CONSUMERS EXPECTED TO FACE HIGHER PRICES THIS HOLIDAY SEASON

Consumer prices are projected to rise up to 20 percent this holiday season, according to new consumer insights and predictions for the 2021 holiday shopping season released on Wednesday by CRM leader Salesforce.

The company expects digital sales to once again top $1 trillion globally, but consumers, retailers, and suppliers are predicted to face rising costs and decreased inventory due to pressure on the global supply chain.

Increased costs appear to be front and center this year for retailers, suppliers, and consumers — for a multitude of reasons. Three key forces that have exerted significant pressure on the global supply chain are manufacturing capacity, logistics costs, and the labor shortage. In total, Salesforce predicts that the retail industry in the U.S. will face an extra $223 billion in the cost of goods sold this holiday season.

With inventory issues and higher costs fueling inflation and cutting into margins, expect to see higher retail prices for merchandise. As consumers contend with these higher prices, global “buy now, pay later” usage will likely account for 8 percent ($96 billion globally and $20 billion in the U.S.) of online orders this holiday season, up from 4 percent of orders during the 2020 holiday season.

One of last year’s biggest challenges was fulfillment delays to consumers’ doorstep. While concerns persist this year, it is much less pervasive. Overall, Salesforce projects a 94 percent decrease in packages at risk of being delayed, or 40 million packages worldwide, down from 700 million last year. Just five million packages are expected to be at risk of delay in the U.S.

These predictions come as consumers place larger and fewer orders. Last-mile carriers have also added year-over-year capacity, and 40 percent of all U.S. retailers now have a brick-and-mortar presence offering buy online, pickup in-store (BOPIS) options.

Plus, while online sales growth is expected to be moderate compared to last year’s historic 50 percent surge and more in line with pre-pandemic growth trends, digital shopping habits formed during the pandemic will persist and drive total sales to record rates for this holiday season.

Salesforce forecasts a 7 percent year-over-year overall growth in global digital commerce for November and December and 10 percent growth in the U.S. Total digital sales are expected to reach a record high of $1.2 trillion globally and $259 billion in the U.S.

“While last holiday was defined by the last mile, this year is expected to be dominated by the first mile,” said Rob Garf, vice president and general manager of retail at Salesforce. “With persistent global supply chain disruptions, retailers must draw consumers to their online and physical stores early in the season to fulfill demand and capture holiday spending.”