Pandemic Predictions: Holiday Forecasts Depend On Three Factors

When the pandemic first took hold of the retail industry in March and April, the phrase “it’s hard to forecast during a pandemic” was heard in most every executive interview or earnings call. Now that the holiday sales season is imminent, the operative phrase is … well … “let’s try to forecast during a pandemic.”

There were reports from several reliable forecasting sources this week, yet the ability to accurately forecast the holidays seems to be more of a dicey proposition than ever. Most of the predictions are optimistic and driven by the increasing comfort Americans have with the digital shift. But the following three factors will affect these forecasts, along with a sampling of what they look like at this point.

The first factor is the coronavirus pandemic, and in a sense it’s the only factor that matters. The U.S. has simply not had the handle on COVID-19 that other countries have shown and hot spots continue to pop up in highly populated states like California, Texas and Georgia. The pandemic and its mitigation has been the No. 1 factor in consumer shopping behavior as shown over time in the PYMNTS COVID-19 tracker project. It will lead to a bigger and more permanent digital shift than many experts are predicting.

That’s part of the thinking behind Deloitte’s annual holiday retail forecast, released earlier this week. It predicts sales will increase between 1 percent and 1.5 percent. That translates to sales between $1.14 billion and $1.15 billion during the November-January timeframe. Deloitte also forecasts the digital shift, saying eCommerce sales will grow 25 percent to 35 percent over 2019 levels, compared to a 14.7 percent lift in 2019 over 2018. And eCommerce holiday sales will come in between $182 billion and $196 billion this season, according to Deloitte.

“The lower projected holiday growth this season is not surprising given the state of the economy. While high unemployment and economic anxiety will weigh on overall retail sales this holiday season, reduced spending on pandemic-sensitive services such as restaurants and travel may help bolster retail holiday sales somewhat,” said Daniel Bachman, Deloitte’s U.S. economic forecaster. “E-commerce is likely to be a big winner because consumers have shown a clear movement towards buying online rather than at brick and mortar stores.”

The second wild card is consumer spending. Holiday 2020 is taking place amid the pandemic, high unemployment, retail bankruptcies, Wall Street volatility and a hotly contested presidential election. So far those issues have not severely impacted a consumer retail spending comeback. But absent another economic stimulus package, they could. Yet, several sources forecast that consumers will fight their way through these obstacles.

Conservative thinking is reflected in an August survey of 2,360 individuals conducted by RetailMeNot with SurveyMonkey, which found three out of five consumers are planning to spend the same amount — or more — than last year. In addition, 36 percent will spread purchases out over longer periods, and 31 percent plan to shop early to avoid shipping delays.

The third factor is inventory levels. Department stores report that metric, and Macy’s and Nordstrom at least indicated they were in good shape with inventory. The amount of inventory dictates pricing — too much and discounting kicks in. This factor will become evident early in the season, which now looks to be mid- to late October. It was also part of the thinking in analysts firm Cowen’s forecast, as cited in WWD.

“We believe that strong availability of advertised products, utilizing omnichannel delivery options, and Thanksgiving closures are important strategies,” that forecast said. “Our take is that goods catering to a semi-permanent nesting lifestyle will be important traffic drivers — this includes home, electronics, comfort-driven apparel, kitchen, and outdoor-related goods. The new ‘hot item’ will likely be instead a ‘hot strategy’ of making your living space more comfortable and appealing.”