Early predictions require fewer bids and delays

Buyers have shown a willingness to spend on new clothes, electronics and jewelry in recent months, and retail analysts are betting that waste will feed the holiday season.

Holiday forecasts from three different companies have forecast a sharp jump in year-on-year spending. Sales in November and December are expected to grow 7% compared to a year ago and reach $ 800 billion, according to Bain. Deloitte sees holiday retail sales grow from 7% to 9%, better than the 5.8% increase recorded in 2020. A Mastercard SpendingPulse forecast said retail sales of holidays are expected to increase 7.4% from a year earlier and rise 11.1% on a two-year basis. , fueled by a rise in in-store purchases and persistent consumer demand.

Retailers echoed similar expectations. Home Depot, for example, said it ran out of an early release of Halloween decorations, an indicator that shoppers may also have a strong appetite for Christmas decorations.

Dick’s Sporting Goods said Monday it would hire the largest number of seasonal associates in the company’s history for the 2021 holiday season.

Walmart CEO Doug McMillon said the pandemic could inspire families to look forward to the holidays even more. The big box retailer said earlier this month that it would hire 20,000 supply chain employees, such as freight handlers and elevator drivers, to keep up with demand during the shopping season and more. beyond.

“Customers, families want to celebrate Christmas,” McMillon said at a virtual conference hosted by Goldman Sachs. “They want to have a Thanksgiving and, if this situation with the virus allows it, or maybe even if not, we will see strong demand for the rest of the year.”

Here’s a first look at what shoppers and retailers can see this holiday season, based on CNBC interviews with retail analysts and comments from industry executives:

Industry-wide supply chain challenges, which include factory outages, chip shortages and port congestion, are expected to last through the holidays and well into next year.

Pressures threaten to ruin the holiday season for families who don’t buy soon enough. Many phases of the manufacturing and delivery processes take longer than normal. Consumers can expect packages to take longer to arrive at their doors, as delivery providers, including UPS and FedEx, work through their own bottlenecks.

Meanwhile, companies are trying to make sure there is enough merchandise within reach to meet projected holiday demand. Most product categories, from consumer electronics to toys and sneakers, are being affected in some way.

Katrina O’Connell, chief financial officer of Gap, told Goldman Sachs at the World Retail Conference on Thursday that the garment company expects supply chain problems to continue until 2022.

“We will do our best to get units here as soon as possible,” he said. “Inventory can be bumpy.”

Lululemon’s solution has been to lease additional air freight in an attempt to avoid backward ports. This is a strategy used by several retailers, but it adds to transportation costs.

Salesforce estimates that the costs of merchandise sold to U.S. retailers will rise more than $ 223 billion this holiday season from a year ago, driven by jumps in transportation, manufacturing and labor costs.

Retailers want to move goods quickly from ports to stores to customers ’homes, but this will be difficult if they don’t have full staff. Aaron Cheris, head of Bain’s retail practice in the Americas, said the tight labor market is the most important factor to see this holiday season.

According to Department of Labor data and the job placement, according to the United States, there are about 10 million jobs in the U.S., about one million more than unemployed people in the United States. Several million workers have been left out for reasons ranging from childcare challenges to lack of necessary skills.

Across the supply chain, companies will look tight as they try to limit stocks and speed up delivery times, Cheris said. This means they will be in a difficult place if buyers insist on delivering goods or have a strict schedule.

“For last minute purchases I really wanted to get before Christmas, will I be upset if they tell me the delivery time is eight days and it’s 3 days before Christmas?” He said. “They can say,‘ Forget it. I won’t bother. “

Retailers will also get lost if they don’t have sellers available to find or suggest items and make sure popular purchases are quickly replenished in the aisles, he said.

If you are expecting a good offer or an item in high demand this holiday season, you better buy early.

Companies have less reason to put items up for sale, as supply chain snafus boosts inventories. Instead, promotions are likely to be strategically placed on products that retailers have in excess of stock. And that might not be a part of your holiday wish list.

“There will always be sales, but they won’t be as deep and as plentiful,” Cheris said. “As a marketer or brand, I don’t have the same motivation when I know I’m going to run out.”

Offers will begin and end sooner, according to Deloitte Vice President Rod Sides, of distribution and distribution in the US. He expects many consumer holiday purchases to begin before Thanksgiving this year and end weeks earlier than usual. He said days like Black Friday could make them less important, as shoppers expect to have to pay, regardless of the extravagance of offers, for certain coveted toys and game consoles.

“The consumer has awakened some of the challenges in the supply chain,” Sides said. “There will be certain categories where retailers will have a lot of stock. And there will be other categories where not … where people want to buy. And those will be the big challenges.”

Many retailers, including Macy’s and Dick’s sporting goods, have reported higher profits as they have offered fewer promotions.

At the Goldman conference, Macy’s chief financial officer Adrian Mitchell said the cuts have been below historic levels this year, in part due to rising costs due to inflation.

Macy’s said she’s less worried about having enough stock of jewelry, beauty items and household items during the holidays. But he is being more cautious about clothing and footwear, due to supply constraints.

Buyers are expected to get off the couch and return to the mall, analysts said. This will increase spending as people are more likely to make impulsive purchases when they buy in person. It’s a sharp setback from last year, when the pandemic inspired a shift towards e-commerce.

Mastercard SpendingPulse’s annual holiday forecast, which is based on aggregate sales activity on the Mastercard payment network, sees in-store sales growing 6.6% year-on-year, excluding cars and gasoline.

Mastercard senior advisor and former Saks CEO Steve Sadove said luxury items and jewelry are the two main categories that send people to stores.

“There’s accumulated demand, the savings rate is high, the stock market is working really well and the consumer wants to go out and buy,” Sadove said in an interview Monday on CNBC’s Courtney Reagan. “The consumer wants to go back to the mall.”

According to Mastercard SpendingPulse, clothing sales (both in-store and online) are expected to grow 46% from November 1 to December 24. Jewelry sales are expected to increase by 59%. Luxury sales, excluding jewelry, are expected to increase 93%, according to MasterCard.

Hurricane Ida flooded homes and caused damage to cars. AccuWeather estimates that the storm caused more than $ 95 billion in damage, making it the seventh most costly hurricane to hit the United States since 2000.

For some families, this extreme damage will mean thousands of dollars in unplanned expenses ranging from repairing a roof to replacing washers and dryers. In the short term, purchases could increase sales to home improvement retailers, such as Home Depot and Lowe’s, or to home appliance sellers such as Best Buy. But Cheris de Bain warns it could bust the holiday gift budget.

“This is another place where my dollars will go where they may not have gone normally,” he said.

Buyers can also allocate their money to other channels, such as booking travel and hotel rooms at a higher price, he said. Travel websites and hotels report that the pace of bookings for December has been robust and in many cases exceeds the levels seen in 2019. People are planning well in advance, which could push back prices up. Increased spending on travel could mean less money on tangible items.

Shoppers are more likely to face headaches, such as impossible-to-find items, weekly shipping delays and unsupervised cash register during this holiday season, and this will condition their sentiment towards retailers, according to the Bain holiday report.

Cheris said companies need to find a way to eliminate a frustrating or disappointing experience so they don’t permanently lose any customers. They may also try to anticipate these times to cushion the impact, such as expanding a delivery window to allow buffer time to have replacement items to suggest if there are no popular items.

“These are kind of moments of truth that really matter,” he said. “These are the emotional moments that, if a way can be found to improve them, is what makes a big difference.”