The National Retail Federation (NRF) is confident that the back half of 2021 will be prosperous for the U.S. retail industry amid pent-up demand as more consumers get vaccinated and resume their normal pre-pandemic routines.
The trade association raised its forecast for 2021 retail sales, now anticipating sales to jump between 10.5 percent and 13.5 percent, a significant upgrade from the initial projected growth range of 6.5 percent to 8.2 percent.
Total retail sales are now anticipated to reach $4.44 trillion and $4.56 trillion, up from $4.33 trillion and $4.40 trillion.
The outlook on online sales and non-store sales has not been revised, with the figure remaining between 18 percent and 23 percent.
NRF chief economist Jack Kleinhenz made the announcement during the association’s inaugural State of Retail and the Consumer event Wednesday afternoon. In addition, NRF now projects full-year gross domestic product (GDP) growth to approach 7 percent, compared with the 4.4 percent to 5 percent forecasted earlier this year. Pre-pandemic levels of output are expected to return this quarter.
At the event, Kleinhenz said “economic activity was more frontloaded than expected” with April retail sales holding level with March figures. Retail sales in May have not yet been revealed by the U.S. Commerce department.
Given the strength of consumer spending, Kleinhenz anticipates this year will bring the U.S. retail industry its fastest growth since 1984. The “unprecedented growth” suggests that momentum is generated from pent-up demand as the economy reopens, according to Kleinhenz.
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“There will likely be some shifting of spending away from goods towards services, but the retail industry has greatly benefited from this acceleration of spending, though this will only help increase employment and income, leading to more spending, creating a virtuous cycle,” Kleinhenz said.
The NRF made its initial forecast in February, when uncertainty surrounded various factors including consumer spending, vaccine distribution, virus infection rates and additional fiscal stimulus, prior to passage of the American Rescue Plan Act.
Retailers must connect with conscious, but fragmented consumer base
The State of Retail and the Consumer event also shed light on how consumers are becoming increasingly divided on key issues and how retailers are aligning their businesses, products and services to appeal to conscious-driven consumers.
Terry Lundgren, former CEO of Macy’s and founder and CEO of TJL Consulting Advisors, said during a panel he hosted during the event that it will be interesting to see how shoppers will continue to buy from companies that share their own values.
“In some cases, they want companies that take a stand and speak up about the issues that are important to them, political or social or otherwise,” Lundgren said. “Yet there doesn’t seem to be a unanimity around all of these various issues that are on the minds of these consumers. And of course, that means that taking a stand is complicated, and perhaps challenging to these actual companies’ reputations.”
Although certain concerns such as diversity, inclusion and sustainability are rising within most demographics, there are still other indicators that show that there is a lot of fragmentation within consumers of what causes they support, and retailers must be aware of this, according to Rachel Bonsignore, vice president of Gfk.
“There’s a lot more nuance and complexity to different issues to what people want from brands that really has emerged in the last couple of years. There’s more polarization and a wider variety of information sources that we’re all kind of attached to in our own way,” Bonsignore said. “We’ve seen just in the last couple of years that even though people are more maybe socially responsible and care about social causes, open-mindedness has gone down a little bit in the last few years. The idea of wanting to be exposed to points of view other than your own has actually gone down.”
Karen Benway, a partner and consumer market leader at Ernst & Young, shared the key questions her firm typically asks clients that want to improve their ability to connect with shoppers on values.
“Are you providing undisputed reliable information to the consumer as a means with which to build your trust?” Benway said. “Are you consistently delivering on your brand promise and making sure it’s well-defined and current? Are you then refreshing that periodically based on the demographics and who’s shopping in your stores? Are you ensuring that consumers understand your ESG goals and communicating how that aligns with your business strategy?”
Bonsignore suggested that as retailers aim to define themselves, they have to realize that they might not be able to share the same values with every current or potential consumer.
“It’s about sometimes being comfortable with losing some customers too and discovering just what place you want to play in the world and what role you want to have,” Bonsignore said.