Despite economic challenges, “healthy” holiday sales expected

The holiday shopping season is upon us — as are survey results and expert predictions about what the next few months may hold for consumers and the retailers trying to woo them.

Although shoppers face inflation, tight budgets, high interest rates, and perhaps the need to start repaying their student loans — organizations like the National Retail Federation (NRF), Nerd Wallet, and Adobe are predicting that holiday sales may be more rosy than one would assume. However, based on its recent survey, Creditsafe says supply chain issues may hinder good tidings for some.

Here, we’ll take a look at recent predictions and how they may impact buyers, sellers, and the supply chain stakeholders supporting both.

Creditsafe: Cash flow, excessive inventory, and supplier issues may pose a threat

According to Creditsafe’s recently released report, “Economics of Holiday Sales,” some retailers and brands have back-end problems that may put a dent in holiday profitability.

In a description of the report for Chain Store Age (CSA), Senior Editor Dan Berthiaume said that among the 200 retailers and brands polled, 80% are relying on holiday sales to make up 40% of annual sales, but nearly half (46%) “either don’t have enough cash in their accounts to finance their holiday orders or are unsure if they do.”

Another problem? Excessive inventory.

According to the results, 78% of the respondents still have 50% of last year’s holiday stock hanging around, leading to increased costs for storage and maintenance.

In addition to issues like these, respondents indicated other worries that include:

And then there’s the sticky wicket of supplier solvency.

A vast majority (83%) of those polled said they’ve had to diversify their supply chains over the past year because suppliers had money problems or went bankrupt. With so many facing this issue, it would seem that checking suppliers’ credit might be a good idea. However, according to the survey, more than half (56%) of respondents said they don’t run credit checks on suppliers to make sure their finances are solid enough to fulfill holiday orders.

“It’s a positive sign that brands are setting ambitious goals for the holiday season,” Matthew Debbage, CEO of the Americas and Asia for Creditsafe reportedly said. “But achieving these goals doesn’t just depend on offering steep discounts and selling higher volumes. Other factors will play a major role, especially since it’s been a rough few years with a pandemic, recession, rising inflation, rising interest rates and decline in consumer spending.”

NRF: “Healthy” holiday sales anticipated

On a more positive note, the National Retail Federation (NRF) recently issued its predictions for the holiday months ahead, saying it expects consumers will lay out the dough — even in the face of persistent inflation.

In its November 3 announcement, the NRF forecasts that holiday retail sales during November and December will increase between 6% and 8% over 2021 to between $942.6 billion and $960.4 billion. In comparison, last year’s holiday sales jumped 13.5% over 2020, a record-shattering outlier influenced by pandemic spending. Over the past ten years, holiday retail sales have increased by an average of 4.9%, the NRF said.

“While consumers are feeling the pressure of inflation and higher prices, and while there is continued stratification with consumer spending and behavior among households at different income levels, consumers remain resilient and continue to engage in commerce,” NRF President and CEO Matthew Shay said. “In the face of these challenges, many households will supplement spending with savings and credit to provide a cushion and result in a positive holiday season.”

Although ecommerce is expected to continue to show gains, the NRF predicts there will also be a shift back to brick-and-mortar shopping and a “more traditional holiday shopping experience.”

“This holiday season cycle is anything but typical,” NRF Chief Economist Jack Kleinhenz said. “NRF’s holiday forecast takes a number of factors into consideration, but the overall outlook is generally positive as consumer fundamentals continue to support economic activity. …”

“The holiday shopping season kicked off earlier this year – a growing trend in recent years – as shoppers are concerned about inflation and availability of products,” Kleinhenz said. “Retailers are responding to that demand, as we saw several major scheduled buying events in October. While this may result in some sales being pulled forward, we expect to see continued deals and promotions throughout the remaining months.”

Of the many challenges retailers face, there’s one they have no control over: the weather.

“Weather, as always, plays a role in holiday retail sales,” the NRF said. “The National Oceanic and Atmospheric Administration is forecasting warmer-than-average temperatures for the Southwest, Gulf Coast and Eastern Seaboard, which cover a large swath of the U.S. population, but wetter and snowier conditions are expected for parts of the northern tier.”

In a November 2 NRF announcement about anticipated consumer spending over the holidays, Kleinhenz emphasized that even in the face of economic challenges, consumers are still in control.

“Consumers remain in the driver’s seat and are resilient despite headwinds of inflation, higher gas prices, stringent credit conditions and elevated interest rates,” he said. “We expect spending to continue through the end of the year on a range of items and experiences, but at a slower pace. Solid job and wage growth will be contributing factors this holiday season, and consumers will be looking for deals and discounts to stretch their dollars.”

“…the composition of spending from goods to services will also define holiday sales trends,” Kleinhenz said. “Service spending growth is strong and is growing faster than goods spending. The amount of spending on services is back in line with pre-pandemic trends.”

NerdWallet: Consumers plan to spend, but some may cut back

According to NerdWallet’s annual holiday shopping survey, consumers are intent on gift-buying, but some may trim their shopping due to inflation.

“Close to 222 million Americans (85%) plan to purchase gifts for friends and loved ones this holiday season, according to a new NerdWallet survey and analysis,” said NerdWallet senior writer Erin El Issa in her summary of the report. “They expect to spend $831, on average, or more than $184 billion on holiday gifts this year.”

Conducted online by The Harris Poll, the survey included more than 2,000 U.S. adults and found that 1,762 of them plan to purchase gifts this holiday season.

Key findings from the report include:

“Every year, holiday expenses can put a major strain on household budgets, and this year is especially challenging given rising prices and lingering debt,” said Kimberly Palmer, personal finance expert at NerdWallet. “Planning ahead by talking to loved ones about scaling back or finding other creative ways to spend less can help mitigate some of that stress.”

Adobe Analytics: October data confirms optimistic predictions

On November 9, Adobe released its first set of insights about online shopping, covering the pre-holiday season during the month of October.

“In advance of the big shopping days during Cyber Week, Adobe’s data shows that consumers are being strategic in managing their holiday budgets — taking advantage of early deals and leveraging Buy Now Pay Later, a flexible payment method that has seen strong traction this year,” Adobe said.

Adobe’s insights are powered by Adobe Analytics and provide a “comprehensive view into U.S. ecommerce by analyzing direct consumer transactions online.”

“The analysis covers over one trillion visits to US retail sites, 100 million SKUs, and 18 product categories — more than any other technology company or research organization,” Adobe said.

Key findings include:

“We continue to experience a challenging economic picture, where increasing costs for consumers has been seen across rising interest rates, inflation in food prices, resuming student loan repayments, and more,” said Vivek Pandya, lead analyst, Adobe Digital Insights. “Despite the uncertainty in the macro-environment, Adobe Analytics data has shown that the consumer remains resilient heading into the big holiday season and are embracing every opportunity to manage their budgets in more efficient ways.”

If you’d like to keep an eye on 2023 holiday shopping trends, Adobe Analytics provides “insights into seasonal retail trends — as they happen.”

“Each holiday season, we examine trillions of retail data points using Adobe Analytics to get a real-time look into consumer spending behaviors and to uncover emerging trends throughout the year’s busiest shopping period,” Adobe says.

You can check it out here: Adobe’s 2023 holiday shopping trends.