Holiday retail sales forecast based on September's sales figures
Retailers are bracing themselves for an uncertain holiday season, as high levels of inventory and inflation are expected to shape consumer behaviour and sales strategies.
In the past year and a half, inflation-adjusted retail sales have remained relatively stable. However, this year's holiday season is shaping up to be different, with retailers facing the challenge of managing high inventory levels and early holiday shopping.
The high inventory levels may lead retailers to scale back holiday orders to avoid surplus stock if demand softens. This cautious approach could result in a mix of cautious promotional strategies or discounting to clear inventory. However, there is a risk of overpriced inventory that may not sell well if consumer spending declines or macroeconomic conditions worsen.
Early holiday shopping trends can shift sales forward, providing more flexibility for retailers to manage inventory and reduce last-minute supply chain pressures. However, early shopping does not necessarily increase total holiday spending; it can spread out demand over a longer period instead of concentrating sales in November and December.
Consumer sentiment during this period has been notably weak. Over half of consumers expect to maintain spending levels from the previous year, and a significant portion plan to spend less. This conservative consumer spending outlook combined with tariff uncertainties and economic volatility suggests subdued overall retail growth.
The demand for the holidays is expected to be influenced by the desire to stretch strained budgets through early shopping. In fact, a quarter of holiday shoppers started shopping before September 30, and half are expected to start before October 31. Retail giants like Amazon and Target have already started their holiday sales in October.
Inflation remains high, with a September rate of 8.2%. Despite this, consumers are spending more on dining out, travel, and entertainment. However, the underperformance of electronics sales throughout the year is not a good sign for the Black Friday period. Electronics sales took a 9% dip in September, suggesting that shoppers are looking for bargains and value in the current economic environment.
The holiday period is characterised by uncertainty due to inflation and changes in consumer behaviour. Retailers are expected to work hard for gains during the holidays, including discounting and promoting. However, they need to carefully manage pricing and inventory to avoid losses from markdowns or unsold goods.
In summary, high inventory levels paired with early holiday shopping in 2022 are increasing uncertainty and pressure on retail sales. This could result in cautious selling with mixed effects on overall revenue due to reserved consumer spending and macroeconomic concerns. The September retail sales report provides clues about the holiday season, with retail sales rising 7.1% in September, excluding grocery, gas, and restaurants. Despite these challenges, demand remains intact, according to the National Retail Federation Chief Economist.
- The high levels of inflation, coupled with the current economic volatility, are causing retailers to be cautious in their holiday sales strategies.
- Despite the uncertainty brought about by inflation and changes in consumer behavior, the demand for dining out, travel, and entertainment appears to be strong this holiday season.
- With early holiday shopping trends in full swing, a quarter of holiday shoppers started in September, and half are expected to start before October 31.
- To manage high inventory levels, retailers may employ a mix of cautious promotional strategies or discounting to clear excess stock.
- The National Retail Federation Chief Economist suggests that demand remains intact, but retailers need to carefully manage pricing and inventory to avoid losses from markdowns or unsold goods.
- The retail industry is bracing for an uncertain holiday season, as inflation and changing consumer behavior are expected to have a significant impact on inventory management, sales strategies, and overall revenue.
