Contents
- 1 Fewer deals and shipping delays: Here are some early predictions for the holiday season : Rashtra News
- 1.1 Supply chain complications will lead to delays
- 1.2 Hiring challenges will compound retailers’ woes
- 1.3 Deals? Don’t expect to see as many
- 1.4 Shoppers are heading back to stores
- 1.5 Hurricane Ida could be a spoiler
- 1.6 Shoppers will be disappointed: Successful retailers will figure out how to manage through it
Fewer deals and shipping delays: Here are some early predictions for the holiday season : Rashtra News
A person wears a face mask while carrying shopping bags in Columbus Circle on November 28, 2020 in New York City.
Noam Galai | Getty Images
Shoppers have shown an eagerness to spend on new clothes, electronics and jewelry, in recent months — and retail analysts are betting that splurging will fuel the holiday season.
Holiday forecasts from three different firms have predicted a sharp jump in year-over-year spending. Sales in November and December are expected to grow 7% compared with a year ago and reach $800 billion, according to Bain. Deloitte sees holiday retail sales climbing 7% to 9%, better than the 5.8% increase it tracked in 2020. A forecast by Mastercard SpendingPulse said holiday retail sales should rise 7.4% from a year earlier and climb 11.1% on a two-year basis, fueled by a rebound in in-store shopping and persistent consumer demand.
Retailers echoed similar expectations. Home Depot, for instance, said it sold out of an early release of Halloween decorations — an indicator that shoppers may have a big appetite for Christmas decorations, too.
Dick’s Sporting Goods said Monday it would hire the largest number of seasonal associates in the company’s history for the 2021 holiday season.
Walmart CEO Doug McMillon said the pandemic may inspire families to look forward to the holidays even more. The big-box retailer said early this month it would hire 20,000 supply chain employees, such as freight handlers and lift drivers, to keep up with demand during the busy shopping season and beyond.
“Customers, families want to celebrate Christmas,” McMillon said at a virtual conference hosted by Goldman Sachs. “They want to have a Thanksgiving, and if this situation with the virus enables it — or maybe even if it doesn’t — we’re going to see strong demand through the rest of the year.”
Here’s an early look at what shoppers and retailers may see this holiday season, based on CNBC’s interviews with retail analysts and comments from industry executives:
Supply chain complications will lead to delays
Industry-wide supply chain challenges that include factory shutdowns, chip shortages and port congestion are expected to last through the holidays and well into next year.
The pressures threaten to spoil the holiday season for families that don’t shop soon enough. Many phases of the manufacturing and delivery processes are taking longer than normal. Consumers can expect packages to take more time to get to their doorsteps, as delivery carriers including UPS and FedEx work through their own bottlenecks.
Businesses, meantime, are trying to ensure there is enough merchandise on hand to meet the predicted heightened holiday demand. Most categories of goods, from consumer electronics to toys to sneakers, are being impacted in some way.
Gap chief financial officer Katrina O’Connell said Thursday at the Goldman Sachs Global Retailing Conference that the apparel company expects the supply chain issues to persist deep into 2022.
“We’ll do our best to get units here as fast as possible,” she said. “The inventory might be lumpy.”
Lululemon’s solution has been to charter extra air freight in an attempt to avoid backlogged ports. This is a strategy a number of retailers are employing, but it adds to transportation costs.
Salesforce estimates the costs of goods sold for U.S. retailers will rise by more than $223 billion this holiday season from a year ago, driven by jumps in freight, manufacturing and labor costs.
Hiring challenges will compound retailers’ woes
Retailers want to move goods quickly from ports to stores to customers’ homes, but that will be hard if they’re not fully staffed. Aaron Cheris, head of Bain’s Americas retail practice, said the tight labor market is the single-biggest factor to watch this holiday season.
There are about 10 million job openings in the U.S., roughly 1 million more than unemployed people in the U.S., according to data from the Department of Labor and job placement site Indeed. Several million workers have stayed on the sidelines for reasons that range from child care challenges to a lack of needed skills.
Across the entire supply chain, companies will be stretched thin as they try to limit out of stocks and speed up delivery times, Cheris said. That means they will be in a tough spot if shoppers insist on getting goods delivered or have a strict timeline.
An employee outside a Target store in Clifton, N.J.
Adam Jeffery | CNBC
“For the last-minute purchases that I really wanted to get before Christmas, am I going to bother if you tell me the delivery window is eight days and it’s 3 days before Christmas?,” he said. “They may say, ‘Forget it. I’m not going to bother.'”
Retailers will miss out, too, if they don’t have salespeople available to find or suggest items and make sure popular purchases are quickly replenished in aisles, he said.
Deals? Don’t expect to see as many
If you’re expecting a good deal or a high-demand item this holiday season, you better shop early.
Companies have less of a reason to put items on sale, as supply chain snafus tighten inventories. Instead, promotions will likely be strategically placed on goods that retailers have in excess stock. And that might not be something on top of your holiday wish list.
“There will always be sales, but they won’t be as deep and as plentiful,” Cheris said. “As a retailer or a brand, I don’t have the same motivation when I know I’m going to stock out.”
Deals will start and end earlier, according to Deloitte vice chair of the U.S. retail and distribution Rod Sides. He expects many consumers’ holiday shopping to begin before Thanksgiving this year and finish weeks ahead of usual. It could make days like Black Friday less important, he said, as shoppers expect they will have to pay up — regardless of the deals extravaganza — for certain coveted toys and gaming consoles.
“The consumer has woken up to some of the challenges in the supply chain,” Sides said. “There will be certain categories where retailers will have plenty of stock. And there will be other categories where they don’t … where people want to buy. And those are going to be the big challenges.”
Many retailers, including Macy’s and Dick’s Sporting Goods, have reported higher profits as they dole out fewer promotions.
At the Goldman conference, Macy’s chief financial officer Adrian Mitchell said markdowns have been lower than historical levels this year, in part because of rising costs due to inflation.
Macy’s said it is less concerned about having enough stock in jewelry, beauty items and home goods during the holidays. But it is being more cautious about apparel and footwear, due to sourcing constraints.
Shoppers are heading back to stores
Shoppers are expected to get off the sofa and head back to the mall, analysts said. That will boost spending as people are more likely to make impulse purchases when they shop in person. It’s a strong reversal from last year, when the pandemic inspired a shift toward e-commerce.
Mastercard SpendingPulse’s annual holiday forecast, which is based on aggregate sales activity in the Mastercard payments network, sees in-store sales growing 6.6% year over year, excluding autos and gasoline.
Mastercard senior advisor and former Saks CEO Steve Sadove said luxury goods and jewelry are the top two categories sending people back to stores.
“There is a pent-up demand, the savings rate is high, the stock market is performing extremely well, and the consumer wants to get out and shop,” Sadove said in an interview Monday with CNBC’s Courtney Reagan. “The consumer wants to get back into the mall.”
Apparel sales — both in stores and online — are expected to grow 46% from Nov. 1 to Dec. 24 compared with the year-ago holiday period, according to Mastercard SpendingPulse. Jewelry sales are forecast to surge 59%. Luxury sales, excluding jewelry, are predicted to rise a whopping 93%, MasterCard said.
Hurricane Ida could be a spoiler
Hurricane Ida flooded homes and damaged cars. AccuWeather estimates the storm caused more than $95 billion in damages, which makes it the seventh-costliest hurricane to hit the U.S. since 2000.
For some families, that extreme damage will mean thousands of dollars of unplanned expenses that range from repairing a roof to replacing washers and dryers. In the near term, the purchases could boost sales at home improvement retailers, such as Home Depot and Lowe’s, or appliance sellers like Best Buy. But Bain’s Cheris warns it might bust the budget for holiday gifts.
“That’s another place where my dollars are going to go where they may not have normally gone,” he said.
Shoppers may also put their money toward other channels, such as booking trips and hotel rooms at a higher rate, he said. Travel websites and hotels are reporting that the pace of bookings for December has been robust, and in many cases it is outpacing the levels seen in 2019. People are planning far in advance, which could drive up prices for procrastinators. The stepped up spending on travel could mean less money on tangible items.
Shoppers will be disappointed: Successful retailers will figure out how to manage through it
Shoppers are more likely to face headaches such as impossible-to-find items, weeks-long shipping delays and unattended cash register this holiday season, and that will shape how they feel about retailers, according to Bain’s holiday report.
Cheris said companies must find a way to turn around a frustrating or disappointing experience, so they don’t permanently lose a customer. They can also try to get ahead of those moments to blunt the impact, such as broadening a delivery window to leave buffer time to having substitute items to suggest if popular ones are unavailable.
“Those are sort of the moments of truth that really matter,” he said. “Those are the emotional moments that if you can find a way to do better on those, that’s what makes a big difference.”
( News Source :Except for the headline, this story has not been edited by Rashtra News staff and is published from a www.cnbc.com feed.)
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