Nation’s top retail trade group predicts highest holiday sales on record

November 1-7, 2021

By The Daily Record staff 

As the number of COVID-19 cases in Arkansas and across the U.S. continue to decline, holiday spending has the potential to shatter previous records in the run-up to the nation’s yuletide season that now spans the months of November, December and early January.

According to the National Retail Federation’s annual forecast leading up to Christmas Day, holiday sales are forecasted to grow between 8.5% and 10.5% over 2020 to between $843.4 billion and $859 billion. The numbers, which exclude automobile dealers, gasoline stations and restaurants, compare with a previous high of 8.2% in 2020 to $777.3 billion and an average increase of 4.4% over the past five years.

“There is considerable momentum heading into the holiday shopping season,” NRF President and CEO Matthew Shay said. “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. Retailers are making significant investments in their supply chains and spending heavily to ensure they have products on their shelves to meet this time of exceptional consumer demand.”

Last week, NRF and Prosper Insights & Analytics reported that consumers plan to spend $997.73 on gifts, holiday items and other non-gift purchases for themselves and their families this year. Nationwide, about 90% of U.S. adults plan to celebrate the upcoming holidays, including Christmas, Hanukkah and Kwanzaa, up from 87 percent last year.

Similar to last year, consumers are prioritizing gifts for family and friends and purchases related to holiday celebrations such as food or décor. Overall plans for holiday spending remain slightly below the pre-pandemic high of $1,047.83 in 2019, as fewer consumers plan to spend on non-gift purchases for themselves and their families.

Overall, 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. While ecommerce will remain important, households are also expected to shift back to in-store shopping and a more traditional holiday shopping experience.

“The outlook for the holiday season looks very bright,” NRF Chief Economist Jack Kleinhenz said. “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 said. “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 on the shelves and merchandise arrives before Christmas, it could be a stellar holiday sales season.”

While it appears 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.

NRF expects retailers will hire between 500,000 and 665,000 seasonal workers. That compares with 486,000 seasonal hires in 2020. Some of this hiring may have been pulled into October as many retailers encouraged households to shop early to avoid a lack of inventory and shipping delays. With the earlier start retailers have announced thousands of open positions in bricks-and-mortar stores and warehouse and distribution centers.

Weather traditionally factors into holiday sales, and the National Oceanic and Atmospheric Administration is predicting 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 has in the past correlated with stronger retail sales and could be a factor in 2021.

NRF’s holiday forecast is based on economic modeling that considers 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.

The methodology used to calculate holiday retail employment in 2020 was changed to accommodate the sizeable impact of COVID-19 on overall industry employment. In 2021, NRF returned to a traditional employment buildup method. Additional holiday information is available on NRF’s Winter Holidays website here:

Big Thanksgiving celebrations on tap too

The NRF forecast are in line earlier pre-Thanksgiving reports that show consumers are planning bigger-than-normal holiday gatherings this year after nearly two years of remote living and despite widespread supply chain challenges that continue to impact industries across the economy.

Chicago-based IRI, a global consumer, healthcare and retail consulting and data analytics firm, also released a new report on Oct. 27 that provides new insight into trends in the 25 grocery categories that drive $2.2 billion in sales for the four weeks leading up to Thanksgiving.

“Consumers are planning for big holiday celebrations this year, so the weeks leading up to Thanksgiving are a tremendous opportunity for grocery retailers and CPG brands,” said Dr. Krishnakumar S. Davey, president of IRI Client Engagement. “IRI’s latest study shows that sales uplift for edible products in the four weeks leading up to Thanksgiving are typically worth approximately $2.2 billion. There is some variation in availability of key products across markets and, therefore, brands must be strategic and leverage real-time data to understand demand granularly and optimize their promotions and supply chain operations to capture a slice of that opportunity and earn shoppers’ loyalty.”

Based on data for the week ending Oct. 17, 2021, it identified these key findings: https://nrf.com/topics/holiday-and-seasonal-trends/winter-holidays

Recent trends suggest more shoppers will be planning ahead. Historically, the sales uplift has been concentrated evenly in the two weeks leading up to Thanksgiving; however, in 2020, the bulk of Thanksgiving sales shifted a week earlier. For the 2021 season, retailers and manufacturers should prepare for an earlier wave of Thanksgiving shoppers and ensure they have key products stocked and a promotion strategy in place to capitalize on heightened demand.

Manufacturers should keep product allocation strategies nimble to accommodate in-stock level variation across regions. The in-stock rates of the top 25 Thanksgiving-related categories vary greatly across the country. In markets in Pennsylvania, Michigan and Florida, in-stock rates of the tracked Thanksgiving items are generally 7 to 9 percentage points above the national average. In markets in Texas, Nebraska and Kansas, supply shortages have contributed to in-stock rates between 9 and 11 percentage points below the national average. Manufacturers should closely monitor their in-stock levels by retailer and region and leverage both historical and real-time purchase data to anticipate shortages and allocate products across markets to accommodate shoppers’ shifting holiday demand patterns.

Shoppers should prepare to make substitutions, given supply chain risks in key categories. Product availability in the whipped toppings, liquid gravy, bakery pies and frozen pie/pastry shells categories were between 5 and 13 percentage points lower this week than the same time last year, but availability has been improving in these categories compared to a week ago. Conversely, bottled cider and pie/pastry filling categories have in-stock levels on par with this week last year, but their stock levels are low, and supply is declining compared to last week. Holiday shoppers should plan to shop early for those key ingredients that are experiencing significant out-of-stock levels or prepare to make creative substitutions.

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National Retail Federation on Oct. 17 forecast that holiday sales during November and December will grow between 8.5 percent and 10.5 percent over 2020 to between $843.4 billion and $859 billion.