November 23, 2020
The National Retail Federation Nov. 23 forecast that holiday sales during November and December will increase from 3.6% to 5.2% over the same period last year, generating $755.3 billion to $766.7 billion in revenue. The data, which excludes automobile dealers, gasoline stations and restaurants, compares with a 4% increase to $729.1 billion in 2019, and an average holiday sales increase of 3.5% over the past five years.
“We know this holiday season will be unlike any other, and retailers have planned ahead by investing billions of dollars to ensure the health and safety of their employees and customers,” Matthew Shay, CEO of the retail trade group, said in a statement. “Consumers have shown they are excited about the holidays and are willing to spend on gifts that lift the spirits of family and friends after such a challenging year.”
NRF expects that online and other non-store sales, which are included in the total, will increase between 20% and 30% to between $202.5 billion and $218.4 billion, up from $168.7 billion last year.
“Given the pandemic, there is uncertainty about consumers’ willingness to spend, but with the economy improving most have the ability to spend,” said NRF Chief Economist Jack Kleinhenz.
Kleinhenz said households have strong balance sheets supported by a strong stock market, rising home values and record savings boosted by government stimulus payments issued earlier this year. Jobs and wages are growing, energy costs are low and reduced spending on personal services, travel and entertainment because of the virus has freed up money for retail spending.
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 been growing month-over-month and year-over-year since June. As calculated by NRF, sales were up 10.6% 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% versus the first 10 months of 2019.
With e-commerce sales up 36.7% 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.
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 Nov. 1 through Dec. 31.
The forecast comes as NRF’s latest research shows 42% of consumers started their holiday shopping earlier than usual this year. NRF’s “New Holiday Traditions” campaign has urged consumers to shop safe and shop early amidst the pandemic, and 59% had begun by early November, up from 49% at that point a decade ago.