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Here’s Why NRF Expects Holiday Sales to Increase

The retail industry’s trade organization, National Retail Federation, is forecasting a wide range for its Holiday 2020 projection, expecting between a 3.6 to 5.2 percent gain over 2019’s sales.

Excluding automobile dealers, gasoline stations and restaurants, that would translate to sales totaling between $755.3 billion and $766.7 billion. It’s a forecast that’s higher that the four percent increase in 2019 to $729.1 billion, and above the average holiday sales increase of 3.5 percent over the past five years.

“We know this holiday season will be unlike any other, and retailers have planned ahead by investing billions of dollars to ensure the health and safety of their employees and customers,” Matthew Shay, NRF president and CEO, said. “Consumers have shown they are excited about the holidays and are willing to spend on gifts that lift the spirits of family and friends after such a challenging year. We expect a strong finish to the holiday season and will continue to work with municipal and state officials to keep retailers open and the economy moving forward at this critical time.”

Other firms and consulting groups have already provided their estimates for the holiday selling season. Shay said that NRF’s  forecast is a month later than usual because of the uncertainties connected to the coronavirus pandemic and the election, and that it wanted to wait to make a “more thoughtful and well-rounded projection.”

The trade organization is also forecasting that online and nonstore sales will rise between 20 to 30 percent to between $202.5 billion and $218.4 billion, up from $168.7 billion in 2019. Shay also noted that more than 40 percent of consumers have started their shopping earlier than normal this year, adapting their behavior and embracing the challenges of an environment that includes social distancing. Major shopping events began in October, about four to six weeks earlier than usual.

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Despite the presence of the coronavirus pandemic this year, Shay said during a conference call on NRF projections that data indicates that “consumers this year have reacted very positively to other holidays,” whether that’s Mother’s Day, Halloween or Thanksgiving. He also pointed out that what consumers and retailers are going through now hasn’t been due to an economic recession, but more because of a medical issue that at some point will get resolved. And because consumers haven’t been spending on travel or on experiences, they have the wherewithal to spend and prop up the economy.

NRF chief economic Jack Kleinhenz said households have strong balance sheets and record savings that will help boost spending. “After all they’ve been through, we think there’s going to be a psychological factor that they owe it to themselves and their families to have a better-than-normal holiday. There are risks to the economy if the virus continues to spread, but as long as consumers remain confident and upbeat, they will spend for the holiday season,” he said.

The economist also cited low energy costs, such as gas prices, as one factor that “should free up dollars to support holiday spending.”

While the range for holiday sales gains is wider than usual, Kleinhenz said during the call that the projection is a reflection of the economy. “It could be that we exceed or be below the range, depending on how the contours of the economy develop,” he said. Kleinhenz did note that the fourth quarter should slow from the prior third quarter and into 2021, and that a surging virus that seems to be accelerating could “pump the brakes on momentum [as] rising cases and tighter restrictions could put spending in reverse.”

The economist also cited low energy costs, such as gas prices, as one factor that “should free up dollars to support holiday spending.”