain Store Age, finds e-commerce will lead the way, with digital and direct-to-consumer sales expected to hit $189 billion — and representing more than 64% of the aggregate holiday sales increase. For major store-based retailers, the report says, the lion’s share will come via online sales. The stores, meanwhile, are expected to see flat or slightly negative in-store sales.
Home improvement (up 8.9%) and sporting goods/toys (8.5%) are expected to be the leading merchandise categories, with the biggest retail declines hitting apparel (down 13.5%) and department stores (11%).
A key factor driving the forecast, CGP says, is an explosion in the household savings rate, which has hit record levels in 2020. “With an extra $1.24 trillion year-over-year in total household savings, now at $2.43 trillion, shoppers have the equivalent of three full holiday seasons of ‘dry powder’ cash available for spending, far above the entire $749 billion holiday forecast,” Johnson said.
The forecast isn’t without some pessimism — specifically, high unemployment and no sign of federal COVID-related aid.
“Looking past holiday, the key question is how sustainable retail growth will be going forward, given the unexpected strength of household finances — and the uncertain pace and impacts of COVID, particularly on employment growth,” Johnson said. “But if the economy can generate at least the current monthly rate of 661,000 new jobs — equivalent to about 8 million new jobs per year — retail spending is poised to expand in 2021 somewhere near a healthy 5% pace, buoyed by the strong consumer fundamentals.”
Meanwhile, a separate report from KPMG sings a significantly different tune. It says consumers plan to spend less and buy fewer gifts this holiday season, with the average budget reduced 18% versus a year ago.
According to the survey, 41% of consumers say they’re not planning to participate in Black Friday sales in person.
“Faced with considerable uncertainty and reduced household income, consumers are spending less this holiday season, focusing on essential purchases for the home and gifts for close family members,” said Scott Rankin, National Advisory Leader, Consumer & Retail, KPMG. “Retail customers are forming new shopping habits, which are expected to continue into 2021 and beyond.”
The report, Season of Reckoning: 2020 COVID-19 Consumer Pulse/Holiday Report, says average per-person spending this holiday season is expected to fall to $515 from $627 in 2019, with a majority shopping in October (25%) or November (38%).