Even though it’s only very early fall, it is beginning to look a lot like Christmas in many of the stores that we go. Santa must be anticipating a mad rush on limited supplies as multiple major retail chains already have their trees and trimmings out for sale.
Typically, late summer and early fall is when all the retail holiday predictions are published. The key words that are bubbling up in this year’s cloudy crystal ball are early, inflation, recession, discounts, and the continuing battle between physical and digital retail. Timing of the economic cycle will potentially lead to more winners than losers.
COVID-19 has moved to the rearview mirror and it has been replaced by financial headwinds. In fact, concerns related to COVID-19 have decreased significantly, from 52 percent (in 2021) to 16 percent this year, while the financial concerns have surged 153 percent. It is now time for my annual summary of those prognostications, along with my own thoughts for Retail Holiday Season 2022.
US Holiday Sales Projected to Increase, But…
Bain & Company forecast that retail holiday sales will increase 7.5 percent this year, above the 10-year average of 5 percent. However, when you factor inflation, real growth will range from 1 to 3 percent below the 10-year average.
Total sales will reach $915 billion this year, with 72 percent taking place in physical stores. Individuals with income ranging from $50K-$100K plan to spend more this year versus 2021, while higher income individuals ($100K+) have less confidence in their spending in 2022.
Comparable growth this year is tougher as last year Bain-defined holiday sales grew 13.2 percent, the highest in 30 years. Interest rate increases, higher debt, and ongoing supply chain challenges are additional microeconomic headwinds. Unemployment at only 3.7 percent in August, wages growing 4.4 percent in the same month, inflation increasing nominal growth, and cash/checkable deposits being 3.8X pre-pandemic levels are the bright spots.
There was a similar positive holiday forecast from Mastercard. Holiday sales excluding automotive are projected to increase 7.1 percent, compared to their reported growth of 8.5 percent in 2021. E-commerce growth continues to accelerate, reaching nearly 19 percent of total retail sales.
Mastercard predicts that physical store sales will increase 7.9 percent and reported that from January through August 2022 they represented 80 percent of total retail sales. Apparel and luxury lead the sales growth with 4.6 percent and 4.4 percent, respectively. Higher interest rates continue to have a negative impact on the US economy.
Salesforce.com projects that online global holiday retail sales will remain relatively flat reaching $1.12 trillion worldwide and $265 billion in the US. Digital sales will continue to dwarf pre-pandemic levels (up 55 percent globally and 61 percent in the US at a 30-year growth rate compared to 2019 sales).
Inflation will negatively impact spending worldwide. While online prices grow 7 percent compared to 2021, and 15 percent compared to 2020, consumers’ total online orders will drop 7 percent when compared to the 2021 holiday season (5 percent fewer in the US). Fully 10 percent of profits will be at risk this year because of increased costs from suppliers, labor, and transportation as they outpace retailers’ ability to pass onto consumers.
Good news on sustainability as the majority will seek this option this holiday season. Salesforce.com reports that despite this preference, only 23 percent of brands promote and offer sustainable options in the shopping journey.
Deloitte forecasts that retail sales are likely to increase 4 to 6 percent in 2022. Holiday sales will total $1.45 to $1.47 trillion during the November through January timeframe. In their analysis, this compared to 15.1 percent growth last year. E-commerce is also forecasted to grow 12.8 to 14.3 percent, reaching between $260 billion and $264 billion this holiday season.
The Other Retail Holidays Stats
Here are some other interesting and important statistics as we prepare for a successful holiday season:
- 59 percent of consumers are stressed about holiday spending due to inflation. The same survey indicated that shoppers plan to spend less on gifts this year, with 73 percent saying they are watching their spending more closely in 2022.
- A CNBC poll indicated that more than half of consumers are either somewhat or very concerned about staying within their holiday spending budgets and 80 percent expect to be affected by inflation. 52 percent of respondents to this survey also said it will be harder to afford holiday gifts this year.
- Lots of indicators from surveys that consumers are shopping early. 77 percent said they purchased holiday gifts during Amazon Prime Day and other competing events offered by retailers in July. This is the earliest statistic that I have seen, but I can confirm from my own households, as we are buying much earlier.
- Digital and loyalty will be just as critical this year. Only 4 percent of shoppers did not use digital channels last year. 61 percent of consumers joined a loyalty program to receive a discount during the 2021 holiday season.
- Discounting is expected to continue into the holiday season with 73% of retailers telling KPMG that stores will have more promotions and 21% stating they plan to be ‘more’ promotional.
- Even as retailers project a positive holiday season, as 92 percent expect a recession in the near future. 81 percent expect it to be one year or less. To prepare, 52 percent plan to seek cuts to indirect expenses and 42 percent would invest more in loyalty, reduce direct expenses, and inventory. 56 percent expect to be stuck with excess inventory after the holidays.
- 61 percent of consumers anticipate spending more or the same on shopping for themselves and their homes for holidays in 2022. 94 percent plan to leverage experts to help navigate rising costs with 56 percent wanting to know where they can find good deals and 40 percent seeking product reviews to match their needs. Creators are 4X more influential to consumers than celebrity posts and also ranked above social ads.
- 48 percent of consumers are likely to purchase a product directly from TikTok while 65 percent have purchased from a streaming platform. One in four US and UK shoppers said they would leave a site if shipping options are limited or they don’t offer a buy-online-pickup-in-store (BOPIS) option.
- 60 percent of digital orders are now influenced by physical stores. Salesforce.com predicts that retailers with physical stores will grow online sales at a rate of 1.5 times faster than those without.
According to E-marketer the 2022 holiday season outlook is solid, but retailers will need to adapt to a fundamental realignment of the shopping season. Two seasons of pandemic-driven holiday shopping will result in lasting changes to the holiday promotional calendar and reset consumers’ expectations around when to shop for the best deals. The 2022 holiday season will be longer and flatter, with less concentrated spending during the Cyber Five period.
As Caila Schwartz, Salesforce director of consumer strategy and insights, said, “For retailers 2022 is about playing the long game. Economic challenges and shifting consumer preferences mean that leading with a data-driven strategy will be critical to reacting to conditions in real-time. And while we can’t stop inflation, we can recession-proof our businesses by improving profitability and solving for operational inefficiencies.”
The future of retail includes strong brands delivering immersive consumer experiences which increasingly will be digitally influenced. This holiday season will severely test our execution in responding to the economic headwinds. Winning retailers will focus on loyalty to engage consumers for this and many more profitable holiday seasons to come.
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