As the pandemic continues to depress consumer sentiment, holiday spending is expect to increase by a modest 1% to 1.5%, according to Deloitte’s annual holiday retail forecast. Consumers’ flight to online stores is expected to continue, with a projected 25-35% surge in e-commerce holiday sales.
The Deloitte report predicts that US holiday spending will be between $1.147 trillion to $1.152 trillion in the November to January timeframe. E-commerce sales are expected to reach between $182 billion and $196 billion.
In last year’s report, Deloitte projected a sales increase of 4.5-5.0% for the 2019 holiday season, reaching $1.1 trillion in spending. Actual US holiday sales between November 2019 and January 2020 realized growth of 4.1% to reach nearly $1.14 trillion in spending, according to the US Census Bureau.
“The lower projected holiday growth this season is not surprising given the state of the economy. 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,” said Daniel Bachman, Deloitte’s US economic forecaster. “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.”
A recent McKinsey consumer sentiment survey noted that many consumers are shifting their spending to target value and essentials – with many expecting the pandemic to negatively affect their finances for at least another four months. Forty percent of US respondents said they are more mindful of where they spend their money, and 31% said they are changing to less expensive products.
The McKinsey survey also recorded a distinct flight to e-commerce, with more than 10% growth in online customer bases across most categories.
With unprecedented uncertainty this holiday season, Deloitte projects two scenarios: marginal growth (0-1%) or a more significant jump of 2.5-3.5% growth. The formal forecast blends the two scenarios.
The lower growth scenario would occur if consumers continue to experience financial and health-related anxiety, with lower confidence driven by expired unemployment benefits, school closures, and lack of a vaccine. That would reinforce the current trend of high savings, at 17.8% in July 2020 versus 7.4% in 2019.
The higher growth scenario will play out if consumers gain confidence as a result of several factors, such as an effective relief bill with unemployment benefit supplements and the creation of an effective vaccine.
“This year, one of two holiday scenarios will play out. 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, Deloitte LLP and US 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.”