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Will retail achieve double-digit sales growth this year?
It’s amazing what a difference a year can make. The U.S. retail sales appear poised to climb to record-setting highs as more Americans get vaccinated against COVID-19, public health restrictions are lifted, jobs rebound in a tight labor market and stimulus checks and breaks in the form of child tax credits all combine to drive consumer purchasing.
The National Retail Federation (NRF) certainly sees big things ahead. The trade group has revised its 2021 forecast from earlier in the year from annual growth of around 6.5 percent (excluding autos, gas and restaurants) to between 10.5 percent and 13.5 percent. That would make 2021 the fastest growing year on record since 1984. NRF is looking to non-store and online sales to be a big driver of retail’s fortunes with dollar revenues climbing between 18 and 23 percent in those areas.
Retailers may be tempted to wear shades with their immediate futures looking so bright, but there are signs of potential storms, as well.
Supply and demand, in the form of labor and goods, poses a particular challenge for retailers. Retailers large and small are competing in an extremely tight labor market with large companies, in particular, offering bonuses, higher wages and other perks to attract recruits.
Product supplies are also a significant challenge as manufacturers ramp up to meet post-pandemic demand.
A “Global Port Tracker” report released earlier this week by NRF and Hackett Associates points to container points having their “busiest April on record” with May appearing to be on track for new all-time highs, as well.
“There’s no shortage of demand from consumers, but there continue to be shortages of labor, equipment and shipping capacity to meet that demand,” said Jonathan Gold, NRF vice president for supply chain and customs policy. “Supply chain disruptions, port congestion and rising shipping costs could continue to be challenges through the end of the year.”
Inflation also remains a potential concern for retailers, but NRF sides with the Federal Reserve Bank that prices will moderate as supply shortages are addressed in the coming months.
Discussion Questions
DISCUSSION QUESTIONS: Do you expect retail sales growth to climb into the double digits this year? Where do you see the biggest opportunities for improvement, and do see market factors that could change the equation once again?
Poll
BrainTrust
Yes, the double-digit growth is on the horizon. The much anticipated post-pandemic era is upon us and opportunities abound for virtually any retailer who has inventory and can execute. As the economy roars back, consumers are out to buy and retailers should play offense to maximize sales during this recovery period. Focus on the merchandise you have or can get. Stay flexible and be prepared to shift product mixes based on available merchandise. Also ensure that store teams are prepared for the influx of traffic – more traffic than they have seen in a long time. Supply chain issues and port congestion will continue to put pressure on inventory and consequently create headwinds. Additionally, Inflation is starting to hit hard with prices up 5 percent in May, the fastest pace increase since 2008. Headwinds aside, these are great times to be in the retail game.
The 2021 retail sales increase forecast of 10.5 percent to 13.5 percent seems hard to visualize, but I hope the results are in that neighborhood. It will be hard for grocers to meet that level as their sales spiked during the pandemic when many restaurants were closed for indoor dining and consumers shifted their spending to groceries for home cooking. Apparel retailers were hit hard in 2020 as many employees worked from home and many stores were closed for a couple months. As more employees return to the office and social events pick up, apparel should be one of the retail segments that achieves the highest sales increase during 2021.
The “comps” from 2020 are so bad that double-digit growth in 2021 is achievable. By the time the year is over, 2019 becomes the more relevant comparison.
Inside that surge in demand, there are going to be wild variations depending on what sold or didn’t sell during the pandemic year. There will be less stocking up on food, commodities and cleaning supplies (at least let’s hope so) but big surges in demand for discretionary goods like apparel. There is also big reported growth in personal care products — everything from cosmetics to teeth whiteners to mouthwash — as we all emerge from isolation.
As Robert De Niro once said to the recently passed Charles Grodin in Midnight Run: “I got two words for you.” the two words in the movie are not suitable for publication here, but the two words here are inflation and supply. In the short term, labor and product supply issues will inhibit our ability to achieve double-digit growth, and in the longer term inflation is looming. I just don’t know if we are really prepared for how consumers will react to double-digit inflation, should it get to that point. I hope it doesn’t get too bad, but if it does, we haven’t been through high inflation in decades, and shoppers are still recovering from the shockwaves of the past year. I wouldn’t be surprised to see them hunker down and save if inflation gets too scary.
The macro numbers look very healthy and that’s certainly good news. But the numbers for any given sector or company will take a deeper dive in order to really understand. Groceries and apparel have very different comparisons and outlooks. And in some cases the healthiest thing for a retailer may be to shrink both store count and inventory per store as the lessons of the pandemic are woven into new modeling. I see 2021 as more of a transition year than a year of growth. Retailers that breathe a sigh of relief because growth is back and don’t put the learnings of 2020 into action just don’t get it.
The next six to 18 months are going to be huge as America leads the world out of the pandemic. Retailers are riding the tailwinds of opportunity but may think it is all them. Now is the time to hire better, train better, and sell what you have, not bemoan labor/supply chain challenges and feel that if those magically would be fixed, all would be well. Fundamentally retailers need to know why their brand exists, how they can provide a branded experience, and focus on the very real shoppers in-store rather than chasing the next shiny object. Malls are packed, use this time to be brilliant on the basics.
Sure – the pent-up demand is there. But are the goods? Rising prices will be a natural curb on white hot growth in 2021.
This is a two-sided process. People owe people in the industry. The impact on goods will depend on relationships and our ability to close reasonable financial agreements to keep product flow healthy.
We have pleaded with the retailers to make sure the store presentations are NOT what consumers saw during last year. If they are, the air runs out quickly of the consumer enthusiasm balloon. A lot of weight is on the retailer’s shoulders. Hopefully new and inspiring merchandising presentations, newly painted walls, and great storytelling signage will abound and welcome customers — and staff will greet the customers like a guest to their home. Here’s the big hurdle: enthusiastic and involved staff members. Hopefully managers have looked deeply into training programs for employees who want to be there. It will not be a cake walk, but it will be worth it!
Double-digit growth is just ahead. With the slackening in demand from the pandemic and now recovering due to vaccinations, pent up demand will be be strong this year. Plus consumers have tax incentive money to spend and will likely do so. Inflation is likely to be a problem with this accelerated demand, but with consumers having been out of the market for some time, they will be excited to purchase things even at the higher price of items. At some point, the novelty of buying and increased prices will slow spending, but not until some amount of demand is satisfied. Only time will tell as to how long this inflationary cycle will last.
Double-digit growth seems a bit optimistic in the face of inflation, labor shortages, supply chain disruptions, ongoing pandemic challenges, etc. even when comparing to 2020.
I don’t believe double digit growth is on the horizon – yet. Retailers still have a lot of work to do in terms of the way they work. Fluid line plans, flexible assortment planning, digitizing and automating parts of their end-to-end process to get closer to the customer – this is still not common practice. Until retailers implement technology and enable the tools for merchants and planners to help put the right product in front of the customer and at the right time, then it’s just a guessing game at best.
Certainly demand is sufficient to drive double-digit sales. The pent-up demand generated by the pandemic will continue as consumers look to return to a new normal. Increased savings and less in-store shopping during the pandemic have contributed to the new venturing back to in-store retail, while online continues to grow as well. Some argue that we are experiencing the roaring 2020s that will mirror the 1920s after the 1918 pandemic. Housing and car prices due to demand and constrained supply have sky rocketed. However everyday purchases, including gift buying, do not appear to have the same level of availability issues, as with the noted big ticket items. Having said this the supply side will be the ultimate determination of the probability of experiencing the roaring 2020s.
Wait, just to be sure, double digits in comparison to 2020? I certainly hope so. Having said that, I get it, we’re feeling pretty good about ourselves — it’s about time. And I agree with the double digits, it’s going to happen. Old school warning though: an old mentor of mine used to say, “hey, don’t do TOO good, you have to beat that next year!” Good one.
Yep. I predicted this in my 2021 Retail And Technology Predictions in January. What’s also going to shock people is that sales from stores will grow more on a dollar basis than e-commerce this year. That’s going to force a reckoning with the retail apocalypse narrative.
Coming off such an unprecedented year of chaos, uncertainty, and global disruption, we should expect a major turnaround throughout 2021 across the entire retail industry. However while it’s been impressive so far, macro-economic factors need to be accounted for to keep maintaining and sustaining these growth levels.
We have not recovered to the point where the employment levels are where they were pre-pandemic. There are price increases, cost of living, and inflationary factors that will impact customer’s discretionary spending. Retailers have to leverage an agile, flexible strategy to develop promotional pricing, personalized strategies, and incentives to entice customers to shop and engage with their brands.
By focusing on an outstanding value-added customer experience, retailers have a fighting chance to maintain this level of growth and recovery.
Seems rather rosy prediction to me given how many households are still struggling. Retailers will need to think about how they manage (and pass on) costs due to inflation, supply and labor to customers.
Yes as it is simply an increase above how badly many sectors within retail were hit. Retail and hospitality will see double digit growth back to 2019 levels, whereby we will then level off at the 3-5% YoY average.