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Dive Brief:

  • Cowen analysts led by Oliver Chen said the retail industry was in for a "rocky" fall this year given opposing forces that could affect consumer spending.
  • Retail could be weighed down by slow back-to-school sales, shipping costs, continued weakness in the apparel sector and lack of continued economic stimulus, according to a report emailed Thursday.
  • At the same time, some retailers, especially Target and Walmart, could benefit from shopping trip consolidation, customer acquisition, low prices, and accelerated sales in home goods and grocery, according to the analysts. They also see a holiday season that starts earlier and lasts longer.

Dive Insight:

Retailers are headed into a season unlike any other they've ever operated in, with forces at play that are capable of both accelerating and slowing spending.

Cowen analysts follow Deloitte in splitting the difference in their predictions. Like Cowen's "bifurcated" fall, Deloitte this week released its annual holiday sales estimates and described in them a "K-shaped" recovery with multiple possible scenarios.

Both Deloitte and Cowen pointed to the possible upside for retailers in consumer savings as well as restrictions and consumer hesitancy around travel and in-person dining given the continued spread of COVID-19. Consumer confidence could also get a bump from more stimulus and progress toward a coronavirus vaccine, as Deloitte pointed out.

On the flip side, the consultancy pointed out that lack of stimulus and unemployment insurance, as well as school closures and other factors could tamp down spending. Depending how things play out, holiday spending could remain flat from last year or, in the more optimistic case, grow by much as 3.5%, according to Deloitte.

The pandemic is also likely to shape what consumers buy during the fall and holiday season. Cowen analysts said they expect home goods, electronics, toys, cooking, loungewear and office products to sell well compared to apparel items like suits and dresses made for the office and going out.

The season also calls for a tailored strategy. Cowen analysts pointed to the importance of an "Every day is Cyber Monday" approach to e-commerce given a shift to online sales. Also critical is analyzing data on regional and recent trends, increasing items per transaction, and the pace of promotions, the analysts said.

Well positioned, in their view, are Target, which has been adding to its customer base during the pandemic, and Walmart, which has launched a membership that includes free shipping in time for the holidays.