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In June the National Retail Federation (NRF) issued their revised sales forecast for 2021, noting they now anticipate retail sales will now grow between 10.5 per cent and 13.5 per cent to more than $4.44 trillion this year as the economy accelerates its pace of recovery.
This forecast far surpasses predictions made in February this year when the NRF projected at least 6.5 per cent growth.
“The economy and consumer spending have proven to be much more resilient than initially forecasted,” NRF President and CEO Matthew Shay said.
“The combination of vaccine distribution, fiscal stimulus and private-sector ingenuity have put millions of Americans back to work. While there are downside risks related to worker shortages, an overheating economy, tax increases and over-regulation, overall households are healthier, and consumers are demonstrating their ability and willingness to spend.
“The pandemic was a reminder how essential small, mid-size and large retailers are to the everyday lives of Americans in communities nationwide.”
The NRF’s revised prediction comes as monthly sales figures waver between small rises and minor falls.
After a strong rebound in March, April data from Census revealed a slight dip (1.3 per cent) on the month prior but year-over-year spending growth of 51.1 per cent with the NRF tipping the US economy could see its fastest growth in more than three decades.
In May, Census data indicated sales reduced by a further 1.3 per cent on April, but the NRF noted the data did not paint a full picture.
Instead, their figures revealed unadjusted May sales totalled $388.6 billion, the second-highest level of spending on record, outpaced only by $414.7 billion in December.
June saw sales again on the rise, according to the Census data, increasing 0.6 per cent on the month prior.
Meanwhile, the NRF noted June sales were up year-over-year across the board, led by increases at clothing, electronics and furniture stores, and also two-thirds of retail categories on a monthly basis.
According to the NRF’s data, June specifics from key retail sectors included:
Back to school is the next major spending event on the retail calendar, with the NRF predicting consumers will fork over record amounts this fall.
Their research indicates:
Looking to the future, McKinsey Research recently offered their insight into how Covid-19 continues to impact the US economy.
They note, personal savings in the United States spiked in April 2020 to 33.7 percent—the highest rate ever recorded, while two major consumer trends which emerged in 2020 seem to be sticking.
These include the phenomenon of ‘home nesting’, where people are using their savings to renovate or improve their home, and the other involves a decrease in consumer loyalty.
“Almost three in ten US households renovated their homes or added fitness equipment during the pandemic; the same percentage plan to treat themselves to more home improvements,” they explained.
Meanwhile their data indicates three quarters of all Americans changed their shopping habits in 2020, and 40 per cent of these changed brands, which was twice the rate of 2019.
“The implication is that, more than ever, companies can’t take their customers for granted. Loyalty must be earned time and again,” they said.
“In sum, American consumers are spending again and eager to spend more. But the pandemic has been a scarring experience, and they aren’t doing so with abandon.”
McKinsey’s major takeaway for retail is that ecommerce isn’t the future, it is the present and a reality that is here to stay. But it comes with its own set of challenges.
“The big change in consumer behavior during the COVID-19 pandemic has been the shift to ecommerce and remote options,” McKinsey explained.
“In the United States, ecommerce grew more than three times as quickly from 2019 to 2020 as it had during the previous five years…”
As a result, their data indicates mass retailers’ online sales rose 93 per cent in 2020. Among apparel, fashion, and luxury retailers, online penetration rose to 26 per cent, from 16 per cent.
“These changes are sticking—mostly,” McKinsey goes on to note.
“People are still shopping online much more than they did before the pandemic but at lower levels than they did during its depths.”
While that’s good news for consumers, for retailers it presents a challenge, with McKinsey explaining ecommerce is often a lot less profitable than in-store shopping.
“…businesses will need to develop whole new capabilities (including data-driven marketing, distribution management, and sustainability) to create long-term value,” they state.
“Omnichannel isn’t just the future. It’s the present, so it needs to be integrated into strategy in a way it often isn’t.”