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Online Holiday Spending Projected at Double the Rate of In-Store: Impact on Retail

Online Holiday Spending Projected at Double the Rate of In-Store: Impact on Retail

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When the coronavirus pandemic erupted in 2020, consumers had to switch gears. That meant ordering items online and retrieving them curbside and having groceries dropped at their doors rather than running the risk of entering supermarkets.

That trend continued into the 2020 holiday season, which saw a major surge in online orders. And this year’s holidays are shaping up to be no different.

Person at laptop holding credit card.

Image source: Getty Images.

Online shopping could well outpace in-store shopping

Deloitte is projecting that online orders will account for 62% of holiday purchases during the 2021 season, up from 59% in 2019. This year, the average household is expected to spend $924 online during the holidays, more than double the $440 the average household will spend in stores.

The news isn’t all bad for physical retailers. In-store spending during the holiday season is expected to rebound to a 33% share in 2021. That’s a nice increase from 28% in 2020, and we can largely thank coronavirus vaccines for that. But the reality is that brick-and-mortar retailers could still lose out on a lot of business during the holiday shopping boom, and that’s something real estate investors have every right to be concerned about.

Will the pain of store closures come to an end?

Following the start of the pandemic, 2020 saw a record number of retail closures. Thankfully, that pattern has died down substantially in 2021. But there’s always the underlying fear that as e-commerce gains popularity, physical retailers will become less relevant and added closures might ensue.

As it is, malls and shopping centers were grappling with vacancies in some markets before the pandemic began. And if this year’s holiday spending patterns largely favor digital sales, retailers may opt to switch gears in 2022 and shutter underperforming stores not out of desperation, but as a strategic move. After all, why spend the money to staff and pay rent on a location with poor performance when those resources could be spent investing in distribution centers to support online orders?

Of course, it’s too soon to tell how holiday shopping patterns will shake out in the course of the upcoming season. Some consumers may intentionally visit physical stores after having shopped online last December out of necessity. And with COVID-19 booster shots just greenlit for the general population, more consumers may feel comfortable shopping in person this season.

Plus, it’s no secret that there’s a truck driver shortage that’s currently lending to supply chain woes. Consumers may be less apt to have gifts delivered for fear that they won’t arrive in time, and may, in turn, take advantage of options like BOPIS, or buy online, pick up in store. That, too, could drive more people to physical retail locations in the coming weeks.

But if online orders really dominate this season, an uptick in store closures could ensue once 2022 rolls around. If that were to happen, it would leave a lot of shopping centers and malls — and the people who invest in them — in a pretty tough spot.

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