Retail trade group forecasts sales growth in 2017 led by e-commerce

Despite an onslaught of retailer woes, store closures and weaker-than-expected holiday sales, the National Retail Federation expects solid growth this year projecting total sales – excluding automobiles, fuel and restaurants – to increase between 3.7% and 4.2%.

The NRF said non-store/online sales, included in that forecast, are expected to grow between 8% and 12% over a year ago. NRF CEO Matthew Shay said the economy is on “firm ground as we head into 2017.” He predicts the industry will build on the momentum seen in 2016.

Shay said consumers are in the driver’s seat as unemployment remains low and incomes are rising. But with those things in consumers’ favor, he said there is still some hesitancy to spend because of uncertain policy changes on taxes, healthcare costs and other issues being debated in Congress.

Jack Kleinhenz, chief economist at NRF, characterizes 2017 as no ordinary year with so many issues being debated in the U.S. and across the globe potentially weighing on consumer sentiment. He said the 4% lift in the recent holiday sales is proof that consumers are resilient.

“Prospects for consumer spending are straightforward – more jobs and more income will result in more spending,” Kleinhenz said. “Regardless of sentiment, the pace of wage growth and job creation dictate spending. Our forecast represents a baseline for the year, but potential fiscal policy changes could impact consumers and the economy. It seems unlikely that businesses will notably increase investment until tax reform and trade policies are well-defined.”

“It is clear that online sales will continue to expand in 2017 and provide growth for the retail industry,” Kleinhenz said. “But it is important to realize that virtually major retailer sells online and many of those sales will be made by discount stores, department stores and other traditional retailers. Retailers sell to consumers however they want to buy, whether it’s in-store, online or mobile.”

The increase in sales is not likely to come from Valentine’s Day. The NRF estimates total spending for the holiday will reach $18.2 billion, down from $19.7 billion in 2016 – which was a record.

Analysts said while a number of retailers are closing and others are shuttering some stores, the industry continues to invest heavily in online retail and giants like Wal-Mart Stores, Dollar General, Amazon.com have all announced store and fulfillment investments with jobs being added.

Dollar General announced plans to create 1,000 jobs in Georgia this year with the addition of new stores as well as a new distribution center. The Goodlettsville, Tenn.-based company said in a news release that it wants to add 1,000 discount stores and create about 10,000 jobs across the country in 2017.

Target said it plans to add another small format store in the Lakeview neighborhood on Chicago. The 31,000-square-foot store is slated to open in October on the heels of another store opening in urban Chicago (Clark Street) slated for July. These stores are part of Target’s plan serve urban areas with these smaller flex-formats. The Chicago area is one of 10 densely-populated markets that Target is focusing for these small formats. The company it has 32 of these small formats in operation and it plans to add 33 more over the next two years.