Jun 21, 2021 - Economy

Report: Retail slowdown ahead

U.S. year-over-year retail sales growth
Data: U.S. Census Bureau and FTI Consulting analysis; Chart: Axios Visuals

Expect retail's recent boom to ebb after June.

What's new: FTI Consulting writes in a report, out this morning, that for many retailers, the second quarter "might represent the last hurrah in a one-year period of above-average consumer spending on goods, largely subsidized by Uncle Sam."

Why it matters: As the economy reopens, there are more experiences and services to spend money on, and the discretionary cushions are disappearing. Retail sales already dipped slightly in May.

The big picture: E-commerce encroached further into brick-and-mortar market share during the pandemic, as those who had rarely shopped online were forced to do so.

  • The market share of online retail sales grew to 19.8% in the first quarter of this year, up from 19% in 2020 and 15.4% in 2019.

The online share will rise further.

  • FTI projects that online retail sales will grow 13.5% this year compared to 2020, reaching $865 billion.
  • That would represent a 20.5% market share of retail sales in the U.S. (excluding cars and gas), the firm forecasts.

The Amazon effect: About 62% of the respondents to FTI's survey said they did most of their shopping online at Amazon.

  • However, more than 60% said they shopped direct-to-consumer channels more often last year, including 36% who said significantly more.
  • Worryingly for Main Street, almost no one said they avoided Amazon in order to support smaller or local businesses.

What to watch: Whether the pandemic-induced demand for online shopping has changed behavior for good.

  • Less than 20% of those surveyed said they really missed in-store shopping. 
  • "Consumers have embraced online shopping to a new extent. We do not foresee a drastic shift or reversal in these behaviors as the economy fully reopens," J.D. Wichser, leader of FTI's retail & consumer products practice, said in a statement.
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