Retailers are gearing up for an unprecedented holiday shopping season as the coronavirus pandemic continues to plague the United States — and only one of two scenarios is likely to pan out, according to Deloitte.
The firm said today that holiday spending could end up being relatively stable, with a year-over-year growth of up to 1%, as anxieties surrounding the global health crisis might lead consumers to preserve their cash for non-discretionary goods. The lack of confidence could be driven by a variety of factors, including the expiration of the weekly jobless benefits, sustained school closures and the absence of an effective vaccine, as well as consistently high unemployment numbers. This would reinforce high savings, with the current national rate already more than double last year (17.8% in July, versus 7.4% in 2019).
On the other hand is a rosier outlook, where sales could see a jump of 2.5% to 3.5%. The professional services firm shared that consumers could experience a steady rise in confidence if Congressional leaders are able to pass a federal stimulus measure with supplemental benefits for the unemployed. This could also depend on the successful creation and distribution of a COVID-19 vaccine. What’s more, as consumers cut back on travel costs and other experiences, these funds might end up being redirected toward spending on holiday gifts.
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Both ranges, however, are still lower than the gains that Deloitte has recorded in previous years and suggest that retail could see a K-shaped recovery. But the good news is neither scenario put forth by Deloitte indicate that retailers should brace for a significant decline.
“Regardless of the scenario, however, the consumer’s focus on health, financial concerns and safety will result in a shift in the way they spend their holiday budget,” vice chairman of Deloitte LLP and U.S. retail and distribution sector leader Rod Sides said in a statement. “For retailers, this holiday season will continue to push the boundaries on the importance of online, convenience, the role of the store, and the criticalness of safe and speedy fulfillment.”
Melding both scenarios, Deloitte reported that holiday retail sales are likely to increase between 1% and 1.5%, resulting in sales between $1.147 trillion and $1.152 trillion in the period from November to January. It also predicted that e-commerce sales will grow by 25% to 35% year over year, compared to sales rising by 14.7% in 2019, and are expected to generate between $182 billion and $196 billion this season.
“The lower projected holiday growth this season is not surprising given the state of the economy. While high unemployment and economic anxiety will weigh on overall retail sales this holiday season, reduced spending on pandemic-sensitive services such as restaurants and travel may help bolster retail holiday sales somewhat,” added Daniel Bachman, Deloitte’s U.S. economic forecaster. “E-commerce is likely to be a big winner because consumers have shown a clear movement towards buying online rather than at brick-and-mortar stores.”