4 Challenges Retailers Face This Holiday Season

Retailers launch the holiday selling season earlier each year—2021 will be no exception. Forecasts by Deloitte and Mastercard anticipate sales will be 7 percent higher than in 2020. However, supplying shoppers with the merchandise they plan to purchase will be challenging for many retailers due to the industry-wide shortages and shipping delays that grip the supply chain. 

Too Few Staff Members to Service Customers

While retailers are under intense pressure to stock store shelves, any solutions to the problem must consider Covid outbreaks at manufacturing plants, labor shortages, and demands for higher wages. Staffing is a critical issue that may prevent retailers from serving customers quickly and efficiently. This shortage is especially true during the holiday season, when retailers typically hire additional staff to accommodate increased store traffic. Aaron Cheris, head of Bain’s Americas retail practice, the tight labor market will be retailer’s most significant challenge during the holidays.

  • 10 million job openings in the U.S. vs. 9 million unemployed people (U.S. Dept. of Labor)
  • Millions of workers have left the labor market due to issues related to child care or limited skills 

High Demand Items in Short Supply

Consumers have indicated they are in the mood to spend. Analysts predict a significant increase in year-over-year holiday spending fueled by the resurgence of in-store shopping and consumer demand.

  • November and December sales are expected to grow 7 percent (Bain)
  • Holiday retail sales to climb 7 percent to 9 percent (Deloitte)
  • Sales to rise 7.4 percent from the prior year (Mastercard SpendingPulse)

In past years, retailers were eager to promote popular products to lure more shoppers into the store. Since supplies are limited, retailers are not motivated to put high-demand merchandise on sale. The focus will be on promoting inventory that is fully stocked or in abundant supply. 

Smaller Retailers Need Plan B

Retailers need a backup plan to compensate for merchandise shortages and shipping delays. While big-box retailers such as Walmart and Home Depot can lease ships to bring in merchandise from overseas, this is not an affordable or practical option for independent businesses. “Smaller entities with smaller buying power are the ones that bear the brunt,” Pawan Joshi, executive vice president of E2open, a supply chain software provider. Joshi suggests smaller operations increase their orders for holiday shoppers to accommodate the earlier season. It’s also essential to rethink the traditional timeline by displaying holiday merchandise earlier to compete with national chains and accommodate consumers.

Consumers Who Delay May be Disappointed

Shoppers who wait until the last minute may leave the store empty-handed or be disappointed that the items they came to purchase are not in stock. However, based on their recent experience, there are three reasons the pandemic may have prepared people to shop earlier. Most shoppers remember how they felt after seeing the empty shelves and long wait for shipments that happened at the height of the pandemic—it’s a feeling few people want to repeat. Another reason to shop early is the resurgence of the Delta virus and fears of new lockdowns. Lastly, early promotions by large chain stores promise big savings, and the ability to get hot products before their gone may motivate procrastinators not to wait until the last minute to buy gifts. Kristen McGrath, the editor of RetailMeNot, a retail deal website, told the U.S. Chamber of Commerce, “Waiting to shop until December is going to be really risky this year,” not just because of shipping delays, but because retailers may not be able to restock sold-out inventory.”

While shoppers may be returning to stores, smaller retailers who built the infrastructure for e-commerce will benefit from the expected increase in online sales since they can offer a more extensive selection than they carry in physical stores. It’s best to look at the big picture and make adjustments to your sales and promotion plans when needed to wrap up the holiday season on a profitable note.

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