In the following Supply Chain Matters blog commentary, we highlight three published forecasts addressing expected retail sales for this holiday fulfillment period, along with the likely implications for supply chain management teams.

Among all three there are common themes as well as observations of changing consumer buying sentiments. These are crucial areas for consumer and retail focused supply chain management teams to focus on, as holiday fulfillment efforts lick into high gear.

 

Deloitte Annual Retail Forecast

In late September, Deloitte released its annual holiday retail forecast, in essence forecasting strong growth spurred by elevated consumer spending on services and continued growth in e-commerce sales.

According to Deloitte’s U.S. retail and distribution services practice, holiday focused retail sales, focused on the period between November and January, are likely to increase between 7 percent and 9 percent in 2021. That would equate to range of $1.28 to $1.3 trillion during this period. As a reference, according to the U.S. Census Bureau, retail sales during last year’s holiday period (between November 2020 and January 2021 and seasonally adjusted and excluding automotive and gasoline sales) increased 5.8 percent to $1.19 trillion.

The Deloitte forecast for E-commerce sales calls for growth of between 11 percent and 15 percent year-over-year, to a range of between $210 billion and $218 billion.

E-commerce sales last year between the same period (seasonally adjusted and excluding gasoline stations, motor vehicles, parts dealers, and food services) grew 34.8 percent to $189 billion. Recall that in the 2020 time period, the U.S. was still dealing with the effects of COVID-19 coronavirus outbreaks and their impacts on people, businesses and product availability.

Deloitte’s U.S. economic forecaster Daniel Bachman noted:

We anticipate strong consumer spending for the upcoming holiday season. As vaccination rates rise and consumers are more comfortable being outside of the home, we are likely to see increased spending on services, including restaurants and travel, while spending on goods will continue to hold steady. A steady decline in the savings rate to pre-pandemic levels will support consumer spending and keep retail sales elevated this season. Further, e-commerce sales will continue to grow as consumers demonstrate an ongoing and steady movement toward buying online across all categories”

Adobe Digital Forecast

Adobe Analytics maintains an annual online holiday shipping forecast predicated on analysis of data covering over one trillion visits to U.S. retail sites and millions of SKU’s. This week’s published 2021 online shopping forecast for the period that spans November 1 thru December 31 forecasts a record $207 billion in U.S. holiday sales, which also represents a new record. Globally, online spending is forecasted to reach $910 billion representing an 11 percent year-over-year increase. Adobe anticipates that over 4 Trillion in E-Commerce spending will occur globally for all of 2021

This forecast’s takeaway messages for U.S. holiday online activity are depicted as:

  • Major online shopping promotional events such as Cyber Week losing prominence. That stated, Adobe anticipates that Cyber Monday will remain the biggest online shopping day, driving $11.3 billion in sales. This forecast expects U.S. consumers will on average pay 9 percent more during the Cyber Monday
  • Of the 18 categories tracked by Adobe, apparel has had the highest occurrences of out-of-stock levels, followed y sporting goods, baby products and electronics.
  • Regarding all retail categories, this forecast anticipates discounts in the range of 5 to 25 percent during this upcoming holiday period, compared to a historical average of 10 to 30 percent. This reduction is attributed to compensating for the explosive increases occurring in supply chain related costs.

Analyzing consumer buying sentiment data of over 1,000 U.S. consumers, 67 percent expressed concern about gifts being more expensive this year. The Adobe data further indicates that 65 percent of shoppers are concerned about shipping delays and thus curbside pickup preferences are expected to increase this year.

 

National Retail Federation Holiday Spending Sentiment

This week the National Retail Federation’s (NRF) holiday buyer sentiment forecast provided a rather positive message, namely that this year, 90 percent of U.S. adults plan to celebrate the upcoming holidays, including Christmas, Hanukkah and Kwanzaa, up from 87 percent last year.

The forecast notes that on-average, consumers plan to spend close to $1,000 ($997.73) on gifts, holiday items and other non-gift purchases. Overall, this forecast indicates that plans for holiday spending remain slightly below the pre-pandemic high of $1,047.83 in 2019, as fewer consumers plan to spend on non-gift purchases for themselves and their families.

A key message from this survey indicated that consumers are motivated to check items off their lists earlier than ever. Half (49 percent) of holiday shoppers will start browsing and buying before November, up from 42 percent in 2020 and the highest in the survey’s history. That data reinforces other forecast data pointing to increased anxieties and supply chain disruption concerns now being manifested in consumer buying actions. An executive from Prosper Insights & Analytics, who conducted this survey for NRF, indicated:

Over the last few years, consumers have demonstrated the desire to begin their holiday shopping earlier and earlier. This year in particular, as retailers promote holiday inventory, they are taking advantage of additional offerings such as free shipping, buy online, pick up in store and even expedited shipping to ensure they receive their gifts on time.

A further data point indicates that consumers continue to state a strong preference for online shopping. Reportedly, over half (57 percent) plan to purchase holiday items online this year, down from 60 percent who identified online as a holiday destination in 2020 and in line with pre-pandemic norms.

 

Additional Perspectives

In light of all of such forecast data, the questions are what additional actions can retail and consumer goods supply chain management teams undertake to ensure that that limited and likely late arriving inventories can be best be optimized  In prior commentaries, we have shared perspectives leading up to this period along with viewpoints from noted supply chain thought leaders.

Approaching this period, overall inventory-to-sales ratio remains historically low, and retailers are scrambling to ensure that inbound inventories can be positioned in time for holiday demand.

As an example, at an investor conference, Walmart CEO Doug McMillon indicated that the retailer’s inventory levels were too light in stores and in E-commerce during Q2. Walmart, along with other select retailers such as Home Depot and Lowe’s have been chartering vessels to move inventories from overseas producers and avoid ongoing global shipping bottlenecks.

Last week, President Joseph Biden called for private industry collaboration in supporting round the clock, seven-day operations among the Ports of Los Angeles and Long Beach as upwards of a hundred vessels remain anchored off-shore awaiting processing. Likewise, port operations have been hampered by bottlenecks and slowdowns in inter-modal rail traffic moving containers inland and, in the ability to garner enough trucks and required drivers to move containers to inland destinations.

Supply Chain Matters indicated in a previous industry commentary, precision planning and inventory management will be the determinant as to whether retailers and wholesalers can support this year’s holiday demand, or whether some holiday gifts may have to be unfortunately delayed.

A further insight and observation comes from Nikki Baird, a former retail analyst and now Vice President of Retail Innovation at Aptos. Given the consensus that is coming from these various consumer sentiment buying surveys regarding expected online behaviors, Baird indicates:

Retailers are looking harder at putting more inventory in stores for holidays, with the idea that they can save on some expedited shipping by placing inventory closer to consumers, and then later shift consumer demand from online to store pickup as they hit those delivery cutoff days. Some retailers do protect that inventory so that some of the in-store inventory is marked for in-store sales only vs. visible to online, so my advice to shoppers is, if there is something you’re looking for and you’re not finding it online, it may be worth the trip to the store to see if it’s there because retailers may actively choose not to share all of their in-store availability online.”

The above may be a very insightful observation for both retailer and consumer goods sales and operations planning and control tower teams as well as for consumers who will need to adroitly navigate buying actions over the coming few weeks. There are further real concerns that parcel carriers will enforce earlier last call shipment deadlines if their networks become overwhelmed as they occurred during last year’s period.

The overall reader takeaway is that the next several weeks are going to be very stressful, providing a lot of actions and responses on the part of supply chain planning and customer fulfillment teams. In the end, the performance and overall synchronization of logistics and transportation teams will be crucial in determining if consumer holiday demand is fulfilled and holiday business performance is achieved.

If we can cite a baseball analogy, it’s the World Series and supply chain management teams represent a team that is behind three games to one in a best of seven games series. Now is the time for added effort in execution, team collaboration and ingenuity. It is also the time for managers to pay close attention to workers and ensure that long hours and burnout are monitored and mitigated. Headcount reductions are a reality and so are the consequences.

Plans have been made as best they can, and the rest is up to events and human dedication and ingenuity.

As always, Supply Chain Matters will be providing added insights during and post-holiday period, so do check back with us often.

 

Bob Ferrari

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