Holiday Retail Sales Growth Predicted to Be Sluggish

Global consultancy Bain & Co. forecasts nominal U.S. retail sales to slow this holiday season, with the lowest growth rate since 2018. Unadjusted seasonal sales are expected to grow 3.0% year-over-year (YoY) in November and December, reaching nearly $915 billion, with 90% of the growth coming from non-store (e-commerce and mail-order) sales. However, adjusting for inflation, real U.S. holiday retail sales growth will be sluggish at just 1.0%, well below the 10-year average and the lowest real sales growth since the financial crisis.

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According to Bain's analysis, U.S. retail sales have been relatively slow in 2023, up 4.0% YoY, on a nominal basis. Bain found that growth has largely come from e-commerce, along with select in-store categories such as health and personal care, general merchandise, and food and beverage. Other in-store categories have decelerated over the past few months, with some categories declining in overall sales. As the holiday season approaches, retailers will continue to face economic challenges stifling holiday sales this November and December, with shoppers allocating more to costly nondiscretionary spending.

"Retailers are facing new challenges this year and are overcoming headwinds from higher interest rates amid increasing debt," said Aaron Cheris, head of Boston-based Bain's Americas Retail practice. "That being said, several tailwinds may boost holiday retail growth, with prices remaining elevated as compared to last year, even as inflation slows. Retailers are continuing novel, targeted marketing approaches, using technologies like generative AI and livestreaming."

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While e-commerce and mail ordering continue to accelerate, in-store sales growth has slowed in recent months, and inflation has decreased spend across categories. Bain expects shoppers to pull forward more holiday spending this year, including during October sales, and the firm predicts that holiday sales may benefit from greater consumer spending power as wages, disposable income, and stocks all go 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's Retail practice. "Winners will continue to invest amid challenges and focus on new solutions that personalize their offerings and improve overall customer service."

Meanwhile, turkey brand Butterball recently shared a rosier outlook for 2023 Thanksgiving celebrations. According to the brand’s annual "Thanksgiving Outlook Report", gatherings are expected to return to pre-pandemic levels, with turkey on the menu for an overwhelming number of households. The survey found that 89% of consumers plan to host or attend a celebration of the same size or larger this year, with an anticipated average gathering size of nine people.

Butterball’s research indicates that 79% of consumers who plan to celebrate Thanksgiving expect high prices to affect their plans in some way. That said, only 16% of hosts said that they'll will ask guests to share the expense of the meal, and less than a third (29%) will tap guests to bring part of the meal.