In its annual retail holiday series newsletter, Bain & Company, the global management consulting firm, forecasted nominal U.S. retail sales to slow this holiday season, with the lowest growth rate since 2018.
Among other findings in its newsletter, Bain noted that in November and December, unadjusted seasonal sales would grow 3.0 percent year-over-year (YoY), reaching nearly $915 billion, with 90 percent growth from non-store (e-commerce and mail-order) sales; however, adjusting for inflation, real U.S. holiday retail sales growth, Bain noted, would be sluggish at 1.0 percent, well below the ten-year average and the lowest real sales growth since the financial crisis.
According to Bain’s analysis, U.S. retail sales have been relatively slow in 2023, up 4.0 percent YoY, on a nominal basis. The firm found that growth came mainly from e-commerce and select in-store categories, including health and personal care, general merchandise and food and beverage. Other in-store categories decelerated over the past few months, with some declining in overall sales.
With the holiday season approaching, Bain noted retailers will continue to face economic challenges in November and December, stifling holiday sales, with consumers allocating more to “costly” non-discretionary spending.
“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 compared to last year, even as inflation slows. Retailers are continuing novel, targeted marketing approaches, using technologies like generative AI and live streaming.”
While e-commerce and mail orders continue accelerating, in-store sales growth has slowed in recent months, and inflation has decreased spend across categories. Bain expects consumers to pull forward more holiday spending this year, including during October sales, and forecasted holiday sales could benefit from greater consumer spending power as wages, disposable income and stocks all up relative to last year.
“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.”
