Originally published by GlobeSt
Holiday retail shopping is expected to start earlier, offer with more promotions and see more sales despite the challenges of a tight labor market, lingering supply chain issues, stubborn inflation and soft consumer sentiment.
CBRE is projecting a 6.9% increase in Q4 retail sales year-over-year to $1.48 trillion, despite inflation straining consumer budgets.
“Consumers can expect greater costs this holiday season, evidenced by an 8.2% annual increase in the Consumer Price Index (CPI) in September,” CBRE reported.
CBRE said the most notable rising expense could be the cost of a homemade holiday dinner, which is projected to average $103 this year compared with $84 in 2020, according to data from the American Farm Bureau Federation and the St. Louis Fed.
Families Seek Bargains for Their Budgets
Jim Bieri, principal, Stokas Bieri Real Estate, tells GlobeSt.com that right now, families are struggling to pay the bills and meet their expenses.
“I expect online discounts to start early on overstocked items as customers look to beat rising inflation and a deepening recession by buying early,” Bieri said. “Online sales will continue to play a strong role in holiday shopping, as families look for bargains to stretch their budget.”
Expect Plenty of Markdowns from Nordstrom
CBRE said an “ill-timed slowdown in July retail sales has left some retailers with excess inventory that may prompt discount offers to consumers.”
It reported that Nordstrom, for example, estimates $200 million worth of markdowns over the second half of 2022.
“However, retailers could benefit from excess inventory due to an extended holiday shopping season,” according to CBRE.
Data analytics firm Placer.ai expects a repeat of last year’s early holiday shopping season when weekly sales in October grew by 3.2% compared with 2.5% growth in November.
An Earlier Start to the Holiday Season
Joe Coradino, CEO, PREIT, tells GlobeSt.com that PREIT is gearing up for robust in-person shopping with an earlier start to the holiday season than in years past.
“The traditional holiday season timeframe for comparison is continuing to morph,” Coradino said. “Due to this, mall owners and retailers need to be stocking product sooner.
“Most importantly for our business, while there have been improvements in supply chain, we think customers will seek surety of in-person purchases. Toward this end, we will be offering customers rewards for shopping in our centers this holiday season.
“At the same time, we have seen a healthy shift of consumer dollars toward dining in our portfolio. Naturally, we expect some of these dollars to be reallocated to goods during the holiday season.
Coradino said that he is watching employment and wage levels, which remain “strong” right now, and know there are inflationary challenges impacting many consumers.
“That said, we think this year is the true return to holidays past and customers are looking for celebratory festivities with their loved ones.”
Parking Lots Are Already Busy
Mark Whiting, mall manager at Simon Property Group’s Northshore Mall, tells GlobeSt.com that shopping in stores is still the preferred way to shop.
“People crave connecting in real life and find joy in discovering the new and different,” Whiting said. “It’s too soon to project sales but we’re already seeing lots of shopping bags, busy Santa set reservation activity and busy parking lots – which is always a good sign and indicator of a busy holiday shopping season!”
Season to Be ‘Promotionally Driven’
Chris Butler, CEO of National Tree Company, said this holiday season will be “extremely” promotionally driven and that in general there will be consumer softness.
“We are seeing a ‘return-to-store’ post-COVID after consumers did a lot of their shopping online,” Butler said. “Over the long term, online shopping will continue to grow, but this year there is a softening based on strong comps from last year.
“Last year, holiday spending was pulled forward due to the supply chain and consumers worrying about lack of availability of goods. We believe that consumers will start spending much later this year.
“The most important thing will be the ability to react in real-time, using data to make in-season decisions to either spend more promo dollars or buy back if volume remains soft.
“We have not seen any issues with the labor market today. We have given our hourly workers a temporary ‘inflation increase’ but have not experienced any other issues.”
Compared to Last Year, This Season is ‘Flipped’
Dave Cheatham, president, X Team Retail Advisors and Velocity Retail Group, tells GlobeSt.com that he expects a more “normal” holiday retail season.
“The supply chain is improving, as we are now able to get merchandise out of the ports,” Cheatham said. “We should see more aggressive pricing during the holidays. I am not saying it will be completely back to normal, but it will be closer to what is expected.
He also expects that people will shop earlier online and in-store according to their preferences and will benefit from aggressive promotions and holiday deals.
“Last year, inventory was so low that retailers were not in any position to offer consumers special markdowns. The retail industry saw high demand for merchandise at all levels and low inventory.
“This year is flipped. Retailers will have a better level of inventory versus last year’s supply chain drought. However, the consumer may fill their shopping list with needs and staples for the family, rather than wants and aspirational luxury items.
“I expect value stores and the basics, such as clothes for the kids, to do well. One thing is clear, economic uncertainties will decidedly play a role in this season’s outcome.”
Retail Foot Traffic Picking Up
Avison Young’s Craig Leibowitz tells GlobeSt.com that according to Avison Young’s Vitality Index, when looking at retail foot traffic across the U.S. the week of Oct. 27, relative to the same week in 2019, he is seeing retail foot traffic at 71.5%.
“As a predictive element, when looking at tourism and hospitality foot traffic, we are seeing a recovery rate of 74.2%. which is a great indication of future demand. We expect this to increase into the holiday seasons.”
Retail Rent Collections at Favorable Levels
Mark Sigal, CEO of Datex Property Solutions, tells GlobeSt.com that three factors make him bullish about holiday sales.
“One is that rent collections in terms of timely rent payments by retailers to retail portfolio owners remain strong for both national and non-national retailers, a trend that has only increased in the past couple of months, and which is outpacing 2021’s numbers. This suggests merchants will have favorable footing to market to customers during the holiday season.
“Two, sales per square feet numbers across the 21 merchant categories that we track in Datex Tenant Track has shown a 71% increase in the number of merchant categories showing sales growth vs. the quarter prior, suggesting favorable tailwinds for merchants.”
The Tenant Track is a monthly report of rent collections, retail sales and occupancy cost trends from thousands of shopping centers, and tens of thousands of retailers nationwide
“Three, the job market remains strong, suggesting that consumers will be feeling flush, and will spend favorably during the holiday season,” Sigal said. “With an amelioration of the supply chain issues that impacted merchants’ ability to fulfill orders last holiday season, we believe this bodes well for the holidays.”
Investors Seek Recession-Resilient Retailers
Daniel Herrold, investment sales broker at Northmarq, following the acquisition of Stan Johnson Company, tells GlobeSt.com that, in general, most investors who are investing in single-tenant or multi-tenant retail are looking at both the historical performance of the tenant, as well as future trends and forecasts for the industry.
“Investors generally lean their preference on those retailers who are recession-resilient and have strong e-commerce platforms so they can capitalize on both in-store traffic and online shoppers,” Herrold said.
“If the forecasts point to a strong holiday season for retailers, that only affirms their investment in the sector. Strong holiday projections aren’t likely to increase investor interest or volume in the sector, but it should certainly help to maintain current investment volumes.”
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