Holiday Season Not Expected to Bring Needed Revenues

In a world that seems to change, sometimes drastically on a monthly basis, business owners are waiting with bated breath to see what this year’s profit margins hold.

The retail holiday season has gone through several peaks and valleys beginning with the Covid-19 pandemic. With another unpredictable holiday season soon approaching business owners have once again found themselves on unsteady ground.

At the beginning of the year, it seemed promising to anticipate a return to normalcy by the holiday season with the easing of supply chain pressures. However, this year has traversed to be anything but normal.

Where collective anxieties revolved around the pandemic in 2020 and supply chain issues in 2021, this year the concern is around the price of goods and services.

Evidence of consumers’ struggles can be seen in credit card debt which has ballooned, posting the largest year-over-year percentage increase in more than two decades according to data upturned by the U.S Census Bureau.

According to an AlixPartners survey, 39% of consumers plan to buy at least half of their holiday purchases on sale and 40% said they plan to buy more affordable brands.

“Consumers were comfortable with their expenses last year, they had pretty substantial wallets thanks to government subsidies. The sentiment has shifted drastically this year, relative to the years prior … and that’s mostly driven because of economics. Inflation has impacted the affordability of items, and consumers are very concerned about the current economy and where the economy will be a year from now,” said Alexa Driansky, a director in AlixPartner’s retail practice.

With more price-sensitive consumers, the growing trend amongst major retailers such a Walmart, Amazon and Target is to extend their holiday sales in hopes to entice customers to buy.

Katie Thomas, who leads Kearney Consumer Institute, said “we went from supply chain issues last year to dealing with rising inflation this year, in response to this retailers are trying to give people that longer window to shop. The length of the holiday season — I think that will be sticky for at least a few more years.”

Looking through the consumers’ point of view this may come as good news.

With the extension of the holiday season Bill Krogstad, a managing director for FTI Consulting’s retail and consumer products practice explained “there’s an excess inventory on the market, so we’re going to see a lot of discounting and bargain shopping.”

Still, Thomas cautioned that, while “in many ways the consumers are at an advantage when it comes to the extension of the holiday season, in some instances they may not be. They are positioned at an advantage because, in theory, it is a longer shopping window, but you, as the consumer, never really know when to pull the trigger.”

Along with the extension of holiday shopping, businesses are expecting to see a sharp increase in digital shopping.

According to AlixPartners, 40% of survey consumers plan to do the majority of their holiday shopping online, which is up 10 percentage points from its pre-pandemic survey in 2019.

In addition, roughly three-fourths of consumers will research a product online before buying according to Driansky. This correlates to consumers relying less on brick and mortar businesses and their employees for information and recommendations.

“That is something that is here forever. When consumers can now have things shipped to them for free, they really prefer the convenience of that. There’s really no reason for them to use curbside pickup or avenues such as that, unless they need to pick something up last minute,” Driansky explained.