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In the US, the number of online orders is forecast to drop 5% compared with the 2021 holiday season, according to data from Salesforce (NYSE:CRM) Inc., which develops software for companies. Globally, e-commerce orders are seen falling by 7%. Online sales in November and December are expected to remain “essentially flat,” Salesforce said, likely due to higher prices despite the predicted drop in units.
Prices for household necessities including rent, electricity and groceries have risen for months while inflation erodes US wage gains from the last year and a half. This is limiting consumers’ buying power — an unwelcome development for retailers that depend on the year-end splurge to meet their financial targets.
Even so, demand has broadly held up this year. Retail sales rose unexpectedly in August, according to Commerce Department data on Thursday. The data aren’t adjusted for inflation, so the pickup could reflect price increases.
Separate data Thursday from Morning Consult, a retail research and data company, showed that spending on gifts is developing differently from a year ago, with shoppers planning tradeoffs in order to afford inflated prices. While consumers are unlikely to reduce spending on groceries, celebrations and gifts, they will cut back on travel, decor and alcohol, Morning Consult said.
Meanwhile, higher costs of production — including for labor and transportation — will outpace retailers’ ability to pass costs on to customers, putting 10% of profits at risk for retailers, Salesforce said.
“Retailers are feeling the squeeze from unprecedented margin pressure due to increased labor wages, fuel prices and inventory-carry costs,” said Rob Garf, vice president of retail at Salesforce. “It’s critical to contain costs by automating and scaling operations.”
©2022 Bloomberg L.P.
