The U.S. Retail Holiday Season Grows 2021 to 2022: An Industry Forecast from Wells Fargo and the National Retail Federation
Christmas and other holiday sales are vital to the U.S. retail industry. It has been a strange few holiday seasons for customers, and retailers, with a ship-ageddon and near record inflation. After several years of disruptions, and amid an economy flirting with a recession, this holiday season has a lot riding on it.
According to an industry forecast, families will likely use credit cards and save money to buy gifts for loved ones this holiday season, even if they don’t skimp on them.
Retail sales for the combined November-December shopping months will grow between 6% and 8% this year compared with the 2021 holiday season, to between $942.6 billion and $960.4 billion, according to projections released Thursday from the National Retail Federation, the industry’s largest trade group.
“This year is very unique. Consumers are cautious. They’re dealing with inflation and tighter budgets impacting their ability to spend,” said Adam Davis, managing director at Wells Fargo.
The group said holiday online is expected to grow between 10% and 12% to between $262.8 billion and $268.6 billion.
Retailers have been doing a good job kicking off the holiday season earlier than usual this year, in some cases rolling out Black Friday-like promotions in early October. This has helped jump start holiday sales ahead of schedule and could support more sales increases in coming weeks..
That compares unfavorably with last year’s robust 15.1% increase, but this year’s expected slower growth is in line with where holiday retail sales were trending pre-pandemic.
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Gap with too many shirts and hoodies, Levi’s with too many jeans, and Kohl’s with fleece and pajamas were all examples. Nike has been discounting shorts, t-shirts and sandals, and Adidas and Under Armor have acknowledged their own inventory issues also.
Brian Ehrig is a partner at the consumer practice of the consulting firm Kearney. “We’re talking tops, bottoms, sleepwear — all of those products are really seeing quite a glut.”
In a given year clothing stores try to predict trends and order goods months in advance. The pandemic made that extra tricky. First, in a blink of an eye, lockdowns had millions of people trading their office clothes for sweatpants and house dresses. With shoppers staying home, malls emptied out and storied clothing chains tipped into bankruptcy.
A shopping boom followed. Retailers hit the gas pedal, ordering more and more. Then, the fairly sudden travel bonanza, in-person parties and the return to office meant everything changed – again.
Many disruptions have been seen in shipments from Asia. Remember last winter’s delays and shortages? Eager to avoid any repeat, many stores decided to take no chances with this year’s Christmas shopping demand, placing those orders even earlier than usual.
The senior research analyst at Telsey Advisory Group, says that no one wants to miss the holiday season. You have too much now that you’ve got it. That’s the dilemma.
Nike CFO Matt Friend said the company had a few seasons landing at the same time, as delayed shipments for spring, summer and fall seasons arrived too late just as holiday orders began arriving early.
“It added to a confluence of events,” Fernández says, “retailers getting some inventory late, orders that (they) didn’t really need, and then consumer demand slowing.”
Target, Kohl’s and other retailers say higher food and gas prices are discouraging people from discretionary purchases — with clothes rarely deemed a necessity.
Apparel prices have been rising more than other goods, but they are only 4% higher than they were a year ago and have fallen for the past two months. Spending at clothing stores rose about 3% in October compared to last year, and is expected to decline over the holidays.
The change in the consumer buying habits is what caught retailers off guard, according to Adam Davis, the managing director at Wells Fargo.
Does this mean that there are a lot of discounts for the holidays? Davis, Ehrig and Fernández all say, yes, very likely. People might decide they want more clothes. That’s a whole other thing.
Cohen said that the best deals are always in the last week before Christmas. But for the very best deals, he advises to wait until “right after Christmas.”
The Saturday before Christmas is usually the busiest shopping day of the year. Super Saturday is on December 17th this year, because Christmas Day is on a Sunday and Christmas Eve is on a Saturday. More than 158 million consumers are expected to shop that day.
Half of gift purchasing has been completed, according to the NRF. Drop-dead shipping deadlines are only eight days away, so people have more buying to do.
The final push is still unsure if consumers will show up in force. The start of the holiday shopping season was reported as slow by the government.
Davis said budgeting for travel and entertainment is cutting into the budgets of consumers.
Retailers are overstocked so all of these dynamics will benefit consumers. Retailers that have excess inventory to sell, and sell at any cost, will push this weekend because they want to start 2020 leaner and clear out of the debt if the economic situation gets worse.
It’s also costly for retailers to sit on an oversupply of merchandise for too long. Retailers who store merchandise in their own warehouse and distribution centers have a finite amount of space to work with, with some wiggle room to accommodate excess inventory. If there is a large amount of space that has to be used, costs will add up and it will take longer to clear out.
Also, unsold products lose value over time. If the trend has passed, savvy shoppers won’t buy last year’s style. Stores are then forced to heavily discount, which impacts profitability.
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Ross Steinman, a professor of consumer behavior at Widener University, said that he hasn’t seen anything like this in his 20 years studying the holiday season.
“Retailers are very nervous,” he said. “The clock is ticking and they know they have to maximize every opportunity now to get consumers to make purchases.”
You can expect to scoop up holiday perfume and cosmetics gift sets, toys, holiday decorations and decor, candles and artificial Christmas trees at pretty low clearance prices, said Davis. Heavy promotions should even extend to some electronics.
In the last year, retailers such as Walmart, Target, Gap and Macy’s have struggled with a oversupply of clothing. Prices for coats, sweaters, boots, scarves, hats and other winter clothing will probably be slashed deeper as chain stores prepare to start selling spring and summer merchandise in the New Year.
retailers want to start selling for the next big holiday, which is Feburary’s Day Stores need to pivot away from holiday merchandise and winter apparel in February, since they are setting up for spring merchandise.
But before you rush to bag New Year bargains, Davis offered this advice: “Check the return policy. The window was shortened from 30 to 60 days to 15 days.