Holiday retail sales in 2020 will see a significant drop-off from recent years, according to projections released this week by the consulting firm Deloitte.
From November to January retail sales could see a year-over-year increase of 1% to 1.5% to $1.147 trillion and $1.152 trillion. In 2019, retail sales grew 4.1% to $1.14 trillion, according to the U.S. Census Bureau.
How small the rate of growth is will depend on how much money high-income consumers spend — and how much lower-income households need to cut gift-giving to pay for necessities.
“Some economists are now calling for a K-shaped recovery — a scenario where certain types of industries see gains while others are left out. Unlike so-called U- or W-shaped recoveries, growth in a K-shaped rebound is unevenly split between income groups, creating a scenario with “haves” and “have-nots,” said CNBC.com.
“This year, one of two holiday scenarios will play out,” Rod Sides, a vice chairman at Deloitte and its retail and distribution sector leader, said in the report. “History would tell us ... we are going to see groups of consumers recover differently.”
Deloitte forecast the 1%-to-1.5% range by blending different scenarios, driven by big and small spenders.
If lower-wage earners remain worried about their finances and health, and must commit more of their spending toward necessities, Deloitte expects holiday sales to grow at an anemic 0% to 1%. This scenario, Deloitte says, is very likely should unemployment insurance benefits end.
However, if unemployment shrinks, government stimulus is renewed and a vaccine for COVID-19 arrives before the New Year, sales growth could rise 2.5% to 3.5%, according to Deloitte. The better economic situation could bolster the confidence of wealthier consumers, who aren’t spending on vacations, concerts and other experiences. That money could flow into holiday gift spending.
“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,” Daniel Bachman, Deloitte’s U.S. economic forecaster, said in the report.
Since most consumers will spend much of their time at home, more spending is expected to happen online. Deloitte expects e-commerce sales to surge 25% to 35%, or $182 billion to $196 billion. In 2019, online sales grew 14.7% year over year to $145 billion.
However, Deloitte said retailers should prepare for a scenario where the economic recovery is uneven, with a wedge being driven even further between the rich and the poor.