Don Unser – is a 1992 graduate of the college and UCF College of Business Dean’s Advisory Board Member. He is Group President, Retail Business Group, at The NPD Group, the leading source on consumer spending with Point-of-sale data from over 600,000 retail locations, plus e-commerce and mobile platforms. Don is especially qualified to speak on this topic…….
The COVID-19 pandemic has caused massive and unprecedented changes in U.S. consumer spending that will have short-term and long-term implications for retail. As a result, the purchase trends we saw in 2020 will certainly set the stage for 2021.
Heading into 2021, U.S. retail spending remains strong. The NPD Group recorded a $100 billion increase in U.S. retail spending in 2020 versus 2019. I expect this strong performance to continue in the beginning months of 2021. In a time of such drastic challenges, many are surprised that retail is performing well. But it’s important to consider that the pandemic is leading to decreased spending for experiences (travel, live events, etc.)outside the home. Consumers are using much of this freed-up source of cash to buy products that facilitate working, learning,and eating at home. For instance, rather than eating out, consumers are increasingly preparing their own meals. In 2020, this shift drove a 14% increase in household grocery spending.Relatedly, consumers are investing in their kitchens leading to a rise in sales for small appliances and housewares.
There are numerous other examples of instances where U.S retail spending is increasing. The need for consumers to work, learn, and stay entertained at home has led to strong performance in the consumer technology space. Toys, homefitness, and video games are additional examples of industries that are growing. I expect these trends to continue until vaccines are more broadly distributed later in the year.
Looking further ahead, once restrictions begin to ease, I expect to see a strong uptick in spending for leisure entertainment such as travel, live events, gyms, and movies. I estimate the annualized spend for those activities in 2019 was nearly $500B. That’s a huge figure with implications that extend beyond consumer spending given the employment linked to those industries. A rise in leisure entertainment spending, however,will likely cause a pull-back in some of the product categoriesthat have grown due to the pandemic as consumers re-allocate their spend. On the other hand, industries that have recentlysuffered at retail, like apparel and footwear, will benefit as consumers look to refresh their wardrobes to partake in activitiesthat take place outside the home.
A return to leisure entertainment spending in the U.S. is inevitable as more people get vaccinated and feel more comfortable leaving their homes. Many families have not had their annual vacation in 2020 and cabin fever will lead to pent-up demand for a variety of experiences. I expect many will splurge. In this regard, companies in the leisure entertainment space should bolster their premium offerings to capitalize on this behavior.
In light of all these factors, I expect 2021 to be another roller-coaster year for consumer-facing businesses. Overall, however, I remain optimistic about the resilience of the U.S. consumer.