- While some supply-chain issues have subsided, retailers are dealing with a fresh set of challenges.
- Those holding a glut of inventory will likely offer heavy discounts this holiday season.
While many of the supply-chain woes that hit small businesses in past year have eased, they'll have new challenges to face ahead of this holiday-shopping season.
Early data indicated that Americans will be holding onto their wallets tighter this holiday season. Inflation is informing the way 85% of adults in the US shop, whether they're looking for discounts or buying less, the market-research firm Morning Consult found. Meanwhile, 24% of small businesses surveyed by Kabbage reported that holiday sales will determine their survival.
Saturday is Small Business Saturday, an event created by American Express aimed at supporting small-business owners during the holiday shopping season. Across the country, independent retailers and restaurants will host special deals to incentivize customers to choose them over big-box stores. Last year, the credit card company estimated Americans spent $23.3 billion at participating businesses.
Shifting habits and higher inventory and shipping costs mean small-business owners will have to strike a careful balance between supply and demand. Keeping too much inventory is costly, but not having enough could lead to missed sales opportunities.
"The savviest of small businesses prepared in advance for supply challenges this holiday season," Nicole Leinbach Reyhle, the CEO and founder of the retail publication Retail Minded, said.
Ify Yvonne, the founder of the loungewear brand Nkeoma, is one of those business owners. She began her holiday-season planning in the summer. "The main thing that we always focus on is having inventory and planning way ahead of schedule," she said.
Here's what experts say retailers can expect this holiday-shopping season and how small-business owners are preparing.
Supply chains meet overstock
While supply-chain issues have eased up, if only temporarily, retailers have learned to expect the worst. Inventory levels are a top concern for small businesses this holiday season. Verizon's State of Small Business Report found that 56% of the business owners surveyed were very or somewhat concerned with ensuring inventory levels or fulfillment schedules amid continued supply-chain disruptions.
Dara Weiss, the cofounder of candle brand L'or de Seraphine, sells her products direct-to-consumer and through wholesale accounts. She said manufacturing and shipping timelines have been so unpredictable that she ordered more inventory than she probably needed to be sure she'll have enough for the holidays.
"Everybody is more sensitive now than in the past to having that product early," she said, adding that wholesalers will cancel orders if they're not confident they'll receive the inventory in time.
Many retailers are holding a glut of inventory now that delayed shipments are coming in. "It's a strange pendulum swing" from last year when demand was high and many retailers worried they wouldn't get inventory in time, said Yoni Mazor, the cofounder and chief growth officer at Getida, a firm that specializes in auditing Amazon seller data. Mazor said the company has worked with more than 10,000 merchants since launching in 2015.
'Putting less faith in trends'
Small-business owners are combating higher inventory levels by stocking up on bestsellers and evergreen inventory and limiting the seasonal items they may have relied on in previous years.
"A lot of these merchants are putting less faith in trends and more faith in what they know will move," Reyhle said.
Yvonne doubles down on Nkeoma's top-selling robes and pajamas during the holiday season to ensure they don't sell out, but she doesn't stock as many new styles. "I don't like to do too many new productions during that time because that's the slowest time for shipping and it's very expensive," she said.
If anything does sell out mid-season, Yvonne said she's more comfortable reordering stock than she was last year, although it is a last resort. "So far the cost of shipping is so much better and more reliable than last year," she said.
Appealing to tighter budgets during inflation
Mazor expects the inventory glut will incite retailers to offer heavy discounts. "Some of them are considering taking a loss because they need the demand of the holiday to get rid of their positions," he said.
But many small-business owners may not be able to offer steep discounts, Reyhle said. "One of the biggest concerns is their competitors, the big retailers," she said. "They can't always offer the same price promotions or marketing initiatives that many of their competitors do."
Yvonne said she plans to offer up to 50% off, while Weiss said the highest discount she'll offer is 30% off. High-income shoppers are more sheltered from inflation, and both retailers said that they're less concerned about decreased spending because their products are geared to luxury shoppers.
To appeal to more budget-conscious shoppers, business owners will have to get creative, lean on their loyal customer base, and tap into their communities, Reyhle said.
She suggests partnering with noncompetitive, like-minded businesses by offering holiday incentives that boost sales for both parties. For example, an athletic-apparel brand can offer a free class at a local yoga studio with purchases over a certain amount. Meanwhile, the yoga studio could offer store credit with the apparel brand for every five classes taken.
"They're working together to introduce new customers and support their existing customers with some great incentives," she said.