Holiday season kicks into high gear, but challenges remain

NEW YORK (AP) — Buoyed by a solid workforce, healthy payroll gains and significant savings, customers are returning to stores and wasting on all sorts of items.

But the big question is: to what extent will supply shortages, higher prices and staffing problems dampen their mood this holiday season?

Already tired of pandemic-induced social distancing policies, Americans may become grumpy if they can’t check off items on their holiday wish lists, or they may be disappointed by the meager holiday discounts. Adding to their bad mood is the fact that many frustrated employees called it quits for the holidays, leaving companies strapped for cash during the busiest time of the year.

According to Aurelien Duthoit, senior industry advisor at Allianz Research, shoppers are expected to pay an average of between 5% and 17% more this year for purchases of toys, clothing, appliances, TVs and other purchases on Black Friday this year compared to last year. TVs will see the highest price spikes on average, according to the research firm, up 17% from a year ago. That’s because all available discounts are applied to goods that are already expensive.

Such frustrations could dampen record-breaking sales for the holiday season.

The National Retail Federation, the country’s largest retail group, forecasts holiday sales to rise 8.5% to 10.5% compared to the 2020 holiday season, when shoppers locked up during the onset of the pandemic released their spent money on pajamas and household items – mostly online. Holiday sales increased by 8.2% in 2020.

“I think it’s going to be a messy holiday season,” said Neil Saunders, managing director at GlobalData Retail. “It will be a little frustrating for retailers, consumers and the employees. We’re going to see long lines. We’re going to see messier stores. We are going to experience a delay in collecting online orders.”

Jill Renslow, executive vice president of business development and marketing for Mall of America, the nation’s largest mall, expects Black Friday customer numbers to be close to 2019 levels and said its store tenants were “powerful” earlier in the season. shopping”. But she acknowledged that the mall’s tenants are struggling with staffing and as a result the center will open two hours later and close one hour earlier on Black Friday.

“They (retailers) are committed to providing a good guest experience,” said Renslow. “But consumers will have to be patient and know that the lines may be a little longer.”

But don’t forget the resilience of shoppers who showed signs last year that they want to celebrate the holiday season after the muted celebrations.

Kathleen Webber, a 58-year-old college professor who lives in Yardley, Pennsylvania, said she will resume large family gatherings over the holidays and buy more gifts after spending the vacation alone with her husband and three children last year.

“Everyone is so happy to be together, which is why we want to celebrate,” said Webber, a major online shopper. But fear of shortages is forcing her to complete Christmas shopping by the end of next week; she usually waited until December 21 to complete her online purchases.

Retailers have also proven to be resilient.

When the pandemic forced non-essential stores to close for several months in the spring of 2020, experts feared the death of department stores and clothing chains. A number of iconic retailers that were already struggling have reorganized into bankruptcy, including Neiman Marcus, JC Penney and Brooks Brothers. Meanwhile, big box retailers like Walmart and Target that were allowed to stay open only got stronger.

But since then, many retailers have become healthier again. According to S&P Global Ratings, the percentage of U.S. retailers failing to pay their debt rose 20% last year, compared to 6% for all corporate issuers. This year it is less than 2%.

Store closures have also leveled off, reversing the bleak picture in 2020. Coresight Research, a global research firm, says U.S. retailers have announced 5,057 store closures for the year, but the number of store openings is 5,103 as of Nov. June 2020 would be as many as 25,000 store closures, but in reality the number was just over 8,000.

The companies that could survive the pandemic were also the ones that could turn quickly. Many switched their offerings from dressy to casual, and department stores like Macy’s that never provided roadside pick-ups suddenly launched them. Others have lost their money-losing locations.

Some of the changes introduced out of necessity in 2020 appear to be here to stay, including offering major holiday discounts earlier in October to offset spikes in online ordering, and doing away with Thanksgiving Day shopping and moving customers online. instead for deals.

And while pandemic-induced congestion in the supply network has reduced the inventory needed to meet customer demand, such shortages have also proven to be a silver lining. Smaller inventories have meant that retailers, who have been trapped in a vicious circle of discounts for years, have regained some pricing power. Such non-stop promotions have eaten away at profits.

“Even with increased labor costs and higher supply chain costs, retail revenues have been quite good,” said Ken Perkins, president of Retail Metrics LLC. see profit again.”

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