By Rieva Lesonsky
In good news for the nation’s retailers (online and in-store), the National Retail Federation (NRF) recently released its holiday spending forecast, showing holiday spending is predicted to set new records. Between November 1 and December 31, American consumers will likely spend between $957.3 billion and $966.6 billion, an increase between 3% and 4% from 2022.
E-commerce sales will increase even more. The online shopping numbers (included in the total) are expected to reach between $273.7 billion and $278.8 billion, up from $255.8 billion last year, an increase of 7% to 9%.
While the projected growth rate of these record-setting numbers is less than last year’s, the NRF attributes that to the stimulus spending of 2022. The current growth trajectory harkens back to pre-COVID-19 years (2010 to 2019), which saw an average annual increase of 3.6%.
Given that a few weeks ago, the U.S. gross domestic product (GDP) for the third quarter boasted the fastest increase in almost two years (a 4.9% annualized rate), the NRF’s predictions are not shocking. Consumer spending grew 4% for the quarter and was responsible for more than half of the total GDP increase.
Consumer spending keeps the economy afloat
Consumers have kept the economy afloat, says Jack Kleinhenz, the chief economist at the NRF, who adds, “Consumers remain in the driver’s seat and are resilient. [But they’ll]
be looking for deals and discounts to stretch their dollars.”
Retailers aren’t the only winners here. Kleinhenz says, “Service spending growth is strong and is growing faster than goods spending. The amount of spending on services is back in line with pre-pandemic trends.”
The NRF also just released its latest holiday survey, which is separate from the holiday sales forecast, revealing that “consumers plan to spend $875 on core holiday items including gifts, decorations, food, and other holiday-related purchases this year.”
Officially, the holiday season has been defined as starting November 1 and ending December 31. However, the NRF holiday survey reported that 43% of consumers had already begun their holiday shopping in October (or even before) and will likely continue through January.
Holiday spending helps small businesses survive
The continued surge in consumer spending is a panacea for small business owners. A special holiday edition of the Small Business Now report from Constant Contact shows how crucial to financial success these last three months of the year are to small businesses.
According to the study, the holiday season is much more vital to small businesses than most shoppers realize. Constant Contact says, “Holiday sales make up more than 25% of annual revenue for half of the nation’s small businesses”—and retailer (online and in-store) “are twice as likely as other businesses to generate at least 50% of their revenue during the holiday period.”
Most consumers don’t realize their importance to the financial survival of many small businesses—only one-third think their holiday spending significantly impacts small businesses.
Some other highlights of the Small Business Now report:
- 54% of small business owners say they receive the most support from their communities during the holiday season.
- Supporting small businesses and their community is the top reason consumers decide to visit or buy from a small business.
- After a customer visits or buys from them during the holiday season, small business owners feel thankful (78%), happy (69%), and hopeful (37%).
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Acquiring (and keeping) new customers during the 2023 holiday season
Attracting new customers is the biggest goal for most small businesses during the holiday season, and consumers “are open to being courted,” according to Constant Contact.
- Small business owners’ top goals at the holidays are finding new customers (63%), retaining current customers (52%), and planning for next year (45%).
- 84% of consumers surveyed will likely visit a small business they’ve never purchased from this holiday season.
- 87% of consumers say they’re more likely to return to a small business in the future after visiting/buying from them during the holidays.
- The top marketing tactics used by small businesses to increase their customer base during the holidays are personalized emails and texts (52%), social media ads (42%), and sales or discounts (40%).
Unfortunately, the report also shows that most “small businesses don’t have an effective marketing strategy to nurture, retain, and convert their holiday customers in the new year.” And small business owners know it—only 18% believe their strategy is “highly effective,” and 14% say they don’t have a customer retention strategy.
But consumers want to be marketed to at this time of year.
- 81% say they’re more open to receiving emails or texts from a small business after visiting or buying from them during the holidays.
- But only 49% get an email after making a purchase, and 27% say they never hear from the business again.
The good thing is, even though the holiday sales season has kicked off, you can still craft and send effective holiday email and text marketing messages.
Small businesses hire temp workers this holiday season
And the consumer spending leads to positive news for American workers. The NRF expects retailers to “hire between 345,000 and 450,000 seasonal workers” for 2023’s holiday sales season.
About the Author
Rieva Lesonsky is CEO of GrowBiz Media and SmallBusinessCurrents.com and has been covering small businesses and entrepreneurship for over 30 years. Get more insights about business trends by signing up for her free Currents newsletter.
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