Retail experts predict a record-breaking holiday sales season

Forecasts by the National Retail Federation for this holiday season is that spending will reach record levels, with growth of between 3 and 4 percent over 2022, for a final result of between 957.3 and 966.6 billion dollars. According to NRF President and CEO Matthew Shay, sales will more than match pre-pandemic levels due to the economic stability of most Americans: “Overall household finances remain in good shape and will continue to support the consumer’s ability to spend.” The holiday season is defined as November 1 through December 31 and the NRF predictions take into consideration factors such as employment, wages, consumer confidence, disposable income, consumer credit and previous retail sales.

Strong consumer spending expected for holiday 2023

Despite overwhelming global unrest and the specter of a recession, the statement released by the NRF is bullish. “Consumers remain in the driver’s seat, and are resilient despite headwinds of inflation, higher gas prices, stringent credit conditions and elevated interest rates,” NRF Chief Economist Jack Kleinhenz said, “We expect spending to continue through the end of the year on a range of items and experiences, but at a slower pace. Solid job and wage growth will be contributing factors this holiday season, and consumers will be looking for deals and discounts to stretch their dollars.”

Some predictions center around steeper discounts this year than last, but experts stipulate that while 2022 discounts were designed to even out supply chain issues caused by the pandemic, those issues are now in the rear view mirror. Instead, some retailers will be discounting this season out of concern that demand will fall off. Said Nikki Baird, VP of Strategy, Aptos,"Uncertainty is the new normal.” Consumer spending is evolving, but service spending is stronger than spending on goods and this is likely to define holiday sales trends. “Consumers still seem to be locked in on spending on experiences over things, but experiential spending does still lead to buying stuff to help enable the experience,” said Baird.

NRF expects retailers to hire between 345,000 and 450,000 seasonal workers, which is in line with 2022 seasonal hires. But in general, the issue of staffing remains problematic. “Retailers are still trying to fill the regular ranks, let alone boost up for holidays,” said Baird. Meanwhile an October survey conducted by the NRF found that 43 percent of holiday shoppers had planned to already start making purchases before November.

Looking ahead, emerging technology will transform in store experience but not in time for holiday

While online shopping fueled by the pandemic has constituted one of the most significant shifts in consumer behavior, in-store shopping has rebounded. The online customer’s search history, viewing habits, and their navigation selections all help e-commerce retailers predict buying behavior and offer personalized recommendations to easily satisfy the customer’s needs. Online shoppers have become used to this level of service. None of these factors are currently available to the brick and mortar retailer in real time so stores must rely on the personal rather than personalization, on the human connection over AI optimization.

An associate can give the customer an attentive and supportive in-store experience, making the customer feel special, in a way that an algorithm simply can't. But the current labor crunch means retailers hiring a wave of seasonal workers may not have time to train them adequately to provide this level of attention during the high-traffic holiday period. The holiday period is perhaps the worst time of year for consumers hoping for a personalized shopping experience.

“Personalization will come to stores. The challenges that exist today are difficult, but not insurmountable," said Baird. "Retailers’ wage and labor pressures aren’t going away any time soon, so they face a lot of financial pressure to invest in things like mobile technology – and personalization is one use-case that could potentially help pay for that investment.” Customers will be required to opt in when they enter the store and associates will need to be trained in the technology. However, personalization will not arrive in time to benefit stores this holiday season.