2023 holiday sales forecast to grow as little as 3%, as much as 4.6%, down from last year
The holidays are upon us. And kids are not the only ones on the edge of their seats anticipating what they’ll receive this year.
Economists and retailers are wondering what the holiday season will bring three years after the COVID-19 pandemic and the resulting business interruptions, labor shortages, supply chain disruptions and social distancing guidelines wreaked havoc on the retail industry.
Since then, some retail stores and businesses have closed permanently, others have reopened and reinvented themselves in a post-pandemic world, and e-commerce has saved the day for numerous retailers and consumers either confined at home or living a new normal.
Earlier this quarter, experts released their holiday sales projections and consumer spending trends for the 2023 season. Most agreed that with a low unemployment rate of 3.8% and rising wages, sales should increase this year, though not as much as last year. Why? Inflation.
Here’s a recap.
2023 holiday retail sales outlook
Holiday retail sales are expected to rise between 3.5% and 4.6% this year, compared with 7.6% during the same November-to-January period in 2022, according to Deloitte’s annual holiday retail forecast. The global consulting and accounting firm predicts $1.54 trillion to $1.56 trillion in holiday sales, up from $1.49 trillion last season.
Deloitte cited cooling inflation and consumers having less money saved than during the pandemic for the slower growth this year.
Market research company Intelligence Insider (formerly eMarketer) forecasts that retail spending will increase 4.5% to $1.3 trillion this season, with e-commerce accounting for nearly 20% of sales and contributing 48.5% of incremental spending gains.
Close behind was the International Council of Shopping Centers (ICSC) with a forecast of 3.8% growth in U.S. retail sales and a 7.6% increase on food and beverage sales, for a total of $1.6 trillion this season.
Meanwhile, global management consulting firm Bain & Co. was less optimistic, forecasting a 3% year-over-year nominal growth in U.S. retail holiday sales, the lowest since 2018 and lower than the 10-year average of 5.1%. Bain cited elevated non-discretionary costs, high interest rates and consumer debt as challenges retailers will face this season.
eCommerce growth accelerates
Deloitte projects e-commerce sales to grow between 10.3% to 12.8%, reaching $278 billion to $284 billion, up from 7.9%, or $252 billion, last season.
ICSC’s Annual Holiday Shopping Intentions Survey found that 75% of consumers plan to purchase items online. Spending is expected to be evenly split between online and in-person shopping, with 41% of total expenditure expected at physical stores, 42% online and 17% on click-and-collect.
Consumer spending trends
ICSC reports that 79% of consumers plan to start holiday shopping earlier than usual. Of those, 51% do so for the early promotions.
But retailers are not too optimistic. According to CNBC’s Supply Chain Survey, 71% of retailers expect consumers to cut back on spending because of inflation. In response, 43% plan to order less inventory than last year.
According to the ICSC, 42% of consumers who expect to spend more attributed it to inflation and higher holiday item costs, while 54% plan to spend less for the same reason, and 38% said they expect to spend more as holiday deals and promotions offer more value.
Consumers anticipate consolidating their purchases across fewer retailers this year, planning to shop at an average of 2.4 different types of retailers, down from 3.4 in 2022, ICSC said. Discount department stores remain the most popular stop for 63% of shoppers, followed by traditional department stores (34%) and electronics stores (22%).
Most consumers plan to pay with debit (63%) or credit (50%) cards, while nearly half (48%) expect to pay with cash, the ICSC reported. Consumer credit card debt reached a record high of $1 trillion in the second quarter of 2023, as reported by the Federal Reserve Bank of New York.
Advice for retailers
Given the challenges, Bain & Company offers the following advice for retailers, both small and large:
- Get an early lead. Shopping begins earlier, and customers could run out of budget.
- Lead with value messages and strategic promotions to draw in cautious customers.
- Stress positive common values to bring holiday joy in tough times.
- Act fast on artificial intelligence to personalize offerings and improve customer service.
- Use stores to support profitable online growth – shipping, returns and trials.
- Put unit sales and profits over price increases. Investors seek healthy growth.
