Holiday retail sales are off to a strong, early start this year. The early surge would seem to validate forecasts that a consumer base generally flush with savings and higher asset wealth would heed warnings of looming inventory shortages to stock up on holiday gifts ahead of the usual rush.
It also suggests the moderate inflation already creeping into the market is not yet much of a purchasing deterrent despite the lowest consumer confidence levels in a decade when it comes to concerns about the rising cost of living.
Retail sales soared 16.3% year-over-year in October, and sales are 21.4% ahead of pre-pandemic levels for the comparable period, according to the Department of Commerce.
What happens as retailers move into the traditional sweet spot of the holiday sales period? Well, that is a multi-billion-dollar question.
The earlier-than-usual sales bump and continuing supply-chain disruption could exacerbate the lean store shelves and limited e-commerce stock — at any price — suppliers saw coming long before consumers caught wind of the problem.
The solution for many shoppers could be right in the palms of their hands: Gift cards.
The dramatic growth of holiday gift cards started long before pandemic-fueled demand and the subsequent supply chain crisis threatened to make it even harder to stuff holiday stockings with the usual holiday stuff.
Expect an extra-large gift card bounty this season, in part because they ease the stress of finding that right gift and in part because each year more people prefer them.
Payment service Blackhawk Network reported holiday shoppers surveyed plans to increase gift card spending on average by 27% to about $270 per person, which would account for about 40% of total gift purchases.
Global Industry Analysts reported accelerated gift card sales growth should reach $4.1 trillion by 2027, about 50% higher than its pre-pandemic estimate.
This season’s gift card growth could fuel opportunities for post-holiday promotions beyond the normal clearance tactics to capture card redemption share. Consumers on average spend 40% more than the value of a gift card when they redeem them, according to Blackhawk.
Of course, the extension of the holiday shopping season into the first quarter afforded by gift cards won’t magically fill store shelves and e-commerce warehouses in January and February. But it could buy suppliers and retailers more time to optimize overdue stock when it finally arrives. Plus, consumers redeeming cards during the depth of winter might be in less of a rush to get goods than they were heading into the holidays.
Reprogramming marketing and merchandising strategies to cash in on this year’s holiday gift card boom is yet another challenge for a journey from factory to consumer wrought with challenges.
During a period that has rewarded suppliers and retailers that can pivot swiftly and effectively, another short-term opportunity with an even bigger long-term payoff could be in the palms of their hands.
