Consumers spent more during the holidays – especially with online sales – than analysts and experts expected despite the ongoing pandemic, according to the National Retail Federation.
The trade group reports retail sales during November and December rose 8.3% to $789.4 billion compared with $729.1 billion reported in 2019. The strong sales blew past the trade group’s estimated range between 3.6% and 5.2%. The trade group’s results include online and other non-store sales which rose 23.9% this past holiday season totaling $209 billion.
“Faced with rising transmission of the virus, state restrictions on retailers and heightened political and economic uncertainty, consumers chose to spend on gifts that lifted the spirits of their families and friends and provided a sense of normalcy given the challenging year,” said Matthew Shay, NRF president and CEO.
Consumers shifted into high gear in December, giving the holiday season a strong finish that could be a good sign for the continuing recovery of the economy this year, said NRF chief economist Jack Kleinhenz. He said the robust 8.3% holiday increase was more than double the 3.5% average holiday increase during the previous five years.
“There was a massive boost to most consumer wallets this season,” Kleinhenz said. “Consumers were able to splurge on holiday gifts because of increased money in their bank accounts from the stimulus payments they received earlier in the year and the money they saved by not traveling, dining out or attending entertainment events.”
Kleinhenz also said while sales were strong, there were winners and losers. Apparel retailers saw a 14% decline in holiday sales from the prior year. Kleinhenz and other retail insiders such as Jan Kniffen of J. Rogers Kniffen expect apparel sales will surge in the spring citing the stimulus and consumers who are growing tired of sweatpants and hoodies.
“Consumers were also encouraged by the news of COVID-19 vaccines becoming available, which helped offset concerns about increased infection rates and state restrictions on activity,” Kleinhenz said.
Six of nine retail categories saw gains this past holiday season with double-digit gains in online and sporting goods and building materials. Following are the sales changes for the categories.
• Online and other non-store sales, up 23.9%
• Building materials and garden supply stores, up 19%
• Sporting goods stores, up 15.2%
• Grocery and beverage stores, up 9.6%
• Health and personal care stores, up 5.4%
• Furniture and home furnishings stores, up 2.2%
• General merchandise stores, down 0.1%
• Electronics and appliance stores, down 14.4%
• Clothing and clothing accessory stores, down 14.9%
Deborah Weinswig, CEO of Coresight Research, said consumer resiliency and increased spending also kept some retailers from closing their doors. She had predicted as many 20,000 stores could have closed in 2020. There were 8,921 store closures tracked by her firm. She said the strong holiday sales may have bought a little more time for some, but she expects more pain will be felt in the sector this year. She said the saving grace for many retailers was the resilient consumer demand that no one predicted during a pandemic.
She said the pandemic brought radical solutions that helped some companies preserve cash, such as not paying rent, furloughing employees and acquiring federal stimulus help. Others such as JCPenney and Brooks Brothers were rescued when they were acquired out of bankruptcy. Weinswig said consumer spending was also buoyed by the economic stimulus families received are part of the federal $2.2 trillion CARES Act approved by Congress in March. A second federal stimulus approved just after the holiday and a possible third to come in the next few weeks is likely to help spur on some spending into the summer.
She also said spending was redirected as many Americans began working from home, kids attended virtual school and daily commutes were no longer a reality. They shifted money spent from childcare, eating out, travel and entertainment toward being comfortable at home. Weinswig said consumers didn’t just save billions of dollars, they saved hundreds of billion of dollars as they hunkered down at home.
Taking data from the U.S. Bureau of Labor Statistics, Weinswig estimates across three major service categories — culture and leisure services, foreign travel and food-service and accommodations — U.S. consumers spent around $462 billion less in the first 11 months of 2020 than they did in the comparable period of 2019. She said shoppers poured some of that money back into retail spending on homes and nesting, fitness equipment as gym substitutes and on entertainment goods in lieu of services. More meals at home shifted money away from restaurants.
Weinswig anticipates some of the store closures and bankruptcies predicted in 2020 have been deferred rather than prevented.
“We expect the impact of 2020 difficulties to roll over into the year ahead of us, not least because the early start of 2021 looks set to see a health crisis as severe as later 2020. In addition, … a number of retailers in structurally challenged sectors may find that holiday sales fell short of what was needed,” she said.