Economic headwinds will cool holiday sales in 2023

After enjoying two consecutive years of sizzling holiday sales, retailers should be preparing for a cooldown this December. 

Though retail revenue is expected to top last year’s holiday season by 3%, that uptick will pale in comparison to the 14.6% shopping surge in 2022 and last year’s 7.5% increase, according to CBRE’s just-released Holiday Retail Trends Guide.

While the U.S. unemployment rate is higher than it was at this time last year, it remains low at 3.9%. But the personal savings rate recorded in August—also at 3.9% of earnings—is well below the long-term average of 8.8%. Credit card usage, meanwhile, is up 14% over a year ago.

Also placing a burden on spendable income is the resumption of student loan payments after a three-year pause. Most of these borrowers—who owe a total in excess of $1 trillion—are young people low on the salary scale who spend higher percentages of their incomes for basic needs.

“Despite economic headwinds, retailers can still expect to have a solid holiday sales season, just not quite at the clip of past years,” said Laura Barr, Americas retail leader for CBRE. “Additionally, retailers’ efforts to streamline the handling of inventories and processing of returns are expected to drive improved product availability and customer experiences.”

Retailers, too, have better adapted to managing their holiday inventory levels due to lower container volume at U.S. ports. They are not requiring as much industrial space as they did last year, having increased onshore manufacturing. They have also become more efficient in the handling of returns, according to CBRE.

More than 50% of respondents to CBRE’s 2022 Global Live-Work-Shop survey said they prefer returning online purchases in-store, compared with just under 20% who prefer returning items by mail. This could lead to more in-store foot traffic, as online returns have been increasing.