Deloitte Forecasts Holiday Retail Sales to Rise 2.3% to 3.3%
Vicki M. Young
6 min read
Consumer spending for holiday this year will see a modest increase in retail sales, a range that’s more in line with trends over the past decade, according to Deloitte.
Deloitte is forecasting holiday retail sales from November 2024 to January 2025 to increase between 2.3 percent and 3.3 percent, with overall projected holiday sales total between $1.58 trillion to $1.59 trillion. E-commerce sales are expected to grow between 7 percent and 9 percent year-over-year, totaling between $289 billion and $294 billion this year.
Those projected data points compare with Holiday 2023 where sales from November 2023 to January 2024 were up 4.3 percent and totaled $1.49 trillion, according to the U.S. Census Bureau. E-commerce sales rose 10.1 percent, reaching $252 billion in total spend.
“Following a sharp rise in spending post-pandemic, this season’s retail sales are expected to moderately increase in line with trends over the past decade,” Deloitte Consulting’s retail and consumer products leader Michael Jeschke said. “Our forecast indicates that e-commerce sales will remain strong as consumers continue to take advantage of online deals to maximize their spending.”
Jeschke said that retailers who focus on building loyalty and trust with consumers “could be well positioned for success.”
“Although the pace of increase in holiday sales will be slower than last year, we expect that healthy growth in disposable personal income (DPI), combined with a steady labor market, will support a solid holiday sales season,” Deloitte Insights economist Akur Barua said. DPI is the money an individual has left after paying mandatory deductions to the government, such as taxes, and is also referred to as after-tax income.
Data on Wednesday from the U.S. Bureau of Labor Statistics indicated that the annual inflation rate is at its lowest level since February 2021. The Consumer Price Index, the broad measure of goods and services that’s used to keep tabs on inflation, held steady in August, rising 0.2 percent—the same increase as in July—on a seasonally adjusted basis. Declining inflation is expected to give a boost to consumers’ purchasing power.
However, Barua noted that rising credit card debt and the possibility that some consumers have exhausted their pandemic-era savings would weigh on sales growth this holiday season. An Invoice Home U.S. consumer survey on holiday found that many respondents said they plan to find ways to save this holiday season. That could mean postponing celebrations until 2025 so they can take advantage of the deep discounting found in post-holiday sales from the end of December through January.
Brian McCarthy, a principal in the retail strategy group at Deloitte Consulting, told Sourcing Journal that the forecast was compiled by Deloitte’s U.S. economics team based on a variety of factors and did not include any consumer survey of spending plans. He also said DPI was used as the explanatory variable because that’s deemed more reliable than alternatives such as employment and the unemployment rate. McCarthy also said the forecasts are in line with the economics team’s “wider outlook for the U.S. economy.
Upcoming is Amazon’s October Prime event, which could see some early holiday shopping activity.
“We have seen the holiday shopping season pull forward with price-conscious consumers taking advantage of big promotional events to maximize their wallets,” McCarthy said. “Overall, we expect to see sales growth slow to more normal growth patterns over the last 10 to 15 years following a sharp surge in retail sales post-pandemic, particularly in e-commerce spending.”
Separately, other data points from a separate Deloitte study found that 84 percent of executives said they are using artificial intelligence (AI)-enabled tools to improve buying and merchandising activities. Seventy-three percent said their company has not experienced any impediments in the use of data to enhance decision making, and 80 percent said they are looking for new or better data sources to assist in demand forecasting.
Customer Growth Partners, a research and consulting firm, expects holiday retail sales this year to grow 2.5 percent to 3.5 percent, similar to the Deloitte forecast. Software firm Salesforce has predicted that global holiday sales will see just a 2 percent rise in 2024 for November and December to $1.19 trillion, with a corresponding 2 percent gain in U.S. holiday sales to $272 billion.
Caila Schwartz, Salesforce’s director of consumer insights and strategy, said that the theme for Holiday 2024 will be “value.”
Several CEOs at retailers who posted second quarter earnings results last month—from off-pricers to the dollar stores—reported that consumers are already on the hunt for value. And Dollar Tree’s chief operating officer Michael C. Creedon said that its middle-income customer and those with annual household incomes greater than $125,000 have now “shifted to buying for need versus buying for want.”
Those perceptions of a shifting consumer mindset was also evident in the analysis of early back-to-school shopping trends. KPMG’s consumer and retail sector leader for the U.S. Duleep Rodrigo said that shoppers are now prioritizing value and have adjusted their spending in response to financial pressures.
While the 2024 holiday season will offer more “normalcy” for retailers in a cooling inflationary backdrop, promotions are expected to play a larger role as consumers continue to seek value, according to Matt Pavich, senior director of strategy and innovation at Revionics, a pricing optimization solutions provider.
“Retailers are dealing with shrinking shopper loyalties, a larger number of competitors across more channels, and, of course, a more dynamic landscape where prices are shifting more frequently to win over consumers who are looking for great deals,” Pavich said. “Retailers can leverage advanced analytics to understand which items are the most important for consumers and how that importance might differ across locations and channels. Once these KVIs (key value items) are identified for the season, a retailer can better focus on where to invest in price perception.”
According to NIkki Baird, vice president of strategy and product at retail technology firm Aptos, a focus on the value proposition and customer experience will be what it’s going to take for retailers to win.
“Retailers aren’t just competing with other retailers when it comes to consumers’ discretionary spending. If consumers feel like the shopping experience isn’t worth their time and effort, they are going to spend their money elsewhere,” Baird said. She explained that retail is a mixed bag, and the winners are those who offer a better customer experience.
“Consumers today have higher expectations for what a retail experience—particularly in the store—needs to offer than it did five years ago,” she explained.
