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The U.S. will hang on to its title as the biggest retail market in the world despite COVID-19, thanks to a boost from government stimulus and consumer spending from the comfort of home, according to eMarketer.
U.S. retail sales are now poised to grow 0.8% for the year, reaching $5.506 trillion, up from a previous forecast for a 10.5% decline. That represents $612.20 billion in sales eMarketer experts hadn’t anticipated in April.
China’s retail market is now forecast to fall by 2.9%, compared with a previous forecast for a 4.0% decline. China’s retail sales in 2020 are expected to reach $5.130 trillion in 2020, down from $5.283 trillion in 2019.
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“In China, the economic development model is oriented around investment, construction, manufacturing, infrastructure build-outs, real estate development, and giant state-owned (or state-directed) enterprises that undertake projects in service of these goals,” eMarketer’s Ethan Cramer-Flood wrote.
“Therefore, in times of economic stress, China’s best bet is generally to juice investment activity by major corporate players by implementing policies that help energize these constituencies.”
On the other hand, the U.S. government pumped money into the pockets of consumers through its stimulus package.
In-store shopping was limited in 2020, with retailers temporarily shut or customer capacity reduced. Moreover, many consumers felt it was too risky for shopping at brick-and-mortar locations. These factors accelerated the shift to e-commerce.
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“[E]conomic pain accrued overwhelmingly to U.S. restaurants, bars, entertainment venues, hotels, airlines, travel companies, educational institutions, theme parks, movie theaters, salons, etc.—and most of the money that normally would’ve gone to these service providers instead went to goods retailers,” eMarketer said.
“To put it succinctly: Nobody went anywhere or did anything in 2020, and instead they used their activities budgets to buy stuff.”
Some of the categories that have benefitted included home goods and consumer electronics, with shoppers spending on upgrades to their living spaces, backyards, and home offices.
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Apparel generally took a hit, however, sales of comfortable clothing like pajamas and athleisure gear were in demand.
The SPDR S&P Retail ETF XRT, -1.14% has rallied 36.3% over the last year. The Amplify Online Retail ETF IBUY, +0.64% has skyrocketed 117%. And the benchmark S&P 500 index SPX, -0.44% is up 15.3% for the period.
