The Supply Chain Matters blog highlights National Retail Federation and US Commerce Department reports of 2021 holiday fulfillment sales along with added insights and cautions for readers related to this data.

In conjunction with its annual conference being held this week, the National Retail Federation indicated that sales during the 2021 holiday period for the period from November thru December grew 14.1 percent over 2020 to $886.7 billion. The 2021 result compares to $773.3 billion reported for this same period in 2020. The number includes both online and other non-store sales but excludes automobile dealers, gasoline and restaurants.

Commenting on the report of holiday focused sales, NRF President and CEO Matthew Shay noted: “Despite supply chain problems, rising inflation, labor shortages and the omicron variant, retailers delivered a positive holiday experience to pandemic-fatigued consumers and their families. Consumers were backed by strong wages and record savings and began their shopping earlier this year than ever before. This is, in part, why we saw a decline in sales from November to December. NRF expects further growth for 2022, and we will continue to focus on industry challenges presented by COVID-19, the supply chain, labor force issues and persistent inflation. The numbers are clear: 2021 was an undeniably outstanding year for retail sales.

Separately, the U.S. Commerce Department reported that sales at retail stores, online and restaurants declined seasonally by 1.9 percent in December, but up 16.9 percent on a year-over-year basis. According to the Commerce Department data, sales declined broadly in December, with online sales declining by 8.7 percent during the month.

 

Added Supply Chain Matters Insights

As Supply Chain Matters has noted, the takeaway from the 2021 holiday period for online as well as in-store sales was that consumers shopped early in the light of reports of significant supply chain shortages related to in-demand holiday goods. That data was reflected in the initial results from the 2021 Thanksgiving, Black Friday and Cyber Monday holiday weekend in November. The numbers were somewhat muted and the commentary from various data collectors seemed to reinforce that shoppers, while increasing visits to physical stores, were not overlay active in online channels. They instead, likely shopped earlier when large retailers such as Amazon, Target and Walmart were running earlier merchandise promotions.

There are additional cautions reflected in this latest data.

As The Wall Street Journal noted in its reporting, actual retail sales numbers are factored for seasonality but not adjusted for inflation. This would include increased price inflation of both goods and of transportation costs. The U.S. consumer price index rose to a level of 7 percent by December, its highest level since 1982.

As Supply Chain Matters pointed out in a blog commentary at this same time point in last year, reports of overall 2020 holiday fulfillment sales reflected conflicting numbers, primarily because they had not accounted for returned goods as well as inflationary factors.

Commerce Department data for December 2020 retail sales also indicated a monthly decline in the final month of 2020, which was reported as 0.7 percent. That would indicate that shoppers electing to shop earlier was already a trend that was occurring in 2020, or that Covid-19 infection rates caused consumers to pause in their shopping during the final month of 2020. This needs to be factored when considering year 2021 year over year decline in December retail sales.

Of added concern related to the 2021 holiday period is the growing concern among some economists of an inventory overhang in the first part of 2022, when all of the queued-up container ships waiting off the U.S. West Coast are actually unloaded with holiday fulfillment ordered inventories.

To summarize, 2021 was likely a banner year for both annual and holiday focused retail sales. Planners should not be assuming that 2022 will be just as robust. Rather, there are a lot more dynamics at play, including growing concerns for added inflation, continued supply chain related disruptions, and more declining GDP growth in 2022.

 

Bob Ferrari

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