When we think about holiday shopping, especially during major events like Black Friday, we tend to picture packed parking lots, customers lined up early to get into stores, and a host of shoving and elbowing to snag the best deals of the season. This year, however, shoppers will be doing things differently. According to Deloitte's 2020 pre-Thanksgiving pulse survey, consumers plan to spend 38% of their holiday budget in stores -- and a whopping 62% online.
But here's a trend worth noting: For the first time in the survey's history, more consumers plan to shop online (61%) than in stores (54%) on Black Friday, which is often the single biggest shopping day of the year. Furthermore, among consumers who plan to shop during the Thanksgiving period, 95% say they'll do so online.
In fact, for the entire Thanksgiving period, the year-over-year share of in-store spending is likely to decline to 37% (compared to 43% in 2019), while the share of online spending is likely to increase to 62% (up from 53% in 2019).
Given that 57% of consumers are nervous to do their shopping in physical stores due to the pandemic, this shift isn't surprising. But it's also a whirlwind of potentially bad news for real estate investors.
The big fear this Thanksgiving season is that spending will be generally sluggish due to the pandemic and general economic crisis it's spurred. And if consumers slash their spending, retailers, which have been struggling since March, could end up filing for bankruptcy in droves in the coming year and taking stores down with them.
There's a strong likelihood consumer spending will decline this year, whether due to general economic uncertainty, personal financial constraints, or a lack of in-store shopping, which commonly lends to impulse buys -- bad for personal budgets but a boon to retailers. In fact, those who feel anxious about shopping in stores anticipate spending less ($386) than those who feel safe shopping in stores ($477) during the Thanksgiving shopping rush.
But let's assume consumers don't cut back on spending too drastically. Even if that ends up being the case, a major shift to online shopping could be seriously bad news for mall operators. If retailers see the bulk of their holiday revenue stem from online sales, it could drive them to close underperforming retail locations in 2021, even in the absence of a notable cash crunch. That, in turn, could leave mall operators grasping for tenants in light of the many retailers that have already declared bankruptcy and are making plans to permanently close up shop.
Of course, when malls struggle, mall REIT, or real estate investment trust, investors stand to feel the pain, which is why this year's Thanksgiving shopping season may, unfortunately, end up being a lose-lose situation for them. In fact, the best news real estate investors might get coming out of the Thanksgiving rush is a surprisingly positive level of in-store sales and foot traffic. But given the health crisis at play, that's unlikely to happen.