The growth rate of retail sales this Christmas season is likely to be less robust than in recent years, according to forecasts by the consulting firm Deloitte on Tuesday.
How subdued this growth will be, however, depends on how much high-income consumers do and how much seatbelt tightening takes place in households with lower incomes.
Some economists are now calling for a K-shape recovery – a scenario in which certain types of industries are profitable while others are left out. In contrast to so-called U- or W-shaped recoveries, the growth of a K-shaped recovery is unevenly divided between the income groups, creating a scenario with "haves" and "have nots".
Since the coronavirus pandemic began, some industries are still chugging where workers can be productive at home. However, others have seen sales dry up as consumers avoid eating out, going to the movies, and taking vacations.
"This year will play out one of two vacation scenarios," said Rod Sides, Deloitte vice chairman and leader in retail and distribution. "History would tell us … we'll see consumer groups recover differently."
According to Deloitte, retail sales are projected to grow between 1% and 1.5% this year during the holidays, and range from $ 1.147 trillion to $ 1.152 trillion between November and January. That's 4.1% growth in 2019, when revenue was nearly $ 1.14 trillion, according to the U.S. Census Bureau.
The range from 1% to 1.5% results from the mixture of two different scenarios controlled by large and small donors, explained Deloitte.
For one, Deloitte believes there could be a relatively stable 0% to 1% jump in sales over the holidays if consumers – especially low-wage earners – remain nervous about their finances and health, and a larger proportion of their spending on have to spend the bare minimum. The expiring unemployment insurance benefits could also make this first scenario more likely, Deloitte said.
However, a bigger increase of 2.5% to 3.5% could happen if wealthier consumers gain even more confidence in the second half of 2020. Factors that could boost confidence in this group include falling unemployment, additional government incentives and an effective Covid-19 vaccine, Deloitte said. This scenario assumes that the money that higher-income consumers don't spend on vacations and experiences like concert and Broadway tickets will go to spending on Christmas gifts, with people more eager than ever to indulge themselves.
"While high unemployment and economic fears will weigh on overall retail sales this holiday season, lower spending on pandemic-sensitive services like restaurants and travel can help prop up retail sales," said Daniel Bachman, Deloitte's US economic forecaster.
With many consumers still spending most of their time at home and avoiding crowded public spaces, inevitably more spending online is inevitable during this holiday season as well. Deloitte estimates that vacation e-commerce sales will grow 25% to 35% and will amount to $ 182 billion to $ 196 billion. That compares with online growth of 14.7% year over year in 2019 and revenue of $ 145 billion.
However, this is also putting pressure on retailers to prepare for a rush of online orders that will begin next month and run until the last minute shipping deadlines arrive.
"Many of the people I speak to right now are scared of running out of inventory," Coresight founder and CEO Deborah Weinswig said in an interview. "We are already capacity constrained … and the consumer has no idea that this is coming."
A number of retailers, including Macy's, have announced that shopping for the holidays will start earlier than ever this year.
Many have announced that they will close their doors on Thanksgiving Day, ending the tradition that began before Black Friday. And strategies to keep stores from becoming overcrowded at a time when social distancing needs to be enforced are being explored. Companies are trying to gauge what consumers are looking to buy amid a global health crisis. The consensus seems to be: everything is comfortable.
Perhaps most importantly, according to Deloitte, retailers should plan a scenario in which the recovery in the US is uneven – driving a wedge even further between rich and poor.