Forget the Grinch, will inflation steal Christmas this year?

Santa is nearly ready to take his sleigh south and pop down chimneys across the country, but will his bag be a little lighter this year? Getting a firm answer is far from easy in 2022, with predictions ranging one end of the spectrum to another. 

On the one hand, the National Retail Federation (NRF) forecasted a growth of 6-8% for holiday sales this year. Smaller than the huge 13.5% growth seen last year but significant nonetheless. 

On the other hand, rising food and gas prices have been eating away at consumer spending with greater gusto than your uncle on his third helping of turkey, while ever-increasing interest rates have brought out the bah humbugs for many when looking at their holiday spending budgets.  

And according to consulting giant PwC, it’s looking like the days might indeed be a little less merry and bright this year. As reported in their holiday outlook report, consumers plan to spend an average of $1,430 on gifts, travel, and entertainment over the holidays. By comparison, last year they spent $1,447. A small decrease sure, but for a season that typically sees a steady increase in spending year over year, it’s a stark indication of how sharply inflation is impacting holiday gift-giving. 

And what are the most popular gifts under the tree this year? According to KMPG’s report, the top two items are apparel and gift cards. Why gift cards? Prices don't rise on gift cards, whereas prices in stores are still climbing. Combining this with the fact that inflation has made everything more expensive brings a unique challenge to forecasting. Sales activity is typically measured by looking at the amount of money being spen, rather than unit sales (the number of products being sold). But when the money that’s coming in isn’t moving as many products, even those retailers who do see higher spending at the checkout counter may see unit sales fall.  

This brings out another seasonal grinch for those in the industry — inventory pressure. In all the panic to get products in stores after last year’s delays, many are now stuck with too much of what consumers don't want and not enough of what they do. In fact, 90% of retailers are experiencing excess inventory, and 88% are already experiencing out-of-stocks on key holiday items. And the fact that much of the spending being seen is going to gift cards means that excess inventory isn’t being moved quick enough.

While it’s still too early to say how retailers and their supply chains performed this holiday season, whether they’re able to wrap up a successful season or find themselves waking up with a holiday hangover, every supply chain comes with risks — and being prepared is the key to keeping them running. From predictive capabilities to identify and resolve potential issues before they happen, to an integrated carrier network to uncover the best options when capacity gets tight, to real-time visibility and communication so you can keep everything on track — no matter what tomorrow brings, Shipwell can help. 

For more information on how our technology can keep your shipments moving, talk to an expert today.