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What Consumers Can Expect from Retail This Holiday

Anyone looking to buy holiday presents better get them soon, or risk having to buy the second-best option.

Retailers aren’t planning on making big purchases for the holiday season, and that means keeping their inventory levels relatively lean this year.

“The consumers have been shifting constantly throughout the epidemic. As their needs shift, retailers have been trying to understand  [and adapt] and because of that, they are more hesitant on their buying,” Sonia Lapinsky, managing director in the retail practice at AlixPartners, told Sourcing Journal. “They are going into this holiday season not making any big bets on product that could end up staying on the shelves. So, retailers are going lighter on their buying.

“Unless they’re really flexible on the back end, they’re really trying to stay agile,” she added. “There will be pockets where they just under-bought [because] they don’t want to end up with lots of inventory.”

Because consumers are planning to shop earlier in the season, retailers have had to start planning for holiday even earlier to manage supply-chain issues. If consumers aren’t quick to hit the stores and shop, “they could lose out or find that the product’s not there,” Lapinsky said.

She also noted that higher-end brands and wholesale channels are concerned about keeping their margins intact. That translates into “brands trying to preserve product that they do have, and putting it in channels that get the most margins. Brands will fill their own retail channels and stores online before handing sought-after product to the national retailers,” Lapinsky said. It’s another reason why many consumers could see barren shelves and racks at stores.

On Monday, AlixPartners’s holiday forecast defined season as running from October through December, with sales expected to rise 1.0 percent to 2.6 percent versus the year-ago period, when sales totaled $1.132 trillion. The annual poll of more than 1,000 consumers indicates that 49 percent plan to start their holiday shopping by Halloween, or earlier, 7 percentage points higher than last year.

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In addition, 45 percent of Americans plan to do the majority of their shopping online, up 15 percentage points from last year’s survey. About 23 percent expect to spend less on holiday this year, while those planning to spend the same or more dropped to 76 percent from 85 percent, down 7 percentage points from a year ago. Of those earning $100,000 or more annually, 84 percent said they expect to spend the same or more.

The top categories for spending include apparel at 80 percent, toys, 77 percent, footwear 75 percent and electronics and video games, 74 percent. Moreover, 37 percent said they expect to spend more on American-made products this year, up 6 percentage points from last year’s survey.

“As our forecast implies, this holiday season could be a tough one for retailers overall,” said Alexa Driansky, senior vice president in the retail practice at AlixPartners and one of the contributors to this year’s forecast and survey. “However, as our survey suggests, there may be upside potential for those able to cater to higher-income consumers, and for those playing in certain sectors.

“Overall, the amount of uncertainty out there is unprecedented,” Driansky continued. “The winners in this environment will be those who can quickly adapt to the dramatic channel-shift playing out right now and leverage the resulting increased data to drive decisions that create a seamless and safe customer experience.”