Will 2021 Break Holiday Shopping Records?

Sales are expected to reach new heights this holiday season, despite impacts from supply chain disruptions and ongoing pandemic uncertainties. 

Holiday sales during November and December are expected togrow between 8.5% and 10.5% over 2020 to between $843.4 billion and $859 billion, according to an estimate from the National Retail Federation (NRF). The estimate, which excludes automobile dealers, gasoline stations and restaurants, is up from 8.2% growth in 2020, when $777.3 billion in sales were reported during November and December––the previous all-time high.

“Consumers are in an incredibly favorable position heading into the last few months of the year,” Matthew Shay, president and CEO of NRF, said during a sales forecasting call with reporters on Oct. 27.

For the first nine months of 2021, retail sales were up 14.5%, with shoppers’ wallets buoyed by stimulus and federal support during the COVID-19 pandemic. While stimulus spending has changed and fallen in recent months, households are still financially strong, according to NRF, with higher wages and compensation as well as lower unemployment rates being reported across the nation.

Online sales and other non-store sales are expected to rise between 11% and 15% to a total of between $218.3 billion and $226.2 billion, driven by online purchases. That’s compared to $196.7 billion in 2020.

Supply Chain Struggles

While retail sales are on fire, there are still challenges holding the industry back and hurdles for retailers to jump over. The pandemic has strained ongoing supply chain issues at the same time imports have reached record highs. A labor shortage in the transportation sector and increased measures to ensure worker safety during the pandemic has slowed the ability of ports to keep up with demand.

For retailers, that means keeping products in stock has become more challenging than ever. 

Congress and President Joe Biden have been looking at the supply chain crunch in the U.S. over the last year, and a comprehensive infrastructure bill has made its way through both congressional chambers. However, negotiations are still ongoing. NRF has been vocal in its support for infrastructure investment. 

Imports are expected to reach 26 million Twenty-Foot Equivalent Units (TEU) this year––an all-time high and 20% increase from 2020. 

“The pandemic didn't create the problems in our supply chain, it simply illuminated the under investment that has occurred in this country for many decades,” Shay said. “There are near-term fixes we are trying to bring into place with the federal government and other stakeholders, and we are making some progress. The real solution is a long-term one and will require investment. That’s why we've been so supportive of the infrastructure bill that was passed in Congress, and we think it should be moved with expedition to the president's desk for signature.”

Supply chain issues aren’t the only headwinds for the retail space. As supply chain challenges increase costs, products are rising in price, and consumers are keeping inflation on their minds. 

“We’re aware of issues like supply chain disruptions, labor shortages and those contributing to rising inflation, and [the issues] against the backdrop of the pandemic, vaccine rates and other things related to the health environment,” Shay said. “There are headwinds and challenges, but we have great confidence consumers will still power the economy in the last quarter of the year.”

Shoppers Adapt

Despite inventory challenges, retailers are confident shoppers will find things to buy for the holidays by adapting to the circumstances.

One work-around promoted by retailers is getting shoppers to shop earlier in the season. Major retailers, including Walmart and Target, have set sales events earlier in the season instead of focusing all their attention on Black Friday and December sales. Encouraging consumers to visit stores sooner to find the items they want and need is already having some effect, according to NRF.

“Nearly half of shoppers [who participated in a survey] have already begun, and it's not even Halloween yet,” Shay said. “Consumers will participate in this holiday season. and they are adapting their behaviors to meet the environment despite pandemic and other external activities.”