Retail sales are going through a turbulent time which started in 2020 and through 2021 to 2022. In 2019, the Covid 19 pandemic restrictions impacted retail sales negatively.
Some retail outlets closed their shops due to insufficient demand, while others could not find raw materials or the merchandise they needed in sustaining their operations.
However, in 2021, retail sales activities picked up, albeit at a slower pace. Nevertheless, the sector grew at a faster rate compared to 2020.
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So What To Expect In 2022?
According to trends and available data, the rising inflation, which started in March, is taking a toll on retail activities. The worse that takes the hit is the stock market.
Reading the article on how interest rates impact stock markets can help you understand the effect the high rates have had on stocks. But despite the odds, retail sales are likely to grow by 6-8% in 2022.
Why Is Retail Growth Lagging In 2022?
The inability of the Federal Reserve to stop the rising inflation is negatively affecting the economy. The rising prices mean consumers spend more on goods and services than savings and investments. Also, the continuing Russia-Ukraine war, which has sent and made the prices of essential commodities, including gas unbearable for most consumers, and now greatly impacting retail sales.
Despite all of this, US retail sales are poised to grow by 6%-8% as American shift their spending to trips and restaurants. It implies that retail sales are likely to rise to $4.86-$4.95 trillion by the end of the year. Of course, some of the money could be accounted for by the inflation-fuelled prices.
Note that the stimulus checks fueled the high sales figures in 2020 sales. These are the monies Americans received to caution them against the effects of the Covid-19 pandemic as most consumers put the dollars they received into retail purchases.
Unfortunately, the stimulus is not available in 2023, impacting consumer spending and affecting sales forecasts.
Additionally, without the stimulus, businesses might consider implementing recoverable draw strategies to manage cash flow and maintain stability.
However, retail sales are expected to benefit from increased wages and declining unemployment. But the escalating crisis in Europe and the new Covid 19 waves will likely jeopardize the situation and impact sales.
Surprisingly, Wal-Mart, Macy’s, and Target say that the high prices have had no significant impact on consumers’ buying volume. They expected consumers to buy smaller packs, avoid private labels and buy budget-friendly alternatives due to inflation. However, this is not what is happening today.
Despite all the odds, Walmart CFO Brett Biggs adds that there are signs that consumers are getting disenfranchised by inflation. Macy’s CFO reiterated the same and said that the store is thinking of the best strategy to implement, given that larger grocery bills are squeezing families from the low-income category.
On the same note, Morgan Stanley observes that budget-strapped families are feeling the pinch since the burden for lower-income families has quadrupled.
What Impact Is The Rising Interest Rate Having On Households?
A rising interest rate means that the mortgage interest burden gets shouldered by disposable income. Also, paying debts and credit cards becomes costly. This impacts the economy in the following ways:
- Households feel more nervous and exposed than before
- Sectors such as fashion, flooring, home décor, gardening, and furniture get neglected
In order to keep up with rising prices, households will choose to save less and borrow more. Such choices will result in reduced savings and investment and economic growth.
So What Are The Retail Forecasts For 2022?
Despite the uncertainties and high inflation, retail sale is poised to grow. The year forecasts show that the growth will likely exceed $27.33 trillion by the end of the year. Some things likely to catalyze the growth include the rebound of brick-and-mortar channels and the use of AI tools. The channel’s bounce back will effectively complement e-commerce retailing and increase sales figures.
Further, the use of AI tools to connect physical and online trading experiences will improve the shopping experience. So, retailers are expected to leverage QR code payment options and curbside clicks to enhance the shopping experience and stimulate sales.
The use of such tech-driven tools will make shopping enjoyable and attract shoppers to physical stores. Besides, augmented reality will play a vital role in bridging digital and physical shopping experiences.
As the Fed battles inflation, the sales volume will likely surpass the $27 trillion mark in 2022. The increased sales will result from a stronger labor market, rising wages, and an enhanced shopping experience.
Rising wages will enhance retail purchases, while enhanced shopping experiences will offer something to entice customers to spend more on purchases. The net effect is increased sales.
