It’s only September and thoughts of a hopefully happy retail holiday season are already swirling through my mind. Looking back to last year, for the November-December season, retail sales in US grew 5.3%, to $926.3 billion, falling short of the National Retail Federation’s (NRF) forecast amid continuing inflation and high interest rates. While holiday growth was less than expected, for the year US retail sales grew 7% to $4.9 trillion, meeting NRF’s forecast of 6% to 8% growth for the year.
For 2023, NRF has tempered US retail growth prospects to between 4% and 6%, equaling $5.13 trillion to $5.23 trillion. The good news for the US economy is that according to JP Morgan, it grew 2% to 2.4% in the first six months this year and is expected to continue to grow at 2% in the second half of 2023.
The elephant in the room—inflation—remains, which is currently heading in the right direction. Core goods inflation has dropped from 12% to 0.8% over the past year, while core services inflation has only slowed to 6.1% in July from its peak of 7.3% in February. JP Morgan expects gradual improvement with inflation over the coming months, though a return to the Fed’s targeted 2% could take until late 2024. For the first half of 2024, US GDP growth is projected at only 0.4%.
An additional headwind this holiday season is high credit card debt. In the US, consumers are now carrying $1 trillion in credit card debt with the average balance at about $6,000, and more than half of credit card holders worrying about paying their debts. While higher debt, depleted pandemic savings, and inflation are introducing risk of a recession, at a global level, retail will remain resilient.
With all this mixed news, what can we expect for the 2023 holiday season? What are the key trends that will drive shopping behavior in this important shopping time of the year?
Will We Shop Until We Drop This Holiday Season?
According to forecasts from eMarketer, overall US retail spending this holiday season will increase 4.5% to over $1.3 trillion, with e-commerce accounting for almost 20% and contributing to 48.5% of incremental spending gains.
Last year, a survey by Google found that by mid-October, holiday shoppers globally had on average 21% of their holiday shopping complete. Retailers should expect the same early start to the shopping stampede this year.
According to Salesforce, 2023 online holiday sales will be flat compared to last year, reaching $1.19 trillion globally. Some interesting new trends are emerging this year that foreshadow more disruption ahead.
According to Salesforce, for 2023:
- Both generative and predictive artificial intelligence (AI) will influence $194 billion in global holiday shopping spend.
- 81% of shoppers report they have stopped purchasing from a brand or retailer after one bad return experience. For this holiday season, poor return experiences, policies, and processes will mean that 21% of online orders are at risk of being lost.
- Those new services that expanded during the pandemic are here to stay. In the 2022 shopping season Buy-On-Line-Pick-Up-In-Store (BOPIS) drove one in five online orders and that surged to over one in three orders after the shipping cutoff dates. For 2023, BOPIS will drive $28 billion in incremental global stores sales.
- Social media advertising will drive ten times more online holiday shopping visits than traditional marketing.
- Resale products are growing faster than ever for the 2023 holiday season; 17% will be resold items, saving 32 billion pounds of waste from going into landfills.
Many of these trends will apply to in-store sales as the retail industry continues to be disrupted by new innovative technologies.
The Physical Store Is Still The Center of Retail
Prior to the pandemic, remember all that industry noise about the ‘retail apocalypse’ which included predictions that all shopping would move online and physical stores would severely decline. The reality once again is that in the US, for the 2023 holiday season, 80.4% of sales will take place in physical stores.
Brick-and-mortar stores remain critical to the to the retail industry mix, but they are also changing. Unified commerce across all channels continues to increase in its importance.
According to GWI data, 7 in 10 shoppers explore products online before making a final purchase decision in a physical store. “Online shopping hasn’t entirely lost its luster, but consumers aren’t prepared to abandon physical stores. Going forward, the growth gap between e-commerce and overall retail will be about 5 percentage points.”
The very good news is that the global retail industry will remain resilient for the foreseeable future. In 2023, it will cross over $30 trillion and by 2026, the projections are for 76% of shopping to be in physical stores.
Wish you all a safe, healthy, and prosperous 2023 shopping season and an even better 2024 with technologies continuing to improve both commerce and our lives.
