Retailers face considerable margin pressures as costs rise and consumers pull back on spending heading into the 2022 holiday shopping season, according to a new forecast from the software company
According to Salesforce (ticker: CRM), overall digital commerce same-site sales declined 3% in the March quarter. While that in part reflects a tough comparison with the year-ago period, the company also notes that macroeconomic factors pose serious challenges for the group.
While Salesforce did not provide a specific growth forecast for this year’s shopping season, the company did say that the combination of high costs and growing consumer-price sensitivity creates considerable margin pressure for retailers.
Margin risk, Salesforce said, “will likely be the grinch that steals Christmas.” The study finds that 51% of consumers expect to make fewer holiday purchases this year than in 2021, while consumer sentiment is at the lowest level since economists began tracking the measure in the 1970s. Salesforce says that 17% of global shoppers and 15% of those in the U.S. are unsure if they will buy any gifts at all this year.
Salesforce projects that produce price inflation will likely remain high, in the 15% range through the end of the year. In part that reflects higher energy prices, which affect the costs of both fulfillment and product returns. The company says the raw-materials shortage continues, but that over-inventory of some goods has emerged as a problem for some retailers.
Salesforce offered five predictions for the coming holiday season.
- Consumers are likely to start their holiday shopping earlier this year to avoid future price hikes. Salesforce’s survey finds that 42% of consumers will begin shopping earlier than they did in 2021. Salesforce said that it expects average discounts through the holiday season of about 18%, up from 14% on average a year earlier.
- Salesforce predicts that consumers will shift their focus from convenience and safety—an approach that developed during the pandemic—to value and experience. Salesforce forecasts that half of shoppers globally will switch brands this year due to pricing.
- Physical stores will be an asset for retailers this year. Salesforce predicts that retailers with physical stores will grow 50% faster than those without them, with 60% of digital stores influenced by shopping in physical stores.
- Shoppers will gravitate towards “sustainable” product options, Salesforce says, asserting that 83% of shoppers “will seek out sustainable brands and products.”
- Salesforce says retailers will “test” offerings of NFTs, or non-fungible tokens, but projects that the total market for gifting NFTs in the year’s final two months will be just $54 million.
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