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Retail Industry Updates

Believe! Deloitte’s Holiday Forecast is Relatively Upbeat

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iStock/Sergii Gnatiuk

Key takeaways:

• Deloitte is forecasting a 1% to 1.5% increase in 2020 holiday sales compared with the same period in 2019.

• Deloitte is forecasting a 25% to 35% increase in 2020 holiday e-commerce sales compared with the same period in 2019.

The North Pole should be fairly busy this season, according to Deloitte’s annual holiday retail forecast.

Considering the times — an ongoing pandemic, a challenging economy and a high unemployment rate — Deloitte’s holiday forecast may be surprisingly upbeat. But don’t tell Santa Claus that.

New York City-based Deloitte predicts that holiday retail sales are likely to increase between 1% and 1.5% over last year. The market researcher projects that holiday spending will result in sales between $1,147 billion and $1,152 billion during the November-January timeframe. (If you throw in October, when plenty more holiday shopping will occur this year, it might be more.)

Deloitte also forecasts that e-commerce sales will grow by 25% to 35% year over year during this holiday season, compared to sales increasing by 14.7% in 2019. E-commerce holiday sales are expected to generate between $182 billion and $196 billion this season.

“The lower projected holiday growth this season is not surprising given the state of the economy,” said Daniel Bachman, Deloitte’s U.S. economic forecaster. “While high unemployment and economic anxiety will weigh on overall retail sales this holiday season, reduced spending on pandemic-sensitive services such as restaurants and travel may help bolster retail holiday sales somewhat. E-commerce is likely to be a big winner because consumers have shown a clear movement towards buying online rather than at brick-and-mortar stores.”

Deloitte said it sees holiday sales playing out in one of two possible scenarios this season — a relatively stable year-over-year sales increase (0% to 1%) or a more significant jump (2.5% to 3.5%), both of which are lower than in years past. The formal forecast increase (between 1% and 1.5%) is a result of melding both scenarios.

“Regardless of the scenario, however, the consumer’s focus on health, financial concerns and safety will result in a shift in the way they spend their holiday budget,” said Rod Sides, vice chairman of Deloitte and U.S. retail and distribution sector leader. “For retailers, this holiday season will continue to push the boundaries on the importance of online, convenience, the role of the store, and the criticalness of safe and speedy fulfillment.”

Again, one of two holiday scenarios will play out, according to Deloitte. For the first scenario (0% to 1% year-over-year sales growth) to be true, consumers will continue to experience mounting anxieties, related to both their finances and health. This lack of confidence could be caused by a variety of factors, including the expiration of the unemployment insurance benefit supplement, continued school closures and lack of an effective vaccine; as well as an increase in unemployment numbers. This would reinforce the current trends of very high savings: The current savings rate is more than double what it was last year (17.8% in July versus 7.4% in 2019). In this scenario, consumers are less likely to spend on holiday as they are reserving funds for non-discretionary items.

On the other hand, for scenario two (2.5% to 3.5% year-over-year sales growth) to occur, consumers will experience steadily increasing confidence. This growing confidence could be a result of several factors, including an effective federal pandemic relief bill with an unemployment insurance benefit supplement, and the creation of an effective vaccine. In addition, as consumers have dramatically cut costs related to travel and experiences, these funds might be redirected to spending on holiday gifts.

In addition to market research, Deloitte provides audit, consulting, tax and advisory services to many brands, including nearly 90% of the Fortune 500® and more than 7,000 private companies.

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