NEW YORK (AP) – Small businesses are stocking the shelves early this holiday season and waiting to see how many gifts inflation-weary shoppers feel like giving.
Holiday shopping was relatively strong during the past two years as shoppers flocked online to spend, aided by pandemic stimulus dollars. Sales in November and December have been averaging roughly 20 per cent of annual retail sales, according to National Retail Federation, making the holiday season critical for many retailers.
This year, small businesses are bracing for a more muted season, as some Americans spend more cautiously. AlixPartners, the global consulting firm, forecasts that holiday sales will rise between four per cent to seven per cent, far below last year’s growth of 16 per cent. With inflation running above eight per cent, retailers would see a decrease in real sales.
To prepare, owners say they’re ordering inventory earlier to avoid the supply-chain snags that frustrated them the past two holiday seasons and to draw in early birds. They’re stepping up discounts as much as they can in the face of their own higher costs. And owners also hope more people will shop in stores and holiday markets after doing more of their shopping online during the pandemic.
CEO Max Rhodes of Faire, an online marketplace used by small businesses to sell their wares wholesale as well as buy goods for retail shops, said he’s seeing earlier ordering from merchants who for two years had trouble getting enough holiday inventory stocked in time for year-end festivities. Stores faced shortages of everything from holiday décor to gift items as COVID-19 lockdowns forced factories to shut, costs rose and fewer shipping containers and truckers were available – all causing delivery snarls.
A study for the Council of Supply Chain Management Professionals by global consulting firm Kearney found United States (US) business logistics costs surged 22.4 per cent in 2021 to USD1.85 trillion.
“There’s a bit of a hangover from that, a bit of fear,” Rhodes said. While it’s too early for sales data, the term “Christmas” was the most searched for term on the site in mid-September. That’s two weeks earlier than last year, and eight weeks earlier than 2020, Rhodes said.
“The one thing we’re certain of is it’s not going to be predictable… We really don’t know what to expect and our retailers feel the same way,” Rhodes said .
Mat Pond operates The Epicurean Trader in San Francisco, including four brick-and-mortar stores, an online shop and a corporate gift basket business. In past years, he started building inventory in November, but this year he’s already stocking up on items such as gourmet food, chocolate and giftware. He’s seeing corporations order holiday gift baskets earlier as well.
“Everyone’s planning ahead,” Pond said. “I think everybody’s learning from the past two years.”
While the pandemic’s economic impact has subsided somewhat, consumers are now being tag-teamed by high inflation and rising interest rates. Overall, spending has held up, although some Americans have been forced to pull back on discretionary items. Any decline can be meaningful because consumer spending makes up 70 per cent of economic activity.
Hannah Nash, the owner of the online jeweller Lucy Nash, expects sales of her earrings, bracelets and other jewellery to slow after two years of strong growth. The main culprit: inflation.
“There is less money going around to the average person and we expect their living expenses to impact how much they can spend on holiday shopping,” Nash said. Nash also expects more people to shop in stores during these holidays.
She started her business, based in Indianapolis, during the pandemic, when online shopping boomed. The percentage of total retail sales done online jumped from 11.5 per cent in 2019 to 17.7 per cent in 2020, then rose again to 18.8 per cent last year, according to the Mastercard SpendingPulse, which tracks all kinds of payments, including those by cash and debit card.
Nash is stepping up discounts and offering bundles to attract shoppers: Her plans include a 15 per cent discount for new customers this year, up from 10 per cent, starting in November. And she’ll offer bundles of products that are about 20 per cent cheaper than buying items separately.
Major retailers such as Amazon and Walmart are also offering holiday deals to cash-strapped Americans earlier this year. Amazon held a two-day discount event on Octotber 11-12 where the average order was USD46.68, USD13 less than what shoppers spent during the company’s Prime Day sales event in July, according to the data group Numerator.
Some business owners are hoping to take advantage of any shift to shopping in holiday markets and in stores.
Kimberly Behzadi operates Read It & Eat Box in Buffalo, New York, which sells themed boxes with food and a book in each box. She started the business in 2020, during the pandemic. She has an online shop but is hoping the return of holiday markets to full capacity will boost sales. She depends a lot on the holidays – 40 per cent of her annual revenue comes between October and December.
She’s planning on being at six markets this year, with two more applications pending.
“Last year, holiday markets were still limited by the necessary safety protocols for COVID-19,” she said. “This year, gratefully, we are able to attend and sell at more holiday markets locally, so my expectation is to double my holiday revenue this year.”
Behzadi also plans on being more promotional.
“With inflation rates high this year I expect consumers to be looking for deals, so I have adapted my holiday strategy to include more bundles and deals,” she said. She’s offering a USD60 box that’s bundled with a blind-date book worth USD25 for Black Friday, for example.
Mariana Leung-Weinstein sells jam and marshmallows and other farm-inspired gifts at about 25 stores via her Wicked Finch Farm brand in Pawling, New York that she started in 2019. She’s focussing on stocking up in stores in case online sales slow.
“I expect people will enjoy seeing and touching things in person this time around, which puts more of my focus in getting my products in physical stores in time for the holidays,” she said.