Back to the Grind
Happy New Year everyone! Before I get going on this week’s commentary, I want to remind everyone that starting this week (Wednesday, January 5) I will be hosting three straight days of my 2022 Retail Forecast. There are three sessions planned (one each at different times on Tuesday, Wednesday, and Thursday) for “Retail 2022: From Crisis to Comeback.”
Please join us on any of these dates. The session will be highly informative and entertaining. I will be breaking down the trends that got us here and where the market will be going in the months ahead. In addition to detailing who will be growing or contracting in 2022, I will issue my ten predictions for the coming year. The presentation will be about 45 minutes with 15 minutes for Q&A.
If you have not registered yet, you can choose your day and time at this link. Join us—you will not regret it.
Last week, Mastercard Advisors reported that their tracking of holiday sales indicates an increase of 8.5% over 2020 levels. The official numbers from the Commerce Department are still a week or two away, but Mastercard tallies are a great bellwether for where the official government numbers typically land.
Last year’s official totals came in at 8.3%, far exceeding most analyst predictions and resulting in the largest annual increase in decades. Of course, eCommerce played heavily into this—as did the fact that Americans shifted spending towards goods and away from travel and services in the pre-vaccine days of the pandemic. The National Retail Federation (NRF) predicted this year’s totals to be between 8.5% and 10.5% with the possibility of 2021 tallies breaking records if on the higher end of the scale.
While the Mastercard and Commerce Department numbers indicate two entirely different data points and set of analyses, Mastercard numbers in the last few years have typically come in a few basis points higher than the government data. I would not be surprised if the final Commerce Department data comes in at the lower end of the predictions made by the NRF. Regardless, all indications are this was a banner holiday season despite supply chain challenges, despite inflation concerns, despite sagging consumer confidence (due to inflation concerns) and despite the ongoing surge of CoVid cases thanks to the Omicron variant. Consumers still showed up despite all these things.
In fact, the news for retail has been overwhelmingly positive. Costar recently published a report citing 2021 retail closures to be at an all-time low following the distress of 2020. Both they and Coresight indicate store openings in 2022 to outpace closures for the first time since 2014. The data I track corresponds; I haven’t seen this much growth in the pipeline in at least seven years. And… it is not all dollar stores—which has been the case in recent times (though they still are the most active retail segment).
This is not to say that we aren’t seeing some impacts from Omicron. Foot traffic levels, which were rebounding nicely everywhere, have dipped again for urban retail and in-restaurant dining is slowing as well. As of December 31st, the US set a record for the highest seven-day average (over 343,000 per day). Most experts believe this metric will hit the 500,000 mark this week. It’s challenging enough that Goldman Sachs, which had taken a hard line about insisting its workers return to the office this past summer, is now asking their staff to work from home the first couple of weeks of January. Meanwhile, Boris Johnson’s government in the UK has warned public sector employers there to be prepared for “worst-case scenarios” of 10%, 20%, or 25% absence rates in the week ahead as Omicron rages there.
Retailers and restaurants (already challenged by a labor shortage) will certainly be facing staffing challenges in the weeks ahead if they aren’t already. That said, even with Omicron, there are some snippets of potentially good news. Data is starting to emerge to support the case that while far more contagious, Omicron is also far less deadly. This could actually bolster the case made by Wall Street Journal columnist Rob Arnott yesterday in, “Omicron Variant May Save Lives,” that the new variant may end up bringing us all closer to herd immunity. Whether that happens remains to be seen, but if the path of Omicron in South Africa is any guide, their surge was intense but short. These numbers will be falling significantly by the end of January. For now, things on the CoVid front are going to get worse before they get better.