Total holiday sales are expected to reach nearly $915 billion, according to Bain & Company.
A new holiday sales forecast is predicting sluggish holiday growth but offers some hope for improvement.
Unadjusted seasonal sales are expected to grow 3.0% year-over-year in November and December, with 90% of the growth coming from e-commerce and mail-order sales, according to Bain & Company’s “2023 Holiday Shopping Outlook” study. Total holiday sales are expected to reach nearly $915 billion.
Adjusting for inflation, however, real U.S. holiday retail sales growth will be sluggish at just 1.0%, well below the 10-year average and the lowest real sales growth since the financial crisis.
According to the study, U.S. retail sales have been relatively slow in 2023, up 4.0% year-over-year on a nominal basis. Bain found that growth has largely come from e-commerce, along with select in-store categories such as health & personal care, general merchandise, and food & beverage. Other in-store categories have decelerated over the past few months, with some categories declining in overall sales.
As the holiday season approaches, retailers will continue to face economic challenges stifling holiday sales this November and December, with shoppers allocating more to costly non-discretionary spending, advised Bain.
"Retailers are facing new challenges this year and are overcoming headwinds from higher interest rates amid increasing debt," said Aaron Cheris, head of Bain & Company's Americas retail practice. "That being said, several tailwinds may boost holiday retail growth with prices remaining elevated as compared to last year, even as inflation slows. Retailers are continuing novel, targeted marketing approaches, using technologies like generative AI and livestreaming."
The firm also predicts holiday sales may benefit from greater consumer spending power, with wages, disposable income and stocks all up relative to last year.
While e-commerce and mail ordering continue to accelerate, in-store sales growth has slowed in recent months, and inflation has decreased spend across categories. Bain expects shoppers to pull forward more holiday spending this year, including during October sales.
To overcome what could be a “humdrum” holiday, Bain recommends that retailers do the following.
•Get an early lead—shopping starts earlier, and customers could run out of budget.
•Lead with value messages and strategic promotions to draw in cautious customers.
•Stress positive common values to bring customers holiday joy in tough times.
•Act fast on AI to personalize offerings and improve customer service.
•Use stores to support profitable online growth —shipping, returns, and trials.
•Put unit sales and profits above price increases —investors want healthy growth.
"Savvy retailers will start early and lead with value messaging—both in terms of price and quality—employing positive commonalities to appeal to potentially cautious consumers this holiday season," said Sarah Irizarry, associate partner in Bain & Company's Retail practice. "Winners will continue to invest amid challenges and focus on new solutions that personalize their offerings and improve overall customer service."