Small businesses brace for cautious holiday shoppers

Small businesses are stocking shelves early this holiday season and waiting to see how many gifts inflation-weary shoppers are itching to give.

Holiday shopping has been relatively strong over the past two years, as shoppers flocked to spend online, helped by pandemic stimulus dollars. Sales in November and December averaged about 20% of annual retail sales, according to the National Retail Federation, making the holiday season a critical one for many retailers.

This year, small businesses are bracing for a quieter season as some Americans spend more cautiously. AlixPartners, the global consultancy, forecasts that Christmas sales will increase between 4% and 7%, well below last year’s 16% growth. With inflation above 8%, retailers would see a decline in real sales.

To prepare, owners say they are ordering inventory earlier to avoid supply chain hurdles that have frustrated them the past two holiday seasons and to attract early risers. They are increasing discounts as much as they can in the face of their own higher costs. And owners also expect more people to shop at stores and Christmas markets after making more purchases online during the pandemic.

Max Rhodes, CEO of Faire, an online marketplace used by small businesses to sell their wholesale goods and buy goods for retail stores, said he’s seeing past orders from merchants who for two years struggled to get enough holiday inventory. in time for Christmas. . Stores faced shortages of everything from Christmas decorations to gift items, as COVID-19 shutdowns forced factories to close, costs rose and fewer shipping containers and trucks were available, all of which led to delivery problems. .

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A study for the Council of Supply Chain Management Professionals by global consulting firm Kearney found that US trade logistics costs rose 22.4% in 2021 to $1.85 trillion.

“There’s a little bit of a hangover about it, a little bit of fear,” Rhodes said. While it’s too early for sales data, the term “Christmas” was the most searched 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 sure of is that 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, which includes four physical stores, an online store and a corporate gift basket business. In previous years, he started building inventory in November, but this year he’s already stocking up on items like gourmet food, chocolate, wine and gift items. He’s also seeing corporations order holiday gift baskets earlier.

“Everyone is planning ahead,” Pond said. “I think everyone is learning from the last two years.”

While the economic impact of the pandemic has eased somewhat, consumers are now being hit by high inflation and rising interest rates. Spending has generally held up, though some Americans have been forced to withdraw discretionary items. Any decline can be significant because consumer spending accounts for 70% of economic activity.

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Hannah Nash, owner of online jewelry store Lucy Nash, expects sales of her earrings, bracelets and other jewelry to slow after two years of strong growth. The main culprit: inflation.

“There’s less money going around for the average person and we expect their living expenses to affect how much they can spend on holiday shopping,” Nash said.

Nash also expects more people to shop in stores this holiday season. He started his Indianapolis-based business during the pandemic, when online shopping skyrocketed. The percentage of total retail sales made online jumped from 11.5% in 2019 to 17.7% in 2020, then rose again to 18.8% last year, according to Mastercard SpendingPulse, which tracks all types of payments, including cash and debit card payments.

Nash is ramping up discounts and offering bundles to lure shoppers: Its plans include a 15% discount for new customers this year, up from 10% starting in November. And it will offer product bundles that are about 20% cheaper than buying items separately.

Major retailers like Amazon and Walmart are also offering Christmas deals to cash-strapped Americans earlier this year. Amazon held a two-day discount event on October 11 and 12 in which the average order was $46.68, $13 less than what shoppers spent during the company’s Prime Day sales event in July, according to the Amazon. Numerator data group.

Some business owners hope to take advantage of any change to shop at Christmas 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 store but hopes the return of the Christmas markets to full capacity will boost sales. It depends a lot on the holidays: 40% of its annual income is obtained between October and December.

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She plans to be in six markets this year, with two more applications pending.

“Last year, the festive markets were still limited by the necessary security protocols for COVID-19,” he said. “This year, fortunately, we are able to attend and sell at more Christmas markets locally, so my expectation is to double my Christmas income this year.”

Behzadi also plans to be more promotional.

“With inflation rates high this year, I expect consumers to be looking for deals, so I’ve adapted my vacation strategy to include more packages and deals,” he said. She’s offering a $60 box that’s bundled with a $25 blind date book for Black Friday, for example.

Mariana Leung-Weinstein sells booze-infused marmalade and marshmallows and other farm-inspired gifts in about 25 stores through her Wicked Finch Farm brand in Pawling, New York. which started in 2019. She is focusing on stocking up in stores in case online sales slow down.

“I hope people enjoy seeing and touching things in person this time, which makes me more focused on getting my products into physical stores in time for the holidays,” he said.

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