Online shopping is here to stay in 2021: Refinitiv

Jharonne Martis, Refinitiv Director of Consumer Research, joins Yahoo Finance’s Julia La Roche and Adam Shapiro to discuss her thoughts on the state of retail, the shift to online shopping, and consumer spending going into 2021.

Video Transcript

JULIA LA ROCHE: Well, COVID-19 has pulled forward and accelerated a lot of trends this year, including the shift to online shopping, something that is likely to persist even as we exit into the new normal or next normal, whatever you'd like to call it. I'd like to bring into the stream Jharonne Martis, Refinitiv's director of consumer research, who has done a deep dive on this. Jharonne, let's talk about the shift to online shopping and how you see that continuing, even in a post-vaccine world.

JHARONNE MARTIS: Absolutely. Americans are telling us the bulk of them will continue to shop online, even as a vaccine has become available and if things go back to normal. About 70%, to be exact, in a collaboration with Maru/Blue Public Opinion, Refinitiv discovered this. And even when we look at earnings and the forecast for next year, it's very evident that the trend is expected to continue.

For the first half of 2020, e-commerce grew about 29.6% year over year for the first half of the year, and that is expected to grow even further to 40.6% in the second half of the year, and then to over 45% in the beginning of the first quarter, according to Refinitiv IFR data. When we look at all of the earnings results that we had in 2020, retail was still very negative. It's expected to be negative for this holiday season, for the fourth quarter, but then we are expected to see a positive earnings result in the first quarter of 2021, mainly driven by internet e-commerce sales.

So this underlines the strength of this as an increasing trend, and that consumers are feeling confident in putting their credit card information online and are expected to continue to shop online next year, which is going to be a huge contributor for the economy.

ADAM SHAPIRO: So let's look six months out. What does this mean-- is there going to be a slowing down at some point? Investors have to prepare for that, because there's going to be an equilibrium between traditional ways of shopping and now how we all shop.

JHARONNE MARTIS: Well, absolutely. The brick and mortar stores, especially department stores, have been struggling for some time now. Even before the pandemic, department stores, apparel stores. And so much so that we're seeing that they're spiking the amount of discounts that they're offering in order to move that merchandise.

Now, what's troublesome is that we're already seeing that the discounters are taking a lot of the market share from the other stores. Target telling us that they took about $5 billion in market share from the department stores, as now consumers have become accustomed to come to them even for things that are non-key essentials. Like just athleisure wear to work out at home.

So as a result, we can see that these can be permanent changes in consumer spending. Even as we go forward, even over six months from now into 2021, that we can see that consumers have learned to trust a fast and efficient way of shopping online and therefore also have gained customer loyalty to these stores, like the discounters. They've learned to trust them. And therefore we can continue to see these stores outperform the other brick and mortar stores that have been struggling for some time.

JULIA LA ROCHE: And, you know, as folks continue to stay at home, I can just tell you, at least, anecdotally, one of the trends is probably improving your home space and where you live. What are you seeing as it relates to those kinds of companies, and are they poised for a breakout move in 2021?

JHARONNE MARTIS: Well, it's interesting, because for this holiday season, we're already seeing that a lot of them are profiting from the fact that consumers are staying at home. There's a lot of uncertainty still that looms for 2021, and consumers don't know whether they're going to be at home or go back to the office. But right now we're seeing that the biggest winners in the space are the home improvement. Lowe's and Home Depot have received a boost from do it yourself projects. Consumers are finally at home and they're picking up those projects that they had been procrastinating on for so such a long time.

As a result, they're also trying to improve the stay at home experience. And because of the nesting theme that we're seeing, they're buying new furniture. Williams-Sonoma, the Lovesac, Havertys Furniture, and even Restoration Hardware are seeing very strong comps for the holiday season. And this is impressive. It's not impressive just because of this factor. It's also impressive because they're facing difficult comparisons from a year ago and are still managing to post double-digit comps for the holiday season.

As we go into 2021, other sectors that are expected to continue to do well are, for example, the health and wellness sectors. Consumers have turned their houses into gyms and as a result, Dick's Sporting Goods, Vista Outdoors, they're all expected to continue to do well. Analysts polled by Refinitiv are very bullish on these companies. And even Nike and Lululemon have positive stock momentum in their favor.

JULIA LA ROCHE: Well, I can tell you this, I'm wearing Nike sweatpants right now. Jharonne Martis, Refinitiv director of consumer research. Thank you so much and happy holidays to you.

JHARONNE MARTIS: Happy holidays. Thank you for having me.