Much has been written about the overstocking faced by large retailers such as Walmart (NYSE: WMT) and target (NYSE: TGT) and online-only outlets such as Amazon (NASDAQ: AMZN), but that didn’t hurt the outlook for holiday sales, it just lowered expectations.
Deloitte forecast holiday sales in September this year will grow by 4-6%., totaling between $1.45 trillion and $1.47 trillion between November and January. This follows an increase of 15.1% in 2021. Deloitte also predicts that e-commerce sales will grow 12.8% to 14.3% year-over-year to reach between $260 billion and $264 billion this season. This year, compared to previous seasons, will be quieter, but it can still create a festive mood.
“The lower projected growth for the 2022 holiday season reflects the slowing economy this year,” he explained. Daniel Bachman, Deloitte’s US economic forecast. “Retail sales are likely to be further impacted by reduced demand for consumer durables, which have been a major part of pandemic spending. However, we expect higher spending on consumer services such as restaurants as the impact of the pandemic continues to diminish.”
He added that “inflation will also help boost dollar sales, although retailers will see less growth in sales.”
Now, a report has emerged that suggests small and medium-sized businesses may be particularly benefited this season.
Capterra, a business software company, surveyed 306 small and medium-sized retail businesses Holiday 2022 Retail Preparedness Survey to gauge their views on the season. While large retailers have plenty of inventory, supply chain issues over the past two years have made life difficult for small and medium-sized businesses.
Inventory on hand
Among the key findings: 75% of small and medium-sized businesses believe they have the right amount of inventory, and 63% expect higher profits for the holidays compared to 2021. The amount of advertising on social networks will increase, with 61% of small and medium-sized businesses noting that they expect to increase their marketing spend on social. Forty-five percent expect to offer more holiday deals this year to entice shoppers struggling with inflation.
Small and medium-sized businesses are increasingly targeting Gen Z and Gen Alpha shoppers, anticipating that spending may be cut among older shoppers, but not among younger generations with young children, or among teenagers and young adults. Retailers targeting these age groups expect to see higher seasonal returns compared to 63% of those targeting millennials and 54% of Gen X and Boomer audiences.
In addition to increased social media spending, 85% of SMBs expect to increase holiday marketing spending through one or more channels, including e-commerce marketplaces and search engine optimization.
“From active inventory management to social media marketing, SMBs are doing everything they can to get clicks and traffic this holiday season,” said Molly Burke, senior retail analyst at Capterra. “Whether consumer spending supports SMB forecasts remains an open question, although most retailers remain confident they will enter 2023 with healthy holiday profit growth compared to larger retailers.”
Hybrid operations are more optimistic
Retailers with both digital and physical stores are more optimistic, with 68% expecting profits to grow this year, compared to 59% of e-only businesses and 51% of brick-and-mortar businesses. Among those businesses that operate both online and offline, 62% expect their online channels to perform better in 2021, while only 38% expect their stores to do the same the most.
“All this SMB optimism is extraordinary, given that experts expect nationwide retail sales to grow minimally, if at all, after adjusting for inflation, and Gartner finds that roughly a third of U.S. consumers will spend less during the holidays this year.” , – said Burke.
Buying inventory early can be a boon for small and medium-sized businesses. Learning from last year’s supply chain chaos, more SMBs ordered this holiday inventory earlier this year. Among those who were in time for the start of the season, 89% said they were in balance and only 3% said they were overstocked, compared to 67% and 8%, respectively, who ordered at the same time last year. year. Of those who have delayed a purchase, only 27% said they had a balanced inventory, 33% said they did not have enough, and another 33% were unsure of their status.
Even hoping for a good season, SMEs face headwinds. The survey found that more small and medium-sized businesses will be offering delivery discounts this year to try to compete with big brands – many of which offer free next-day and in some cases even same-day delivery.
Capterra noted that 55% of holiday shoppers do not want to pay for shipping, but SMBs continue to lag in this area, with just over half expected to offer free shipping. Only 16% of small retailers will offer same-day or next-day delivery. With online shopping and consumer appetite for lightning-fast delivery showing no signs of slowing down, fast last-mile logistics represents a much-needed growth area for smaller retailers in the near future.
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