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09/09/2021

KPMG: Retailers optimistic about holiday but worried about inventory shortages

Marianne Wilson
Editor-in-Chief
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Holiday sales are expected to rise 7% this year, according to a new report from KPMG.

Holiday sales are expected to be 7% higher this season compared to last year — the metric is almost double the industry’s historical growth, which tends to run 3% to 4%.

That’s according to a new report from KPMG, which surveyed 114 U.S. retail executives across the country from companies of more than $500 in annual revenue. The surveyed executives anticipate holiday e-commerce sales will grow 35% this year compared to last year. KPMG Also found that omnichannel strategies are continuing to expand, with a greater percentage of retail executives citing buy online pick up in store, ship from store and home delivery from store as methods of e-commerce fulfillment.

More than half of the retailers said they will keep doors open on Thanksgiving. And most said they plan on launching Black Friday and Cyber Monday events to boost holiday season sales. 

In other findings, retailers expect consumer prices to rise up to 15%   year-over-year. They also said promotions will play a bigger role this holiday shopping season — 68% of retail executives surveyed said they believe this year will be either “much more” or “somewhat more” promotional than last year. Over half of survey respondents cite offering more value options in their assortment to accommodate the holiday shopper.

“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,” stated Matt Kramer, national sector leader, consumer and retail at KPMG LLP.

CHALLENGES

Despite retailers’ enthusiasm, several issues have the potential to undermine sales expectations. Supply chain disruption is a key factor, continuing to present inventory challenges again this year.

[Read More: Retail import growth slowing amid supply chain disruptions]

Eighty-two percent of executives surveyed said that they are either “somewhat” or “very concerned” about inventory shortages.  Many retailers plan to alter their sourcing approaches by investing more heavily in safety stock (59%) and utilizing alternate suppliers (55%).

To help retailers prepare for potential challenges, KPMG identifies five steps that retailers can take now.

• Think more strategically about holiday promotions. Consider the pressures inflation is having on margin structure. While consumers may expect to pay more, they’re also looking for good deals, especially during the holidays.

Retailers can navigate both the supply and demand challenges of inflation by taking a strategic approach to revenue growth management. Use analytics to understand what pricing decisions can increase revenue while limiting the impact on margins.

• Double down on digital. New delivery models such as BOPIS; curbside pickup; ship from store; and click-and-collect are here to stay. Optimize an omnichannel approach to meet consumers where, when, and how they want to shop, while carefully monitoring the profitability impact of fulfillment. Retailers can increase market share by demonstrating an exceptional customer experience across each channel.

• Prioritize health and safety measures. With Delta variant concerns rising, retailers are wise to review and adjust health and safety measures to accommodate the holiday season. Being diligent about exhibiting high safety standards will help protect staff and customers and help make in-store experiences more comfortable.

• Encourage shoppers to start early. Retailers can use digital marketing, promotional events, and social media to their advantage, focusing on loyalty and rewarding their most important customers that start their shopping early. Encouraging shoppers to start earlier in the season will help counter last-minute rush and supply chain bottlenecks.

• Exercise agility and adaptability. Due to ongoing pandemic uncertainty, maintaining flexibility and being ready to pivot operations is key. Shifting consumer shopping behavior may require retailers to scale down in-store staff, while quickly ramping up digital and supply chain resources.