Salesforce projects retailers will pay $223 billion extra for goods in the second half

Key Points
  • Salesforce's study also said retailers could see the labor market tighten later this year because of a 350,000 worker shortfall for the industry.
  • Consumers should expect to see higher prices, and many will be more willing to pay up for goods, said Salesforce's Rob Garf.
Shoppers carry bags of purchased merchandise at the King of Prussia Mall, in King of Prussia, Pennsylvania, December 8, 2018.
Mark Makela | Reuters

Retailers in the U.S. will spend $223 billion more in the second half of 2021 than in the same period in 2020, according to a Salesforce forecast released Tuesday.

The amount represents a 62% increase from last year. It's comprised of an additional $12 billion spent with suppliers, $48 billion more in wage expenses and $163 billion extra in logistics costs.

Salesforce VP and GM of Retail Rob Garf said consumers, in turn, should expect higher prices.

"Retailers will certainly take on some of the burden and consumers are going to feel it as well, but given the significant increase across the board from manufacturing to logistics to labor, it can't be all passed on to the consumer," he told CNBC.

"What we have found through the first half of the year though, even with inflation and the increase in the cost of goods sold, partly being pushed off to the consumer, we are all a willing participant," Garf added. "We're willing to spend a little more. I think there's enough momentum and positivity among people that they are willing to absorb the additional cost all the way through the holiday."

For the study, Salesforce said it tracked quarterly transactions of more 1 billion shoppers globally at brick-and-mortar and online retailers using first and third party data.

The forecast comes as trucking rates are at an all-time high — some 49% higher than 2020 and 83% higher than pre-pandemic times. Demand for e-commerce warehousing is also spiking as online buying booms.

Mastercard reported e-commerce increased 8% year over year in June and 95% over June 2019 levels. CBRE estimates for every $1 billion in retail sales an additional 1 million square feet of e-commerce warehousing is needed.

"Retailers are trying to figure out at what point does this inflation become an issue or demand destructive?" Oppenheimer retail analyst Brian Nagel said in an interview. "No one knows the answer to that. It's a moving risk."

Salesforce also forecasts U.S. retailers will experience a labor shortage of about 350,000 workers heading into November and the holiday shopping period. Garf said that will be a major catalyst pushing wages as much as 46% higher from a median of $13.02 for the holiday shopping peak in 2020 to $19 this holiday season.

However, Garf said retailers will expect more from employees, including inventory management, fulfillment of e-commerce deliveries and fulfillment of click and collect or BOPIS — buy online, pick up in store.

Salesforce research found retailers that offered curbside, drive-thru and in-store pickup options saw their sales increase by 54% year over year in the five days leading up to Christmas 2020, compared with 34% for retailers that did not offer those options. Garf expects those trends to continue this year due to cost savings for retailers and convenience for consumers.

"Retailers are saving on fulfillment because, for all intents and purposes, they're outsourcing the last mile to the consumer and the consumers are willing participants because we all experienced wanting to buy a product and it not being available, or us getting it two, three, four weeks after the date that it showed when we got our confirmation email," Garf said.

"There's an immediacy, convenience and safety aspect that still plays in, even as parts of the world are getting back online and getting back to some semblance of normal."