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Forrester Projects $2.1 Trillion in 2020 Retail Losses

Across the globe, retail is in for a rough ride for the remainder of the year amid the spread of COVID-19, warns a major analyst and advisory firm. Forrester predicts that due to the coronavirus pandemic, global retail sales will decline by an average of 9.6 percent in 2020, marking a loss of $2.1 trillion.

The majority of sectors will be hit drastically by the end of the year, with offline non-grocery retail expected to contract by 20 percent. E-commerce sales, which retailers hope will buoy total sales while their stores remain closed, will be flat. However, the altered shopping habits are expected to boost e-commerce numbers over the next few years, with Forrester expecting one-third of non-grocery spending to occur online by 2024.

Overall future forecasts are not very bright, with Forrester noting that it will take four years for retailers to catch up with sales levels prior to the pandemic.

Michael O’Grady, principal forecast analyst at Forrester, pointed out fashion as one of the worst performers in spend since the pandemic started. “Retail categories like grocery and essential consumables are performing well, while other categories like fashion, beauty and cosmetics are seeing a marked decline in consumer spend,” O’Grady said.

“In 2020, there will be a significant decline in global retail sales, particularly with non-essential items sold offline, which will be a big challenge for brick-and-mortar retailers,” he added. “Online sales, however, will be more resilient. To navigate the crisis, retailers need to manage their costs and drive their e-commerce sales and services as much as possible.”

The data appears to fall in line with recent figures reported by the federal government. The U.S. Department of Commerce’s March retail sales report showed record-setting declines stemming from changes in consumer behavior and stay-at-home guidelines. Overall sales dropped 8.7 percent for March compared with a revised decline of just 0.4 percent in February, marking the worst drop since the government began tracking retail sales in 1992. Previously, the largest one-month drop in retail sales came in the fall of 2008, when the financial crisis led spending to plunge nearly 4 percent for two straight months.

Forrester did not break out projected sales numbers by category, but given the Commerce Department’s report that clothing and clothing accessories stores saw a 50.5 percent decline in sales throughout March, it is likely that even improved apparel sales over the next month wouldn’t be sufficient to offset weeks’ worth of store closures. J.Crew already was the first major victim of the pandemic, filing for Chapter 11 bankruptcy, and there have been rumblings that Neiman Marcus and J.C. Penney are not far from following suit.

Global retail sales will decline by an average of 9.6 percent in 2020, marking a loss of $2.1 trillion.

Face-mask-wearing shoppers keep their distance in a near-empty mall in Yogyakarta, Indonesia.

Stats indicating a full-year decline also are backed up by a preliminary holiday 2020 spending survey from Coresight Research. In a survey conducted on April 8, the research and advisory firm found that nearly one-fifth of respondents (18.5 percent) expect their spending won’t return to normal levels until six months or more from now, which would carry over to the holiday season.

In a further blow to confidence that people will be willing to shop at normal levels any time soon, Americans have filed more than 30 million first-time unemployment benefits claims since mid-March, with April unemployment rates potentially set to hit 16.1 percent, according to economists surveyed by Refinitiv.

E.U., APAC nations see worst sales declines across the globe

COVID-19’s effect on retail sales varies throughout the globe due to regional differences, considering that each nation is enduring a different phase of the pandemic. For example, Forrester sees U.S. retail sales falling by $320 billion in 2020, a decline of 9.1 percent from 2019. Canada is slightly better off than the U.S., but not much, with a 7.7 percent anticipated drop ($25 billion) in 2020.

The top five European nations tracked―U.K., France, Germany, Spain and Italy―will experience the worst of all regions, losing approximately 260 billion euros ($283 billion) in retail sales on a 10.4 percent decline. Forrester projects U.K. retail will experience an 11.4 percent drop, while Germany and France could see 10 percent and 9.5 percent dips, respectively.

Forrester’s #PandemicEX research project found that European consumers were not too confident in their government response efforts as the outbreak grows. More than 40 percent of workers across Europe believe their governments are reacting too conservatively to the coronavirus crisis, adding weight to their fears of widespread job losses.

The Asia-Pacific region is experiencing fallout nearly on par with the major E.U. nations, with retail sales losses projected to reach $767 billion in 2020, a decline of 10 percent from 2019. China is the most negatively affected country in the region, with $192 billion of retail sales lost in January and February alone compared to the same period last year.

Latin America will be the least-hit compared to its contemporaries, with retail sales declining 6.8 percent.

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