Online Retail Sales Projected to Fall in 2021 As In-Store Sales Rise

The retail market will recalibrate next year. In 2020, most retail spending has shifted online, but a new report from Colliers International predicts that online retail sales will decrease 8.5% in 2021, while in-store retail sales will increase 5.9%.

This year, online retail sales jumped more than 36% due to the pandemic, and in-store retail sales declined 3.2%. While Colliers’ predictions for 2021 won’t offset the massive online shopping growth this year, it is also clear that in-store shopping is not dead. Last year, online shopping accounted for 13.8% of total retail sales. This year, the online portion of the retail market jumped to 18.4%. Colliers forecasts the number will fall to 16.3% in 2021 and steadily increase, hitting 18.3% again in 2023 and 19.9% by 2025.

This year, in-store retail sales actually held up better than expected, growing 2.2% overall. Colliers data forecasts retail sales to grow again next year by 3.2%. Grocery sales led the gains, growing 12.5% this year, followed by the home, electronics and beauty retail segments, which were up 9%, 2.9% and 2.4% respectively. Apparel led in retail losses, down 25.7% for the year. This is likely because consumers bought fewer items for work and social occasions, according to the report.

Apparel sales could rebound at the end of the year when sales increase for holiday shopping. Colliers expects apparel, jewelry and beauty to be the top retail segments through the holiday season. Already, Christmas and holiday searches are up significantly compared to last year and started earlier than the usual season.

This forecast is a significant improvement from early in the pandemic, when many CRE experts expected pure catastrophe for retail this year. In June, a JLL predicted that retail sales would drop between 2.1% and 7.7% this year. Instead, retail sales actually grew, albeit online rather than in store. At the time, the same report estimated that retail sales would rebound by 2022, but this new report from Colliers estimates sales will rebound strongly next year.

Speakers at NAIOP’s CRE.CONVERGE in October were already seeing the bright side. Wade Achenbach, executive vice president, Portfolio Management at Kite Realty Group, said, “I think there is more of an opportunity (in retail) than any of the other sectors.” He also noted the necessity of physical stores, even during the pandemic. “What’s really happening when somebody says e-commerce?  It’s more of an omnichannel,” he said. “Even Amazon realizes the value of stores with its purchase of Whole Foods.”