2023 Holiday Shopping Is off to a Slow Start According to Recent Survey

According to the latest CNBC Supply Chain Survey, companies in the logistics sector are bracing for a relatively calm peak holiday shopping season as opposed to the usual seasonal rush.

Thousands of retailers across the nation are reportedly adopting a strategy of cautious inventory management. Amidst the prevailing economic climate, purchasing decisions are being taken with a degree of restraint that’s not typically associated with the holiday season.

Superstore heavyweight Target, for example, has already shared its recent declining results. The retail corporation is experiencing a trend of consumers reducing expenditures, even on everyday grocery items.

The freight market is not immune to these shifting dynamics, either. Concrete evidence of this comes from the trucking firms, which are operating under conditions that have been likened to those experienced during a severe recession.

As the holiday shopping season kicks off, a distinct trend of smaller orders among retailers is emerging. The CNBC Supply Chain Survey suggests a growing apprehension about potential weakness in consumer spending that could mark this year’s festive season.

C.H. Robinson, a global logistics company that serves around 7,500 retailers, reported that customers are demonstrating unprecedented caution. Noah Hoffman, the vice president for North American Surface Transportation at C.H. Robinson, mentioned that factors such as persistent inflation and mounting uncertainties regarding the U.S. economy, coupled with concerns over a potential recession, are influencing this caution.

The national inventory-to-sales ratio, on the surface, seems to have rebounded to pre-pandemic levels. Nevertheless, Hoffman points out that this is primarily skewed by the largest retailers. He elaborated, “Further upstream in the retail supply chain, many wholesalers are also still carrying excess inventory.”

The economics team at C.H. Robinson perceives the economy to be on the brink of a critical shift in consumer spending. They believe that this shift could be attributed to Americans depleting the savings they accumulated due to pandemic stimulus funds. This prediction, if realized, could significantly impact the dynamics of the upcoming holiday season’s consumer spending trends.

“We’re already seeing this emerge in some leading indicators like loan and credit-card delinquencies.”

Noah Hoffman, C.H. Robinson, via CNBC

2023 Holiday Shopping Is Affected by Logistics

With the holiday season approaching, logistics companies are noting a significant shift in the type and value of goods being transported into stores. A noted 67% of these firms reveal that the majority of products they are currently moving are promotional or lower-cost items. A more significant 83% of these companies have not observed an increase in the transportation of higher-priced goods.

This trend was reflected in the CNBC Supply Chain Survey, conducted from Oct. 21 to Oct. 31. The survey included logistic executives from leading firms such as C.H. Robinson, DHL Global Forwarding Americas, SEKO Logistics, Kuehne + Nagel, OL USA and ITS Logistics. These companies manage the flow of freight manufacturing orders and transportation, providing valuable insights into current market trends.

In the survey, the products experiencing the steepest decline in transportation demand were, in order of prominence: appliances, furniture, household goods, luxury items, and aspirational luxury items.

Paul Brashier, vice president of drayage and intermodal at ITS Logistics, attributes the current state of play to the Federal Reserve’s aggressive policy of raising interest rates. This policy has led to a significant cooling of the housing market, with a noticeable impact on new home purchases.

Retailers are also not able to offer as many discounts on popular items. “Retailers are finding that the items they rely on to bring people into the store and boost sales are costing them more,” Hoffman stated. “That’s limiting how much they can discount so we’re working with them to find savings elsewhere in their supply chains.”

One proposed strategy involves seeking purchase orders that can be consolidated in a retailer’s transportation schedule. This approach could potentially result in significant savings for shippers — up to 10% to 15% — providing a viable way to mitigate the impact of these shifting market dynamics.