The US holiday season which starts from Halloween that falls on 31st October and goes up to New Year’s Day – 1st January, is particularly a lucrative season for retailers and has the potential to make or break retail business. It’s when consumers spend the most and retailers gain the most. Though retailers and brands are full of optimism but going by the previous nine months, it’s a challenging year as budget-conscious shoppers have pulled back from discretionary spending.
US getting ready for holiday rush
Last year, despite rising inflation, surplus inventory and high interest rates, US holiday sales grew to US $ 936.3 billion, up by 5.3 per cent compared to 2021. This year, Deloitte (a leading global financial advisory company) expects holiday retail sales to increase between 3.5 per cent and 4.6 per cent for a total of US $ 1.54 trillion to US $ 1.56 trillion. Year over year, e-commerce sales are expected to climb between 10.3 per cent and 12.8 per cent, bringing online holiday sales to be between US $ 278 billion and US $ 284 billion.
As per e-commerce protection provider Signifyd, holiday apparel sales in the US are projected to grow by 9 per cent, which is a larger growth compared to that in 2022 of 2.2 per cent.
According to 2023 Holiday Shopping Trends Service Report from technology provider Celigo, consumers plan to start shopping in September and October with 69 per cent of shoppers expecting retailers to provide more personalised offers in addition to good deals and cost savings this year. Hanna Andersson, a children’s clothing brand, has made holiday pajamas available in September for those who want to get a head start, along with personalisation and segmentation and likewise many retailers in the US have started by offering holidaywear.
US retailers expecting prosperous and promising Holiday Season 2023
Retailers are on their toes for this holiday season offering huge discounts and deals, improving their services to cater to all types of customer needs.
Clothing businesses like Nike and Foot Locker are investing more in wholesale in order to grab sales wherever they can. Brands are also banking on wholesale to clear inventory surpluses caused by supply chain problems and decreased customer demand.
Nike, which has mostly focused on its direct-to-consumer strategy since 2017, has re-entered relationships with DSW and Macy’s this month and is also collaborating with Foot Locker once more. L.L. Bean is expanding its wholesale presence through customers such as Dillard’s and Moosejaw. Richer Poorer, which has a presence in Bloomingdale’s and Nordstrom, was acquired by Francesca’s earlier this year so that the apparel retailer can take advantage of the wholesale push in department stores.
Retailers are also on a hiring spree for this season. Target said it would hire nearly 100,000 employees for the holiday season. Amazon.com announced plans to hire 250,000 workers for the holiday season, higher than 150,000 it planned to bring in last year. Macy’s said it would hire more than 38,000 full and part-time seasonal workers, fewer than the 41,000 workers it had announced to hire in 2022. M&S has launched its annual Christmas recruitment drive to fill in 10,000 new customer assistants’ posts to support in its stores over the festive period. UPS is prepared to hire over 100,000 workers for deliveries since millennials and Gen Z are increasingly looking at online purchases to procure their goods.
Apparel retailers are also looking at Black Friday to garner sales since data from Buy Now, Pay Later (BNPL) service Square and Afterpay’s Annual Festive Forecast reveals that 30 per cent of consumers plan to have all their holiday shopping done by the end of October. One in three (36 per cent) plan to shop in November, with 11 per cent waiting for Black Friday or Cyber Monday to grab a deal.
Retailers and brands like Nordstrom, Amazon, Saks Fifth Avenue, Bloomingdales, Everlane, Skims and more are now offering early Black Friday clothing deals on everything from high-waisted jeans, soft pajamas and the best shapewear to fall coats and laptop bags.
JCPenney has made supply chain optimisation ‘a big part’ of its reinvestment efforts and it will continue to do so during the holidays. Personalised texting is a major focus of Forever21’s Black Friday marketing plans. Fashion retail chain Francesca has pushed its store purchases through SMS, email and social media campaigns, including paid ads. Crate & Barrel Holdings is building on its in-store fulfilment programs by encouraging people to head to their local store location to avoid delays, potentially missing out on receiving their orders. Target is also opening new small-format stores and locations in denser urban areas. This is all in a bid to entice potential customers to their physical stores and prevent unnecessary delivery costs.
Abercrombie plans to ramp up marketing in the back half of its financial year for Hollister, as well as press on the gas for Abercrombie. The company recently expanded its target age group from 22 to 40
Discounts will be a big selling point due to less discretionary income of customers this holiday season. H&M’s upmarket brand COS has started to offer 20 per cent sale online and in stores for knitwear and outerwear clothing.
Amazon kicked off the holiday shopping season with a two-day exclusive shopping event for Prime members. On the first day of Prime Big Deal Days, US Prime members purchased more than 25 million items with same-day or next-day delivery, with hundreds of thousands of items delivered within four hours of purchase and apparel was one of the best-selling categories.
For online sales, consumers continue to turn to increasingly popular Buy Now, Pay Later options like Affirm and PayPal that provide an alternative to credit cards. Buy Now, Pay Later is expected to drive a record US $ 17 billion in online spending this holiday season, up by 17 per cent from 2022, a study by Adobe stated.
During the crucial US holiday season, online sales are expected to rise 4.8 per cent from a year earlier as retailers go all out to woo inflation-hit consumers, a report by Adobe Analytics stated. The sales are also expected to grow at a much faster pace and hit US $ 221.8 billion for the period between 1st November and 31st December compared to US $ 211.7 billion last year.
Potential roadblocks ahead
Retailers have made some progress with their preparations, but they still face many challenges as the holiday season approaches. Challenges in the market have been seen, particularly in terms of sustaining lower inventory levels and matching consumers’ tastes.
Many retailers like Bestseller and Crew Clothing in the United States have acknowledged decreasing growth, blaming it on a combination of high inflation and changed consumer tastes. Apparel prices in the United States increased 3.1 per cent between August 2022 and August 2023.
Levi’s reported a 4 per cent increase in selling, general and administrative expenses (SG&A) spending for the third quarter. Nike’s SG&A expenses increased by 5 per cent. Urban Outfitters anticipates SG&A growth to outperform sales growth in the coming quarter, while American Eagle Outfitters anticipates SG&A growth in the mid-teens in the second half of its fiscal year.
The Indian scenario
The Indian scenario is a mixed bag, with some buying houses and exporters seeing growth while others see minor decreases. Interactions with a few buying houses as well as exporters reveals that the trends are optimistic despite some fluctuations being there in the US market. The optimistic trends are, as discussed, either due to Indian companies having a surplus of customers to even out lowered order numbers, or the product segmentation is such that lower orders are not causing a large dip in the market. Due to these factors, Indian companies have seen a positive result this season.
Sarbajit Ghose, Managing Director at Laguna Clothing, has said that his organisation is experiencing a good holiday season and seeing continuous growth. Because of working with a lot of customers, it has reduced the risk of there being less orders from some customers by creating a balance between several customers. There is also a benefit being seen from the China+1 strategy where brands are consciously moving away from China and seeing India as a better opportunity. Thus, this transfer from China ensures that there is still growth despite fluctuations in inventory and market conditions. In case of linen products, Sarbajit says that the duty is nearly 0 per cent, so it is almost a duty-free product which then reduces the impacts of inventory and market conditions. Cotton and linen products are taken into consideration more seeing India as a good manufacturing base for these.
There has been a minor decrease in orders as compared to last year but overall there is still positivity in the market, views Naren Goenka, Owner of Texport Industries Ltd., further adding that woven products are seeing demand and there is overall demand for apparel, be it in kidswear, womenswear or menswear. The demand has not been compartmentalised into any specific categories, showing that the market remains robust for all product segments, despite the minor slowdown in overall orders.
E Karthikeyan, Owner of Crowntex Clothing, a Tirupur-based buying house that also has an office in the UK and ships menswear, womenswear, kidswear and home textiles, reveals that for this holiday season, there has been an increase in orders, although that increase has not been at the level it was in 2022. In terms of products, they have been getting maximum orders for kidswear. Also, in terms of material, the industry seems to be moving away from recycled polyester towards more sustainable options since that is also what their customers are asking.
Despite economic downturns, supply chain disruptions and changing consumer preferences, there are positive signs and the order placement is robust. This has been the opinion of Sameer Thapar, CEO, Montrose India (a leading buying house) who sees the emphasis growing more on innovation and sustainability. Montrose is majorly catering to the US and Canadian markets and shipping knitwear to leading retailers in the US namely — Macy’s, Sears, Kohl’s and JCPenney.
Sanjay Shukla, Team Leader at Triburg is optimistic about the market despite a minor decrease in orders this season. Wovens is the segment that has been the most in demand according to his observations. This segment has grown and is a promising one that is making the holiday season list from customers, despite reports of a general slowdown.