A Season of Planning: Holiday Sales to Break Records In Spite of Supply Chain Issues

This holiday season is anticipated to hit a record in retail sales despite ongoing supply chain challenges – reaching up to $859 billion in sales during November and December, according to the National Retail Federation.

“There is considerable momentum heading into the holiday shopping season,” said NRF President and CEO Matthew Shay in a press release. “Consumers are in a very favorable position going into the last few months of the year as income is rising and household balance sheets have never been stronger.”

The retail trade group forecasted holiday sales to grow between 8.5 percent and 10.5 percent over 2020, totaling between $843.4 billion and $859 billion. These numbers exclude automobile dealers, gasoline stations, and restaurants. According to the report, the forecasted sales numbers top the “previous high of 8.2 percent in 2020 to $777.3 billion and an average increase of 4.4 percent over the past five years.” 

“There is considerable momentum heading into the holiday shopping season,” – National Retail Federation President and CEO Matthew Shay.

With that anticipation of skyrocketing sales, retailers have already started investing heavily in their supply chains to make sure they can meet increased consumer demand, according to NRF. The retail trade group also forecasted that online and other non-store sales (included in the total) would rise between 11 percent and 15 percent to total between $218.3 billion and $226.2 billion – up from $196.7 billion the previous year.

 Consumers are eager to compensate for lost time by spending on gift-giving, having missed out on large gatherings, and socially distancing for nearly two years. On top of that, the higher vaccination rates have caused shoppers to be more at ease with traveling, eating out, and staying in hotels.

The “75 Days of Christmas”

Retailers adopted an earlier holiday shopping start once again this year. Retail sales for the “75 Days of Christmas” are expected to rise, excluding automotive and gas, according to a forecast from Mastercard SpendingPulse. Meanwhile, e-commerce sales are projected to increase by 7.5 percent compared to the previous year.

Mastercard SpendingPulse, which measures overall retail sales across all payment types, including cash and check, anticipates holiday retail sales in categories from Apparel to Luxury items to rise this year. Sales for Apparel and Jewelry are expected to grow 45.4 percent and 60 percent, respectively. According to the report, Luxury sales are forecasted to grow about 92.2 percent compared to the previous year.

While the outlook is more optimistic than just a year ago, the report shares some trends to monitor:

  • Retailers are offering omnichannel promotions earlier than usual, especially in Electronics, Apparel, and Department Store sectors.
  • Pandemic-spurred technology such as contactless payment, curbside pickup, and buy online, pick up in store will remain popular.
  • A combination of being able to save more and government stimulus funds has given consumers the ability to spend. This trend is seen in the strong YOY and YO2Y growth in the Luxury retail and Jewelry areas.

While shoppers are ready to browse in stores this holiday season, e-commerce sales retail will continue to thrive.

“This holiday season will be defined by early shopping, bigger price tags, and digital experiences. Over the past two years, retailers have learned a lot about what shoppers want and need, bringing us into an exciting new age of retail resilience,” Steve Sadove, senior advisor for Mastercard and former CEO and Chairman of Saks Incorporated, said in the report.

Tips to Ensure a Smooth Holiday Season

About 20 percent of annual revenue is made during the holiday season between Thanksgiving and New Year for most businesses.

With so much at stake in sales and revenue, small businesses should review their marketing tactics and implement strategies to ensure a seamless holiday season.

Here are a few suggestions from the Better Business Bureau that may help generate more sales:

  • Planning in Advance. Being prepared is a crucial component of a successful holiday season. Besides setting a budget to avoid overspending, forecast the demand to ensure sufficient supplies, and conduct market research to gain additional ideas for promotions.
  • Offering a Special Returns Policy. Since holiday shopping is starting earlier than usual, consider extending the return policy to 60 or 90 days during the holiday season. That may provide shoppers – concerned about not returning gifts on time – the assurance needed to purchase your products.
  • Running a Social Media Contest. One way to engage with your audience and create interest for your offers is through a social media contest such as a weekly prize drawing. Make sure your ideas are in sync with your target audience.
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