The 2024 holiday shopping season is well underway, with just under a month left for consumers to complete their treasure hunts for gifts, whether via goods or experiences, for their friends and loved ones. Forecasters estimate an increase in retail sales of 2.4% to 3.6% over last season—a solid, if below-average, performance amid lingering inflation.
Supply Chain and Distribution
- E-commerce’s share of total retail sales sits at 21.8%, surpassing its previous spike during the pandemic. Sales within 4Q are on average 29.5% higher than the average of 1Q to 3Q across the last 15 years.
- With the ever-growing e-commerce share of total retail sales, a wave of development in modern logistics space has outpaced development of retail space — a factor of five times from 2014 to 2023.
Retailers and Consumers
- Traditionally, retailers stock up massive supplies of goods in October and November, which often led to end-of-season sales and massive discounts. However, the ratio of inventory to sales has since reduced over time.
- In 2023 the ratio was 1.17, which is lower than the ratios for both manufacturers and for merchant wholesalers. This indicates that the retail industry has improved at clearing inventory by way of sales, increasing the chances of retailers to make a profit.
- The role of the store has expanded, as most consumers prefer to buy digitally and pick up and/or return items in-store.
Outlook
- Advances will continue to be made within retailers’ supply chains to improve efficiency. Although the footprint of logistics space has expanded exponentially over the last decade, construction of new retail space remained relatively flat. This puts most of the burden on the industrial side.
- Holiday retail sales have outpaced e-commerce sales by 275% since 2020, thus retailers must ensure their supply chain and distribution are within striking distance of their targeted communities.
- Overall demand for logistics space has reset to levels below the pre-2020 baseline, as retailers unload excess space and curb expansion plans to better align with consumer demand.
- Retailers carrying less of an inventory bump by the holiday season benefit in two significant ways: lower inventory carrying costs and mitigating the harm end-of-season discounts can have to the bottom line.
- As more consumers prefer click-and-collect purchases and in-store returns, retailers must adapt by dedicating more space for returns, equipping associates with better in-store logistics technology and focusing on seamless mobile app performance.
