Small Businesses Brace for Cautious Holiday Shoppers

NEW YORK — Small businesses are stocking the shelves early this holiday season and waiting to see how many gifts inflation-weary shoppers feel like giving.

The past two years saw holiday shopping grow as more people flocked to online shops in response to the pandemic stimulus dollars. According to National Retail Federation sales in December and November averaged around 20% annually. This makes the holiday season crucial for many retailers.

Small businesses should be prepared for a less prosperous holiday season this year due to Americans spending more carefully. AlixPartners, the global consulting firm, forecasts that holiday sales will rise between 4% to 7%, far below last year’s growth of 16%. Retailers would experience a drop in sales if inflation is higher than 8%.

To prepare, owners say they’re ordering inventory earlier to avoid the supply-chain snags that frustrated them the past two holiday seasons and to draw in early birds. They’re stepping up discounts as much as they can in the face of their own higher costs. The owners hope that more people shop in shops after having done more shopping online during this pandemic.

Max Rhodes, CEO of Faire, an online marketplace used by small businesses to sell their wares wholesale as well as buy goods for retail shops, said he’s seeing earlier ordering from merchants who for two years had trouble getting enough holiday inventory stocked in time for Christmas. Stores faced shortages of everything from holiday décor to gift items as COVID-19 lockdowns forced factories to shut, costs rose and fewer shipping containers and truckers were available — all causing delivery snarls.

Kearney, a global consultancy firm found that U.S. logistics costs rose 22.4% to $1.85 Trillion in 2021 according to a study.

“There’s a bit of a hangover from that, a bit of fear,” Rhodes said. While it’s too early for sales data, the term “Christmas” was the most searched for term on the site in mid-September. That’s two weeks earlier than last year, and eight weeks earlier than 2020, Rhodes said.

“The one thing we’re certain of is it’s not going to be predictable … We really don’t know what to expect and our retailers feel the same way,” Rhodes said .

Mat Pond owns The Epicurean Trader, a San Francisco-based business that includes four brick-and mortar stores as well as an online store and a gift basket company. In past years, he started building inventory in November, but this year he’s already stocking up on items such as gourmet food, chocolate, wine and giftware. He’s seeing corporations order holiday gift baskets earlier as well.

“Everyone’s planning ahead,” Pond said. “I think everybody’s learning from the past two years.”

While the pandemic’s economic impact has subsided somewhat, consumers are now being tag-teamed by high inflation and rising interest rates. Although spending is up overall, some Americans are forced to cut back on certain discretionary goods. A 70% share of the economy’s activity is consumed by consumer spending, so any decline in this area can be significant.

The owner of Lucy Nash online jeweler, Hannah Nash expects the sales of her earrings and bracelets to decline after two years’ strong growth. Inflation is the primary culprit.

“There is less money going around to the average person and we expect their living expenses to impact how much they can spend on holiday shopping,” Nash said.

Nash hopes that people will be more inclined to buy in store during the holidays. In the midst of the Pandemic and when online shopping was booming, she started her company, which is based in Indianapolis. According to Mastercard SpendingPulse which monitors all payments including cash, the percentage of online retail sales jumped to 11.5% in 2019, 17.7% in 2020 and 18.8% in 2017.

Nash plans to offer bundles and discounts in order to draw customers. And she’ll offer bundles of products that are about 20% cheaper than buying items separately.

Amazon and Walmart offered holiday discounts to Americans with tight budgets earlier in the year. Amazon held a two-day discount event on Oct. 11-12 where the average order was $46.68, $13 less than what shoppers spent during the company’s Prime Day sales event in July, according to the data group Numerator.

Business owners may be able to capitalize on any shift towards shopping at holiday markets and stores.

Kimberly Behzadi operates Read It & Eat Box in Buffalo, N.Y., which sells themed boxes with food and a book in each box. In 2020, she started her business during the flu pandemic. Although she has an online store, she hopes that the full return to holiday markets will increase sales. She depends a lot on the holidays — 40% of her annual revenue comes between October and December.

She’s planning on being at six markets this year, with two more applications pending.

“Last year, holiday markets were still limited by the necessary safety protocols for Covid-19 ,” she said. “This year, gratefully, we are able to attend and sell at more holiday markets locally, so my expectation is to double my holiday revenue this year.”

Behzadi is also planning to become more visible.

“With inflation rates high this year I expect consumers to be looking for deals, so I have adapted my holiday strategy to include more bundles and deals,” she said. She’s offering a $60 box that’s bundled with a blind-date book worth $25 for Black Friday, for example.

Mariana Leung Weinstein, a Pawling-based farmer who started Wicked Finch Farm in Pawling in 2019, sells farm-inspired gift items at approximately 25 locations. She’s focusing on stocking up in stores in case online sales slow.

“I expect people will enjoy seeing and touching things in person this time around, which puts more of my focus in getting my products in physical stores in time for the holidays,” she said.

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