Dive Brief:
- With optimistic predictions of a rise in holiday sales during 2021, the National Retail Federation (NRF) speculates that this year’s holiday sales could surpass its initial growth projections of between 8.5% to 10.5%. The NRF projects an impressive increase of up to 11.5% year over year, as stated on Friday.
- Consumers’ disposable personal income and spending have risen by 4.1% and 12%, respectively, according to the NRF.
- Jack Kleinhenz, the NRF’s Chief Economist, noted that the Omicron variant’s impact on the economy remains unclear, but it remains a "wildcard" raising uncertainty about the economic outlook.
Dive Insight:
Anticipated Holiday Sales Exceed Expectations, Projected to Reach 11.5% according to NRF
Multiple reports suggest a potential influx in 2021 holiday sales, a forecast made all the more challenging due to the ongoing COVID-19 pandemic. While the original NRF estimation pegged sales growth at up to 10.5%, reports from various sources such as Deloitte projected a wide range of spending growth. Early holiday sales promotions may have led to depressed Thanksgiving weekend sales.
Kleinhenz stated in a release that consumer and retailer behaviors have evolved, creating a departure from traditional patterns. He added that the momentum observed thus far suggests a strong likelihood of surpassing the initial projection. The NRF references the University of Michigan’s Index of Consumer Sentiment, which plummeted to a decade-low of 67.4 in November. However, Kleinhenz emphasized that spending data provides a more accurate reflection of consumer behavior.
The pandemic has hit middle- and lower-income consumers particularly hard, and uncertainty persists amid a cautiously optimistic climate. A survey released in October by Alvarez & Marsal’s Consumer Retail Group found that 57% of respondents expect to have the same or less disposable income in the coming months, while 58% anticipate their families to have the same or less money.
The Omicron variant presents another hurdle for consumers' health and economic outlook. Moderna CEO Stephane Bancel stated during an interview with CNBC that scientists require approximately two weeks to evaluate the extent of the vaccines' protection against the new variant. According to the Centers for Disease Control and Prevention figures, as of Dec. 3, about 60% of the U.S. population is fully vaccinated, and just under a quarter have received booster shots.
Enrichment Data:
The COVID-19 Omicron variant significantly impacted global health and economic dynamics, affecting holiday sales and consumer spending. Here are some key ways it influenced these areas:
Impact on Holiday Sales and Consumer Spending
- Shift to Online Shopping: The Omicron variant led to increased caution among consumers, resulting in a mass shift toward online shopping during the holiday season. This trend extended worldwide as people sought to avoid crowded stores and reduce the risk of infection.[1]
- Localized and Smaller-Scale Celebrations: Due to travel restrictions and health concerns, many consumers opted for local shopping and smaller family gatherings, which impacted the types of products purchased and the scale of spending.[1]
- Supply Chain Disruptions: The variant exacerbated existing supply chain issues, leading to product shortages and delays. This disrupted the holiday season availability of goods, affecting sales and consumer confidence.[2]
- Cautious Spending: The uncertainty and health risks associated with Omicron led some consumers to be more cautious with their spending, potentially reducing overall holiday sales growth.[1]
Economic Context
The Omicron variant contributed to economic challenges faced by businesses and consumers in 2021. The surge in cases led to increased costs for safety measures, reduced customer traffic in physical stores, and heightened concerns about the economic recovery.[2] Despite these challenges, many retailers adapted by focusing on digital platforms and offering flexible shopping options, which helped mitigate some of the negative impacts on sales.
- As the holiday season approaches, concerns about the Omicron variant's impact on trade and consumer spending remain high, potentially affecting two-week projections.
- Amid these uncertainties, experts in the business and finance sectors are closely watching developments regarding the efficiency of existing vaccines against the Omicron variant.
- The ongoing pandemic has amplified the need for robust cybersecurity measures, with online shopping surging and making businesses more vulnerable to cyber threats.
- With holiday sales set to break records this year, the fashion industry is gearing up for an increase in demand for sustainable and socially responsible holiday wear.
- The National Retail Federation's updated forecast for holiday sales growth is not the only indicator of the overall health of the global economy; global markets continue to play a crucial role in shaping financial policy.
- As the relationship between climate change and economic growth becomes increasingly complex, climate policy becomes a critical factor in determining business strategies and market trends.
- To cope with the continuing challenges posed by the pandemic, businesses are increasingly turning to artificial intelligence to improve operational efficiency and forecast consumer behavior.
- The ongoing health crisis and its aftermath have also forced a reassessment of cultural norms and values, with a renewed focus on the importance of community interconnectedness and well-being.
- Holiday sales this season could be a bellwether, signaling a gradual return to pre-pandemic levels of consumer confidence and spending, ultimately impacting the overall trajectory of the global economy.
