Consumer habits spell challenging 2023 holiday season
November 28, 2023
The holiday season is not just a time of joy and celebration; it’s a crucial period for retailers, marking a significant portion of their annual revenue. Depending on the sector, this festive period can contribute up to 40% of a retailer’s revenue. The stakes are high, and as the holiday season approaches, retailers are gearing up to make it a success. With much of the transport industry connected to retail partnerships, the fate of the two sectors is tied closely this holiday season.
For many businesses, the holiday season can be a make-or-break scenario. This is evident in the unfortunate trend of retailers declaring bankruptcy each January. The reason behind this timing is strategic—the holiday season injects a substantial amount of cash flow into their businesses. This influx allows them to repay creditors, settle outstanding debts, and, of course, cover legal fees. The importance of the holiday season to the retail industry cannot be overstated.
“The holiday season coming up is expected to be a little slower than last year,” says Dan North, Chief Economist at Allianz Trade North America. “There are always a number of estimates, but one of the ones that we like to watch comes from the National Retail Federation.”
As we approach the end of the year, industry experts are closely following the National Retail Federation’s estimates for holiday sales growth. While last year saw a robust 7% increase, the forecast for this year suggests a more modest growth of 4% to 6%. However, when factoring in the current inflation rate of 3.7%, the net growth appears lukewarm. Consumers may find themselves paying more for fewer items, a challenging prospect for both retailers and shoppers.
Will uncertainties in consumer spending and the labor market lead to holiday chaos? Check out the latest episode of the Stay In Your Lane Podcast for the full economic update.
One perennial challenge for retailers is managing inventory effectively during the holiday season. Holiday ordering decisions, often finalized by August, require careful consideration. Ordering too much of a particular item risks overstocking, while underestimating demand can result in missed opportunities and disappointed customers.
The concept of “seasonal creep” is gaining prominence in the retail industry. Traditionally, holiday shopping kicked off with Black Friday and extended through December. However, recent trends indicate an earlier start to the holiday shopping season, with November and even October becoming fair game for discounts and promotions. Retailers are capitalizing on this shift in consumer behavior, strategically placing holiday items on shelves well before the calendar hits December.
“Last year, shoppers were holding on because they knew that the longer they waited, retailers with excess inventory were going to have to start marking stuff down,” North explains. “It could be different this year, but shopping habits are obviously changing.”
Anticipating a potentially slower holiday season, retailers are bracing for an “early and done” scenario. Shoppers, aware of potential discounts as the season progresses, may opt to complete their shopping earlier. This trend could redefine the holiday shopping landscape, impacting both sales patterns and inventory turnover.
The economic forecast for the upcoming quarters suggests a significant slowdown, with indicators pointing to flat growth for the next three quarters. While labor reports may initially appear positive, historical data indicates that the labor market tends to lag behind other indicators, making it an unreliable predictor of economic health.
In the face of these challenges, retailers need a reliable partner in the supply chain to navigate the complexities of the holiday season. Triple T Transport understands the importance of timely and efficient Third Party Logistics, especially during peak seasons. As the retail landscape evolves, Triple T Transport remains committed to helping businesses adapt, thrive, and deliver holiday cheer to consumers worldwide through a wide range of superior service offerings.
The holiday season is a dynamic time for the retail industry, marked by challenges and opportunities. With strategic planning, innovative solutions, and a forward-looking approach, retailers can weather the storm and make the most of this critical time of year.