Retail Industry Trends
There’s good news for retailers, e-tailers, and those who want to start a retail business, whether online, in-store, or both. 2021 looks like it’s going to be a huge one for retail—in fact, it may be the biggest year for retail sales in years.
The annual forecast from the National Retail Federation (NRF) predicts retail sales growth between 6.5%-8.2%. The NRF expects the national economy will spring back to life as more Americans get vaccinated—and as a result, retail revenues for 2021 will ring in between $4.33trillion-44.4 trillion.
Online sales (which are included in the overall retail numbers) will likely grow 18%-23%, to $1.14 trillion-$1.9 trillion (topping a trillion dollars for the first time).
NRF president and CEO Matthew Shay says, despite the “continuing health and economic challenges” COVID-19 brought, they’re “very optimistic healthy consumer fundamentals, pent-up demand, and widespread distribution of the vaccine will generate increased economic growth, retail sales, and consumer spending.”
The overall economy will benefit from all this as well. As we head into the 2nd and 3rd quarters of 2021, the NRF expects the economy to add 220,000-300,000 jobs a month.
While these numbers are spectacular, you can’t label 2021 as a comeback year since retail sales for 2020 shocked everyone, topping the original forecast, which was made pre-pandemic. Overall retail sales grew 6.7% over 2019, hitting $4.06 trillion, nearly doubling the initially projected growth of 3.5%. Since most of us couldn’t go to stores last spring, this surprising number was fueled by online sales, which zoomed to $969.4 billion, up 21.9%.
Many of these online sales were driven by a demographic group that hadn’t previously embraced e-commerce—baby boomers. According to The Washington Post, those over 65 are the fastest-growing category of e-commerce shoppers. They may need a little help, The Post says, so businesses are “scrambling to meet them [online, offering] round-the-clock customer service…and interactive videos aimed at simplifying e-commerce for the uninitiated.”
If you want to attract this group of older consumers, think about how you can help them create accounts and start shopping. This is a smart demographic to cater to. Boomers are loyal customers with more disposable income than younger generations. And AARP says consumers aged 50 and older accounted for 56% of all U.S. spending, totaling $7.6 trillion in 2018.
NPD Group’s Checkout Tracking showed a 49% increase in online spending for those 65 and older in the first 10 months of 2020 and more than a 40% increase in the frequency of purchases.
This surge in online sales does not mean in-store shopping is a relic of the past. The NRF expects consumers will flock to stores once they’re able and are assured it’s safe to shop. Actually, however, most consumers will be looking for local businesses that offer hybrid solutions. Options like BOPIS (buy online, pickup in-store) and curbside pickup will stay in high demand.
The year is already off to a strong start, with the NRF reporting January retails sales “grew sharply” with “none of the falloff in spending that we often find post-holiday. The increase was even better than expected,” says NRF chief economist Jack Kleinhenz. He adds, “There is plenty of purchasing power available for most consumers, and the pickup in shopping has even been reflected in the number of hours worked by retail employees.”
And retail sales will likely continue on that path, especially with another round of (even larger) stimulus checks. Kleinhenz says he expects consumer spending to build on this momentum.
The numbers, as reported by the U.S. Census Bureau, show January sales increased 7.4% over sales in January 2020. The NRF’s numbers were even better, showing January retail sales this year up 10.7% unadjusted over 2020.
Look for even more “accelerated growth” to start mid-year, says NRF’s Kleinhenz, who adds, “the economy is expected to see its fastest growth in over two decades.”
In good news for other small business owners, Kleinhenz says the service sector, which usually accounts for 70% of consumer spending, will bounce back as well.
Of course, you need to get ready for the expected increase in customers and sales. Need help? You can count on a SCORE mentor to advise you. If you don’t already have a mentor, you can find one here.