Consumer purchasing power from growing income and household wealth will lead to record-breaking holiday sales this year, according to predictions from the National Retail Federation. Gift buyers are expected to shop early, extending the holiday season even as retailers grapple with inventory problems.
During November and December, holiday sales are expected to grow 8.5% to 10.5% compared to the same period in 2020, for totals ranging between $843.4 billion and $859 billion, according to NRF. Sales during this period, which exclude automobile dealers, gasoline stations and restaurants, have grown 4.4% on average over the past five years. Somewhat surprisingly, 2020’s increase over the previous year set a five-year record, climbing 8.2% to $777.3 billion.
“Consumers are in a very favorable position going into the last few months of the year, as income is rising and household balance sheets have never been stronger,” said Matthew Shay, President and CEO of NRF in a statement. “Retailers are making significant investments in their supply chains and spending heavily to ensure they have products on their shelves to meet this time of exceptional consumer demand.”
In preparation for an unprecedented early holiday season, Target is kicking off what it calls “Holiday Best” deals — “best planned prices of the season” — on Oct. 31. Available in stores and online, Target is offering special deals on gift-oriented items including electronics, toys and kitchen appliances.
To take full advantage of consumers’ willingness to open their wallets, however, retailers will need to successfully deal with inventory issues to meet booming holiday sales expectations, according to NRF.
“Pandemic-related supply chain disruptions have caused shortages of merchandise and most of this year’s inflationary pressure,” said Jack Kleinhenz, NRF Chief Economist in a statement. “With the prospect of consumers seeking to shop early, inventories may be pulled down sooner and shortages may develop in the later weeks of the shopping season. However, if retailers can keep merchandise on the shelves and merchandise arrives before Christmas, it could be a stellar holiday sales season.”
Online Sales Could Increase up to 15%
NRF expects that online and other non-store sales, which are included in the total, will climb 11% to 15%, totaling $218.3 billion to $226.2 billion. These purchases totaled $196.7 billion in 2020.
NRF predicts that while ecommerce will remain important, shoppers will shift back to in-store shopping and a more traditional holiday shopping experience this year.
To deal with the expected surge in sales, NRF projects that retailers will hire a total of 500,000 and 665,000 seasonal workers, compared to 486,000 seasonal hires in 2020. This year, retailers are holding hiring events and offering higher pay to ensure they have enough employees for the holidays.