It's fair to say that 2020 was a pretty bad year for retailers. Sure, some managed to thrive -- namely, dollar stores that catered to budget shoppers in search of discounts, and big-box stores that were essential during the pandemic. But a large number of retailers spent the better part of 2020 grappling with declining revenue as the pandemic kept shoppers out of stores and economic uncertainty prompted many consumers to cut back on spending across the board. In fact, things got so bad that dozens of well-known brands were forced into bankruptcy last year.
But now, things may be looking up for retailers. Not only is the economy in a stronger place on a whole, but coronavirus vaccines are helping consumers shop comfortably in person once again. Just as importantly, new data indicates that consumer spending may rise in the context of back-to-school purchases. And that alone could help retailers mount a quicker recovery than expected.
In a recent KPMG survey, consumers plan to spend $268 per child this year for back-to-school items, which represents a 9% increase from the $247 they spent in 2020. Spending is especially projected to grow in the context of footwear (21%), school supplies (16%), and apparel (14%).
Interestingly, consumers said they'd be less likely to buy computers and study-related furniture this year. That could be due to the fact that most school districts are planning for a relatively normal academic year, aiming to open for full-time, in-person learning, as opposed to the remote and hybrid models that defined the 2020-2021 school year.
Another important takeaway is that while there was an uptick in online shopping for back-to-school items last year, this year, more consumers are expected to shop in stores than online. That's good news for physical retailers, which have lost a lot of business to e-commerce as consumer shopping patterns shifted during the pandemic.
Good news for real estate investors
It's in real estate investors' best interest to see retailers thrive once again. Those with shopping center and mall REITs (real estate investment trusts) in their portfolios are directly impacted by widespread store closures, because they can result in a serious loss of rental revenue for those REITs. The fact that consumers plan to spend more this year on back-to-school purchases is good news itself, and the fact that they plan to visit physical retailers to do that shopping is even better.
Of course, this uptick in back-to-school spending is part of a general -- and positive -- trend. In May 2021, retail sales rose 23% compared to May 2020's levels, and clothing and accessory sales rose 200% over the same time period as society began to reopen, according to Retail Dive's analysis of U.S. Department of Commerce data.
All told, the National Retail Federation estimates that retail sales this year could increase by 10.5% to 13.5% from last year, which could be the ticket to preventing store closures, helping retailers stage their recovery, and giving shopping center and mall REIT investors some much-needed peace of mind.