As big retailers fret over holiday sales, SMBs are poised for success

Much has been written about the inventory glut facing big-box retailers like Walmart (NYSE: WMT) and Target (NYSE: TGT) and online-only outlets like Amazon (NASDAQ: AMZN), but that has not dampened the outlook for holiday sales, it has just lowered expectations.

Deloitte, in September, predicted holiday sales would increase between 4% and 6% this year, totaling $1.45 trillion to $1.47 trillion during the November to January time frame. That follows a 15.1% increase in 2021. Deloitte also forecasts e-commerce sales to grow by 12.8% to 14.3% year over year and reach between $260 billion and $264 billion this season. This year, compared to previous seasons, will be muted but might still deliver some holiday cheer.

“The lower projected growth for the 2022 holiday season reflects the slowdown in the economy this year,” explained Daniel Bachman, Deloitte’s U.S. economic forecaster. “Retail sales are likely to be further affected by declining demand for durable consumer goods, which had been the centerpiece of pandemic spending. However, we anticipate more spending on consumer services, such as restaurants, as the effects of the pandemic continue to wane.”

He added that “inflation will also help to raise dollar sales, although retailers will see less growth in sales volume.”

Now comes a report that suggests small and midsize businesses are particularly poised to benefit this season.

Capterra is a platform for business software reviews and insights. It is a part of Gartner and is focused on helping SMBs. It surveyed 306 small and midsize retail businesses in its 2022 Holiday Retail Preparations Survey to gauge their outlooks on the season. While the big retailers have plenty of inventory, the supply chain problems of the past two years have made life more difficult for SMBs.

Inventory on hand

Among the key findings are that 75% of SMBs believe they have the right amount of inventory on hand and 63% expect to see higher holiday profits compared to 2021. Advertising will increase in social media, with 61% of SMBs indicating they expect to ramp up marketing spend on social. Forty-five percent expect to offer more holiday deals this year in an effort to lure in shoppers that are battling inflation.

SMBs are increasingly targeting Gen Z and Gen Alpha shoppers, expecting that spending may be curtailed among older shoppers but not among the younger generations with young kids, or among teens and young adults. Retailers targeting these age brackets expect to reap higher seasonal profits compared to 63% of those targeting millennials and 54% targeting Gen X and boomer audiences.

In addition to boosting social media spend, 85% of SMBs expect to increase holiday marketing spend across one or more channels, including e-commerce marketplaces and search engine optimization.

“From proactive inventory management to social media marketing, SMBs are pulling out all the stops to get clicks and foot traffic this holiday season,” said Molly Burke, senior retail analyst at Capterra. “Whether consumer spending supports SMBs’ projections is an open question, though most retailers remain confident that they’ll enter 2023 with healthy holiday profit growth compared to big-box retailers.”

Hybrid operations more optimistic

Retailers that have both digital and physical store presences are more optimistic, with 68% expecting profit growth this year, compared to 59% of e-commerce-only businesses and 51% of brick-and-mortar-only businesses. Among those businesses with both online and offline presences, 62% expect their online channels to perform better than 2021 while just 38% expect their stores to do the same.

“All this optimism from SMBs is remarkable, given that experts expect nationwide retail sales to grow minimally, if at all, after adjusting for inflation, and Gartner finds that roughly a third of U.S. consumers will spend less during the holidays this year,” said Burke.

Buying inventory early may be a boon to SMBs. Having learned from last year’s supply chain chaos, more SMBs ordered this holiday inventory earlier this year. Among those that got a jump-start on the season, 89% said they have balanced inventory levels and just 3% said they were overstocked, compared to 67% and 8%, respectively, that ordered at the same time as last year. Of those that delayed purchasing, only 27% said they have balanced inventory, with 33% saying they are understocked and another 33% that are unsure of their status.

Shipping holdouts

Even as they hold out hope for a good season, SMBs face shipping headwinds. The survey found that more SMBs this year will offer shipping perks to try and compete with the big brands — many of which offer free next-day and even in some cases same-day shipping.

Capterra noted that 55% of holiday shoppers are not willing to pay for shipping, yet SMBs still lag in this area, with just over half expected to offer free shipping. Just 16% of small retailers will offer same-day or next-day package delivery. With online shopping and consumers’ appetite for lightning-fast delivery showing no signs of slowing, rapid last-mile logistics marks a much-needed area for growth for small retailers in the near future.

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As big retailers fret over holiday sales, SMBs are poised for success

A new survey finds that 68% of SMBs expect to see profit levels above 2021

Inventory on hand

Hybrid operations more optimistic

Shipping holdouts

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Brian Straight