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Deloitte estimates retail sales for 2020 holidays will increase 1 to 1.5%

The retail sales growth rate during the holiday season is expected to be less robust than in recent years, according to projections released Tuesday by consultancy Deloitte.

But how much this growth is attenuated will depend on how much high-income consumers spend and how tight their belts are in low-income households.

Some economists are now calling for a K-shaped recovery, a scenario where some types of industries see gains while others are excluded. Unlike so-called U-shaped or W-shaped recoveries, growth in a K-shaped rebound is split unevenly between income groups, creating a “haves” and “haves” scenario.

Since the coronavirus pandemic began, some industries continue to snort where workers can be productive at home. Others, however, have seen sales dry up, as consumers avoid eating out, going to the movies and taking vacations.

“This year will be one of two vacation scenarios,”

; said Rod Sides, vice president of Deloitte and a leader in the retail and distribution industry. “History would tell us … we will see consumer groups recover differently.”

According to Deloitte, holiday retail sales this year are expected to increase between 1% and 1.5%, worth between $ 1.147 trillion and $ 1.152 trillion during the November-January period. This is compared to a 4.1% growth in 2019, when sales were nearly $ 1.14 trillion, according to the U.S. Census Bureau.

The 1% to 1.5% range resulted from the combination of two different scenarios, driven by large and small spenders, Deloitte explained.

For one, Deloitte expects there can be a relatively stable increase in sales of 0% to 1% during the holidays if consumers, especially lower-wage workers, remain nervous about their finances and health and have to commit a greater part of their spending to needs. Running out of unemployment insurance benefits could also make this first scenario more likely, Deloitte said.

But a bigger increase from 2.5% to 3.5% could occur if wealthier consumers gain even more confidence in the second half of 2020. Factors that could boost confidence within this group include reducing the unemployment, further government stimulus and an effective Covid-19 vaccine, Deloitte said. This scenario predicts that the money that higher-income consumers don’t spend on vacations and experiences like concert and Broadway tickets will be funneled into spending on holiday gifts, with people more eager than ever to indulge themselves.

“While high unemployment and economic anxiety will weigh on overall retail sales during the holiday season, reducing spending on pandemic-sensitive services like restaurants and travel can help boost holiday retail sales somewhat,” said Daniel Bachman, Deloitte’s US economic meteorologist.

With many consumers still spending most of their time at home and avoiding crowded public places, it is inevitable that even more online shopping will take place during the holiday season. Deloitte expects ecommerce sales over the holidays to increase 25% to 35%, ranging from $ 182 billion to $ 196 billion. This is compared to online growth of 14.7% yoy in 2019, with sales reaching $ 145 billion.

But this is also putting pressure on retailers to prepare for an onslaught of online orders, starting next month and until the last minute shipping deadlines arrive.

“A lot of the people I’m talking to right now are afraid of running out of stock,” Deborah Weinswig, founder and CEO of Coresight, said in an interview. “We are already limited in capacity … And the consumer has no idea this is coming.”

A number of retailers, including Macy’s, said they expect Christmas shopping to begin earlier this year.

Many have announced that they will close their doors on Thanksgiving Day, ending what had become a recent tradition to open before Black Friday. And strategies are being explored to prevent store overcrowding in an age where social distances need to be applied. Companies are trying to gauge what consumers will want to buy in the midst of a global health crisis. The consensus seems to be: anything welcoming.

According to Deloitte, retailers should, perhaps most importantly, plan for a scenario where the recovery in the United States is uneven, with a further driven wedge between rich and poor.

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