The Supply Side: Rosy retail outlook for many despite Delta variant; apparel to benefit

Retailers across the country experienced the gamut in 2020 amid the COVID-19 pandemic — supply chain hiccups, reduced operating hours, keeping employees safe, record revenue, robust online growth and more attention to social, racial and equity issues.

Retail insider and expert Jan Kniffen, founder of J. Rogers Kniffen Worldwide Entertprises, said retail “could not be better.” He said the consumer is dying for deals, which bodes well for retailers like Nordstrom and those who “throw the sales.”

“What does this portend for back to school and holiday? Well, the consumer is sitting on $2 trillion of excess savings,” Kniffen said. “Unemployment is falling, and hourly wage rates are rising. Credit card debt is not excessive. Asset wealth as measured by home values and 401(k) balances are at all-time highs. The consumer just found out that each of their kids is getting $300 every month for a while. That means that mom or dad can spend on the kids for back-to-school.”

Kniffen added that this will be the best back-to-school spending year he’s ever seen. He insists it’s not just clothes for the kids. Families might have thought they bought every electronic item their kids needed last year, but Kniffen predicts 2021 will be another big year for electronic sales ahead of the school year.

The National Retail Federation expects back-to-school spending for children K-12 to top $37.1 billion, up 9.4% from a year ago. Per-capita expenditure is pegged at $848.90, up $59 more than last year for back-to-school items.

Kniffen said the strong back-to-school season sets the stage for more spending on fall apparel and a robust holiday season for clothing akin to the roaring 1920s.

Kniffen predicts country and western apparel will be “hot” items this fall. The fashion craze is being played out amid pop culture influences. TV personality Kourtney Kardashian swapped flip-flops for cowboy boots in recent social media posts. Bolero ties from Prada are seen around the necks of singers Nick Jonas and Quavo.

Kniffen said this trend could be good for American Eagle, The Buckle and Urban Outfitters, and retailers who carry the Levi brand. He expects the fashion trend will run through the first half of 2022. Walmart, Amazon, Target and Costco could also be essential market share winners in the western fashion fad. Kniffen said these winners from 2020 are not going to want to concede their share gains, and they will likely play at scale.

He said the fashion trend would help boost apparel sales through mid-2022, depending on how big the fad gets. It could also be a catalyst for sales growth in home decor to benefit many other retailers like Bed, Bath & Beyond and At Home.

Kniffen said the COVID variant would have to get scarier before he sees it wrecking holiday sales. Kniffen noted that given the improving vaccination rates and more mandates that require it, he does not see the Delta variant having much of a negative impact on holiday sales.

Early predictions for holiday sales by eMarketer indicate another record year with sales rising 2.7% to $1.09 trillion. E-commerce sales are forecast at $206.88 billion, up 11.3% and making up a record 18.9% of total holiday sales in 2021.

A recent report by Salesforce predicts U.S. retailers will face an extra $223 billion in costs of goods sold this holiday season due to significant year-over-year cost increases for freight, manufacturing and labor. Salesforce anticipates retailers will pay $12 billion more for raw materials this year than they did over the same period in 2020. That’s on top of ocean freight spending in the second half of 2021 that’s expected to grow by $163 billion more year-over-year. Salesforce said the added costs would hit suppliers, retailers and consumers alike.

Salesforce expects three categories to see significant growth this holiday season as consumers spend on wants and not needs to buy more apparel, luggage, sporting goods and vacation wear. Kniffen agreed there would be winners and losers for category sales again this holiday season.

Kniffen said consumers are, by and large, done with COVID restrictions as they become vaccinated. He predicts 2021 will be a record holiday season, and some retailers will see improved gross margins because of shorter inventories and continued supply chain hiccups. He said retailers have likely under-ordered this year, and that’s going to mean shoppers better buy it if they find what they want because it won’t likely be any cheaper.

Salesforce predicts demand for travel and adventure products will rise this year as families get back to planning trips, holiday gatherings and social events. Kniffen and Salesforce agree that consumers will be spending more on apparel and investment pieces like watches, designer sneakers or jewelry as they trade Zoom events for in-person celebrations. Kniffen said consumers are financially healthy heading into the fall.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.