Holiday retail sales predicted to rise as much as 10.5%

Retailers are expecting big holiday sales and the National Retail Federation (NRF) predicts spending will range between $843.4 billion and $859 billion. The sales gain is forecast between 8.5% and 10.5% over the pandemic year of 2020 when sales rose 8.2% to $777.3 billion.

If the predictions ring true it would be an all-time high for holiday sales growth and top last year’s record. The retail trade group acknowledged supply chain disruptions and labor shortages have raised concerns about product inventory and eventual total sales. For the five years leading up 2021, holiday retail sales have averaged 4.4% annual increases.

NRF CEO Matt Shay said retailers are doing all they can to ensure inventory is on the shelves. He said customers have already begun shopping, partially in fear of the shorter supplies. He said some may have to settle for their second or third choices on their wish lists because of supply chain issues.

That said, more consumers are vaccinated for COVID-19, have grown used to navigating life during a pandemic and had extra funds because of stimulus dollars and more time at home and that has made 2021 a smoother year for retailers, he added.

Shay said consumers will go out to shop this holiday season, but e-commerce sales are also expected to get a lift from a year ago. Online and other non store sales are expected to rise between 11% and 15% over last year, with sales expected between $218.3 billion and $226.2 billion, according to the NRF. The trade group expects 2021 holiday shoppers to spend an average of $997.73 on gifts and other non-gift purchases. A separate forecast from Deloitte is also bullish with 7% holiday sales growth from last year with average household spending at $1,463, up 5% from 2020.

Jack Kleinhenz, the chief economist at NRF, said he is watching inflation, which is a factor for higher sales this year. He said many households have a better balance sheet and have paid down debt during the pandemic, which is allowing them to absorb higher prices. He expects to see gains in the labor market and rising consumer optimism in the coming months as COVID cases decrease, booster shots become widely available and children qualify for the vaccines. He said this will influence shoppers’ mindsets as they prepare to celebrate the holidays.

Kleinhenz said individuals are returning to work, traffic is picking up in stores and in some service areas. Other economists and logistics insiders have said retailers will offer fewer discounts this holiday season given higher transport costs resulting from supply chain disruptions.

Many retailers have already begun to feature their sales early as shoppers are eager to make holiday purchases. NRF reports half of the respondents said they have already started their holiday shopping in October. Phil Rist, executive vice president of strategy at Prosper Insights, said consumers are taking advantage of free shipping, buy-online, in-store pick-up, and expedited shipping to ensure they get gifts on time.