Can Retailers Be Hopeful for the Holiday Season?
KPMG expects that holiday sales in the 2021 season will be 7 percent higher than last year — almost double the retail industry’s historical annual growth, as stated in its new holiday retail outlook report.
The report, called “Merry and Bright,” surveyed 114 U.S. retail executives across the country from companies of more than $500 in annual revenue and aims to reveal expectations for the 2021 holiday shopping season.
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According to KPMG, retail executives are anticipating that 2021 holiday e-commerce sales will grow 35 percent compared to the year prior. With this in mind, the authors of the report said executives will rely on the growing popularity of last-mile delivery options including buy online, pick up in-store, or BOPIS, curbside pickup and buy in-store with home delivery.
“Retailers are bullish on the holiday season, showing confidence in their digital commerce improvements and the ability to fend off the inflationary and supply chain risks,” said Matt Kramer, national sector leader, consumer and retail at KPMG LLP.
Additionally, as retailers say they expect consumer prices to climb up to 15 percent year-over-year, they also said promotions will play a bigger role this holiday shopping season. In fact, 68 percent of retail executives surveyed said they believe this year will be either “much more” or “somewhat more” promotional than last year.
More than half also said they will keep doors open on Thanksgiving and most said they plan on launching Black Friday, Cyber Monday and specific loyalty program promotions to boost holiday season sales. Retail executives told KPMG they expect to spend 35 percent of their overall marketing budget during the six-week holiday period from Thanksgiving to the New Year with 42 percent being spent on digital campaigns. At the same time, 93 percent said they expect digital marketing budgets to see moderate to significant increases while 55 percent said they predict traditional marketing spend to moderately decrease.
Meanwhile, while retailers are staying positive about the upcoming holiday season, KPMG’s report points out several issues with the potential to undermine sales expectations.
Most notably, supply chain issues that have been disruptive to retailers throughout the pandemic could be a key factor, according to KPMG. “Difficulties pertaining to shipping container capacity, port congestion, driver shortages and the Delta variant concerns pose a significant risk,” said the authors of the report. “As a result, retailers face added pressure to better understand logistical challenges and anticipate consumer selection of higher-demand products to meet inventory needs.”
Notably, 82 percent of retail executives told KPMG that they are “somewhat” or “very concerned” about inventory shortages. To get ahead of the problem, 59 percent said they plan to invest more heavily in safety stock and 55 percent said they plan to set up alternate suppliers.
The Delta variant may also cause an impact on sales as consumers increase a show of concern for health and rising prices.
To prepare for what’s ahead, KPMG said retailers need to start addressing challenges now. Authors of the report said they recommend retailers start by thinking more strategically about holiday promotions, doubling down on digital, encouraging shoppers to start early and prioritizing health and safety measures.
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