Economists' Outlook

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Weekly Retail Update: December 1, 2020

U.S. Holiday Season Insight

E-commerce share of total U.S. retail erupted amidst the coronavirus pandemic. E-commerce was already growing prior to the pandemic and accelerated as a result. A comparison between Q2 2019 and Q2 2020, the height of the coronavirus pandemic illustrates significant acceleration of e-commerce. E-commerce as a percent of total U.S. retail was 10.8% in Q2 2019 while Q2 2020 represents 16.1%.

Quarterly eCommerce Retail Sales

Q3 2020 recorded weaker than anticipated retail report and e-commerce figures. E-commerce share of overall U.S. retail spending decreased to 14.3%, e-commerce sales were $209.5 billion in Q3 2020, up 36.7% from Q3 2019, and as a result of increasing physical store retail sales as stores reopened, e-commerce share decreased.

Prior to the holiday season, in October, personal income decreased $130.1 billion (0.7%), disposable income decreased by $134.8 billion (0.8%), and real PCE increased $63.5 billion ($12.7 billion in spending and $48.7 billion in spending for services). Although Real PCE increased $63.5 billion in October, this indicates consumers are pulling back on goods and services purchased as real PCE has been decreasing month-over-month since May. Consumer confidence also dropped as Black Friday neared.

The Conference Board’s consumer confidence indicator decreased on the 24th of November to 96.1 from 101.4 in October as consumers are concerned about the economy, labor market, and resurgence of COVID-19 cases. Despite the aforementioned, with high expectations for the holiday shopping season, did consumers disappoint?

Typically, the holiday shopping season begins the day after Thanksgiving, but for this year, the holiday shopping season was pulled forward to October as retailers encouraged consumers to shop earlier and online. Despite decreases in consumer confidence and real PCE, results from Dicks Sporting Good, Target and Walmart over the past few weeks indicate an appetite for consumers to spend online as retailers reach new e-commerce sales heights. While there is an appetite for consumer spending online, consumer and shopping behavior in November does not follow the typical patterns as local governments discouraged consumers from traveling for Thanksgiving and potentially other holidays moving forward. Thus, signaling that consumers should stay home.

According to SafeGraph data, consumers listened as foot traffic counts for more than 5 million points-of-interest including 5,500 retail chains and 3 million smaller business indicates significantly reduced foot traffic across the U.S. on Thanksgiving and Black Friday.

Foot Traffic by State

Although, there was a significant reduction in brick-and-mortar retail foot traffic, e-commerce sales totaled $5.1 billion on Thanksgiving Day, up 21.5% year-over-year according to Adobe Analytics. Black Friday brought in $9 billion, which is up 22% year-over-year. While this note is published halfway through Cyber Monday, e-commerce sales is anticipated to reach an all-time high on the day as the holiday season’s online shopping activities advance the shift towards e-commerce that has been seen throughout the COVID-19 pandemic.

While the complete holiday picture is unclear at the moment, it is best to not discount the consumer as the traditional holiday season transitions from single one-day events towards a digitally-intensive multiweek-long event. While no one is surprised with respect to the shift to online shopping at this point, the multiple weeks-long holiday sales promotions retailers have been utilizing may water-down the scope of the e-commerce peak this year as retailers pull purchases forward, thus watering-down the demand spike typically seen as a result of the holiday season.

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