Consultant Insight: Holiday peak season and the rocky road to normal

It’s a rocky road back toward “normal” supply chains as the industry emerges from pandemic conditions. As rates and volumes continue to fluctuate , making it difficult to forecast demand, this holiday peak season will be another challenging one to predict. Several forecasts have already been released and they offer a wide range of expectations , but something they all have in common is growth — and that’s good news for carriers, consumers and economies. However, inflation will likely remain high through the end of the year, and how much more shopping consumers will do remains a key question. For retailers, concerns about higher inventory levels will result in more promotions to unload bloated inventories, potentially reducing retailers’ anticipated profits — if consumers spend. Retailers plan to start the holiday season in October , a trend that began during the pandemic to ensure consumers could purchase items amid supply shortages as well as help smooth out last-mile delivery carriers’ capacity availabilities, which were limited. [caption id="attachment_69752" align="alignright" width="404"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] But it’s different this year as shortages have eased, and last-mile carriers’ capacity availability has expanded . Still, this week, Amazon announced Prime Early Access Sale to give members “a chance to kick off the holiday shopping season early with hundreds of thousands of deals,” according to a Sept. 26 release from the company. The event takes place Oct. 11-12. Meanwhile, Walmart announced price savings for the holiday season along with three returns options —extended return window until Jan 31 for goods purchased on or after Oct. 1, curbside returns, and Walmart+ return pickup from home. Target and other retailers will likely follow with their own holiday announcements. Carriers prepare for peak Carriers are ready, but at a higher price. “We are ready to deliver for peak. We will remain nimble in leveraging peak surcharges to balance demand and the capacity of our network as we monitor volume trends,” FedEx Chief Customer Officer Brie Carere told analysts on Sept. 22 . Meanwhile, UPS announced plans to hire 100,000 seasonal workers, the same number as last year . UPS will also carefully monitor demand and capacity via surcharges. But, perhaps in a dig at FedEx, UPS noted in its announcement that “after achieving superior on-time performance during last year’s peak holiday season, topping its two major competitors for a third consecutive year,” the company is again gearing up to meet customer needs. Last year FedEx struggled with on-time performance due to a worker shortage. Holiday forecasts Inflation will likely take a bite out of retailers' sales this year. The year-over-year growth rate is expected to be positive but at lower levels than what we’ve seen in the past couple years. Consulting firm KPMG estimates holiday retail growth of 4.2%, down from a 14.1% increase in 2021 reported by the National Retail Federation, while Bain forecasts 7.5% nominal growth in U.S. holiday retail sales. Meanwhile AlixPartners, another global consultant, expects a 4% to 7% increase in sales over the past year’s season. According to a survey it conducted of more than 1,000 American consumers, 30% plan to spend less this year than last, and only 17% plan to spend more. Around 39% plan to buy at least half their purchases on sale. The number of respondents who plan to do the majority of their shopping online is 40%, up 10% from a similar 2019 survey. Meanwhile, Deloitte forecasts that holiday retail sales will likely increase between 4% to 6%, compared with 15.1% in 2021. “The lower projected growth for the 2022 holiday season reflects the slowdown in the economy this year. Retail sales are likely to be further affected by declining demand for durable consumer goods, which had been the centerpiece of pandemic spending,” said Daniel Bachman, Deloitte’s U.S. economic forecaster. “However, we anticipate more spending on consumer services, such as restaurants, as the effects of the pandemic continue to wane. Inflation will also help to raise dollar sales, although retailers will see less growth in sales volume,” Bachman added.

Consultant Insight: Holiday peak season and the rocky road to normal

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