NRF on Shopping Shifts and That $1 Trillion Holiday Forecast

With news headlines shouting doom and gloom in so many directions, is the National Retail Federation’s record-breaking $1 trillion holiday forecast wishful thinking? Or something more nuanced?

“The consumer is sentimentally weak, but fundamentally sound,” explained Mark Mathews, chief economist and executive director of research for the National Retail Federation (NRF) in a special podcast episode for Retail Rx with Ian Fredericks, chief executive officer of Hilco Global Capital Solutions and executive director of Hilco’s Consumer and Retail platform. That’s important because the consumer is powering our economy more than ever before. Today, 68 percent of GDP is driven by consumer spending — the largest percentage in the past 15 years.

“While lower-income households are definitely struggling, what we have seen over the course of the year is that all households have protected their spending on loved ones,” said Mathews. “Mother’s Day, Father’s Day, Valentine’s Day, back to school, Halloween… we’ve had at or near record levels of spend across all of those events.”

Essentially, it’s the nature of spending that has changed, and to safeguard that spending, many have pulled back in other areas like recreation or travel. Consumers have also shifted to more promotional spending that squeeze margins. “The retailer is constrained because prices are rising, so while retailers will offer sales that are important to consumers, we may not see the breadth of sales that we’ve seen before,” Mathews said.

Seasonal hiring, often a retail bellwether, has fallen to the lowest figure in 15 years, underscoring retail’s “wait and see” attitude on adding headcount. But, noted Mathews, retail is also at a historically low level of separations (firings and quittings) and companies are managing with current staff.

“Thinking about some of the headlines or the different things we’ve dug into, it seems like where something might look bad on its face if you were just looking at it stand-alone, actually there are other forces on the other side that are balancing it,” said Fredericks.

The NRF has been analyzing data and advising retailers for over a century. The November/December season represents roughly 20 percent of the year’s retail sales for many retailers.