2020 was a miserable year for retail, with many well-known names filing for bankruptcy after months of sluggish sales. Of course, the coronavirus pandemic didn't help things. Quite the contrary -- it exacerbated a bad situation for retailers that were already struggling.
Things are looking up, however, for 2021. The National Retail Federation (NRF) expects retail sales will grow between 6.5% and 8.2% this year as the U.S. economy begins to stage its recovery. But will that prevent more store closures -- closures that are battering shopping malls and leaving investors very worried?
Where exactly will sales pick up?
Despite the many challenges and closures spurred by the pandemic, retail sales actually grew 6.7% in 2020. Seeing how retailers aren't facing the same restrictions many were looking at a year ago, it's fair to assume sales growth this year will mimic 2020's growth and/or exceed it -- hence the NRF's 6.5% to 8.2% prediction.
But much of that anticipated growth will come in the form of online sales. The NRF projects e-commerce will climb between 18% and 23%, and these figures are included in its total projections.
That's sort of a mixed bag for real estate investors. On one hand, any influx of revenue is good for retailers, and the more money they take in, the less likely store closures will be. But if there's notably accelerated growth in digital sales, it could prompt some retailers to start making store closure plans -- especially in underperforming locations.
In the course of the pandemic, a lot of people have shifted to online shopping as a means of staying safe. But at this point, consumers may not be so quick to shake that habit. Even if people aren't skittish about stepping foot inside stores, they may not want to deal with the inconvenience of getting into a car, finding a parking space, and shopping in person when they can instead point and click their way to the items they need and wait for them to show up at their doorsteps. As such, there's no reason to think online shopping will die down -- even once it becomes a lot safer to enter stores again.
Of course, the extent to which retail sales rise will depend heavily on how well the economy fares. The jobless rate has been steadily declining since peaking in April 2020, but we're nowhere close to pre-pandemic unemployment levels as of now. That could change, though, as the year rolls on, more Americans get vaccinated, and jobs begin to open back up.
The Millionacres bottom line
All told, there's reason for real estate investors to be optimistic that retail sales will pick up this year. There's also reason to believe that if that happens, it'll prevent store closures to some degree. But let's not forget malls have already lost a number of key tenants over the past year, so even a modest level of closures could result in a very big problem. And if digital sales really pick up, it could further fuel the retail apocalypse, which has been threatening malls long before the pandemic began.