It may be the dog days of summer, but retailers are already busy planning for a holiday season geared toward experiential, but less expensive, gifting.
The new forecast from Salesforce, released Tuesday (July 20), also predicts that logistical challenges could pose a $200 billion retail headwind in the second half of the year.
The issue this year is on inbound logistics — such as a shortage of shipping containers and delays at ports — rather than last-mile delivery, which delayed 700 million packages in 2020.
Overall, costs across the retail supply chain are expected to increase by $223 billion in the second half of 2021, with manufacturers adding $12 billion because of continued risk of COVID-19; stores adding $48 billion because of a severe shortage of employees; and logistics companies adding $163 billion because of a shortage of shipping containers and capacity on ships.
Rob Garf, vice president and general manager of retail at Salesforce, said inflation is also hitting the retail sector harder than other consumer categories. Whereas the U.S. Labor Department cites an increase of 5.4 percent inflation, Salesforce’s Shopping Index indicates that the average selling price in the retail sector rose 11 percent year-over-year in the second quarter.
As for who’s going to absorb the cost increases, Garf said “it’s pretty uniform that we all are, all the way from consumers to retailers back to suppliers.”
Some companies such as Amazon and Walmart have prebought shipping containers ahead of the holiday season and Home Depot is renting its own cargo ships, but for most retailers, these options aren’t available. Still, Garf said, “retailers are really starting to get scrappy, really trying to get creative.”
“So we once again have an amazing and unique holiday season … but we do have a lot to draw on for the last 16 months,” he said.
Extending The Holidays
Garf said digital shopping will also continue to extend the holiday season, with back-to-school shopping triggering many consumers to start looking for deals and gifts early. Though the holiday shopping season still officially encompasses November and December, bumps are expected in September and October as well, even without a fall Prime Day.
“You’re already sensing it,” Garf said. “A lot of the categories are focused on experiential … and the physical products that will help extend that experiential experience. But we are going to see this surge happening.”
Additionally, with inventory scarce, prices rising and consumers still scarred from 2020’s last-mile issues, buy online, pickup in-store (BOPIS) and curbside options will continue to be crucial for retailers. Last year, in the five days leading up to Christmas, retailers offering in-store pickup options saw online spending grow 54 percent, compared to 34 percent growth for those who didn’t.
“We’re going to see it again,” Garf said. “Those retailers that can extend the holiday shipping window all the way to right before Christmas have that much more runway, have that much more availability for fulfilling a product.”
Indeed, PYMNTS research shows that 83 percent of consumers did some or all of their holiday shopping online last year, and 75 percent planned to maintain some or all of their digital shopping habits beyond the pandemic. Nearly 14 percent of consumers said they used BOPIS after the onset of the pandemic while 16 percent said they utilized curbside pickup.
Gifts To Be Given
That product, however, may be different than in years past, Garf noted, as consumers shift from purchasing “needs” to “wants” in an attempt to recapture experiences that were lost during the pandemic.
This goes beyond just planning a trip, though — it includes “the entire experience that goes around the trip and the products you need,” Garf said, including luggage, sporting goods, outdoor and vacation wear.
Consumers are also expected to focus more on social products, such as party and home dining supplies, as well as luxury items to revamp wardrobes or turn liquidity into goods with value as inflation concerns grow.
Garf said handbags and luggage are among the top luxury items expected to do well this holiday season, as well as luxury apparel and accessories such as watches.