Small businesses brace themselves for cautious holiday shoppers

NEW YORK (AP) — Small businesses are stocking shelves as this holiday season begins, waiting to see how many gifts inflation-weary shoppers want to give away.

The holiday shopping season has been relatively strong over the past two years as shoppers spend online in droves, helped by pandemic stimulus dollars. According to the National Retail Federation, November and December sales average about 20% of annual retail sales, making the holiday season crucial for many retailers.

Small businesses are bracing for a more subdued season this year as some Americans spend more cautiously. AlixPartners, the global consulting firm, forecasts holiday sales to rise between 4% and 7%, well below last year’s 16% growth. With inflation above 8%, retailers would see a drop in real sales.

In preparation, owners say they are ordering inventory earlier to avoid the supply chain issues that have frustrated them over the past two holiday seasons and to attract early risers. Given their own higher costs, they increase the discounts as much as they can. And owners are also hoping more people will shop in stores and holiday markets after shopping more online during the pandemic.

Max Rhodes, CEO of Faire, an online marketplace used by small businesses to sell their goods wholesale and buy goods for retail stores, said he sees earlier orders from merchants that have struggled for two years in a timely manner to get enough Christmas inventory for Christmas. Shops faced shortages of everything from Christmas decorations to gift items as COVID-19 lockdowns forced factories to close, costs rose and fewer shipping containers and truckers were available – all causing delivery difficulties.

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

“With that comes a little bit of hangover, a little bit of anxiety,” Rhodes said. It’s still early for sales data, but by mid-September, the term “Christmas” was the most searched term on the site. That’s two weeks ahead of last year and eight weeks ahead of 2020, Rhodes said.

“We’re sure it won’t 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, one online store and a gift basket business. In previous years, he started building inventory in November, but this year he’s already stocking up on items like deli, chocolate, wine, and gifts. He also sees companies ordering Christmas gift baskets earlier.

“Everyone plans ahead,” Pond said. “I think everyone learns from the last two years.”

While the economic impact of the pandemic has abated somewhat, high inflation and rising interest rates are now gripping consumers. Overall spending has held up, although some Americans have been forced to step down from discretionary positions. Any drop can matter, as consumer spending accounts for 70% of economic activity.

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

“The average person is getting less money and we expect their cost of living to impact how much they can spend on holiday shopping,” Nash said.

Nash also expects more people to shop in stores during these holidays. She founded her Indianapolis-based company during the pandemic when online shopping was booming. The percentage of total retail sales that were made online rose from 11.5% in 2019 to 17.7% in 2020 and then rose again to 18.8% last year, according to the Mastercard SpendingPulse, which covers all types of Payments tracked, including cash and debit cards.

Nash is stepping up discounts and offering bundles to lure shoppers: their plans include a 15% discount for new customers this year, up from 10% from November. It also offers bundles of products that are about 20% cheaper than buying them individually.

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

Some business owners are hoping to benefit from a shift to shopping at holiday markets and in stores.

Kimberly Behzadi runs Read It & Eat Box in Buffalo, NY, which sells themed boxes with food and a book in each box. She founded the company in 2020 during the pandemic. She has an online shop but hopes the full capacity of the holiday markets will boost sales. It’s heavily dependent on the holidays – 40% of its annual sales come between October and December.

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

“Last year holiday markets were still constrained by the necessary safety protocols for Covid-19,” she said. “This year we’re thankfully able to attend and sell at more local Christmas markets, so I expect to double my holiday earnings this year.”

Behzadi also plans to do more publicity.

“With high inflation rates this year, I expect consumers will be looking for deals, so I’ve adjusted my vacation strategy to include more bundles and deals,” she said. For example, she offers a $60 box bundled with a $25 blind date book for Black Friday.

Mariana Leung-Weinstein sells infused jam, marshmallows and other farm-inspired gifts at about 25 stores through her Pawling, NY brand Wicked Finch Farm, which she founded in 2019.

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

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