Sharp Slowdown in Retail Growth Seen for Holiday

·4 min read

U.S. retail sales should increase 6.7 percent for the November-December holiday shopping season, amounting to a sharp slowdown from the 14 percent growth seen year-to-date through September.

That’s according to Customer Growth Partners, which also indicates that the 6.7 percent gain in 2021 holiday sales falls below the 7.7 percent sales increase seen in holiday 2020, and lags CGP’s full-year 2021 forecast of 11.9 percent sales growth.

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CGP estimates that 2021 holiday sales will reach a record $813 billion, from $762 billion in 2020.

“After stratospheric growth for almost a year, consumer spending is beginning to settle down to ‘near-normal’ rates,” said Craig Johnson, president of CGP, a research and consulting firm. “However, the deceleration from the heady double-digit growth of 2021 year-to-date is due to raging energy price hikes, widespread inflation and the supply chain challenges — all mitigating but not fully offsetting otherwise healthy consumer fundamentals.

“On a two-year basis,” Johnson said, “the retail recovery is exceptional, with 2021 holiday spending up 15 percent from 2019’s $707 billion pace — itself a record at the time. Still, the slower growth pace shows the sharp effects of inflation in general, and energy prices in particular, which are estimated to take some $46 billion out of discretionary spending for the holiday period, with gasoline alone expected to subsume some $35 billion. Supply chain challenges will reduce holiday spending by at least $10 billion, with some demand pulled forward into October or delayed into January.” CGP’s holiday forecast spans all retail sales except autos, gasoline and restaurants.

CGP’s forecasts are less optimistic than some others. Last month, AlixPartners projected an increase of 10 to 13 percent over last year’s holiday season in the U.S., making 2021 the strongest holiday period since 1999. The Mastercard Spending Pulse reported that U.S. retail sales are anticipated to grow 7.4 percent excluding automotive and gas. And KPMG expects holiday sales will be 7 percent higher than last year.

CGP predicted that growth would ease this fall, as comparisons became more challenging and as services spending recovers. “Labor shortages, supply chain bottlenecks, and consumer resistance to rising prices are also holiday headwinds,” Johnson said. “The greatest uncertainties may be a COVID-19 rebound, along with spiking energy prices — each dime of increase at the pump takes $1.3 billion a month out of retail spending.”

But Johnson also said the higher energy costs, COVID-19 and supply chain challenges will be mitigated by rising disposable income — up 4.5 percent — healthy household balance sheets, an extra $500 billion in consumer savings from 2020, and a rising cash “underground” economy — from weed to lawn care — spending money but not showing up in statistics.

Apparel and accessories will outpace other merchandise sectors for the first time this century, with “stellar” 18 percent growth from 2020’s sluggish sales, according to CGP.

In other forecasts, CGP said department stores will see their best holiday growth rate in decades — up 13 percent — but will still lag their total sales from the 1990s, when the sector’s shrinkage accelerated.

Consumer electronics and appliances will rise some 10 percent from last year, paced by Apple’s new iPhone 13, updated iPad models, and new notebook computers from all major brands.

Sporting goods, toy and hobby stores will also thrive, up 9 percent, “as once hunkered-down households return to normal recreation patterns and hobbyists shop Michael’s, et al.,” Johnson reported.

E-Commerce retailers will rise a solid 7.7 percent to a record $194 billion.

“The past 18 months have provided a unique window into the resilience of the American consumer, the resourcefulness of American retailers — and the underlying strength of the economy at large,” said Johnson. “Retail growth is slowing as we lap 2020’s fourth quarter, but we will still see record holiday spending. If the worst of the inflation fires ease in the new year, and the supply chain rebalances by mid-year, we may well see a return to solid but sustainable midsingle-digit growth for 2022.”

CGP bases its forecasts on a two-decade-long “big data” retail platform tracking retail spending, nationwide field research across over 100 benchmark shopping venues and a field sample of about 12,990 intercepts at malls and stores. CGP’s 18-member field team conducts primary research weekly in more than 100 major shopping venues nationwide.

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