Prepare for the Christmas revenge. After so many people in the US, UK and Europe missed the celebrations last year, consumers are keen to make up for this holiday season.

Let’s just hope the supply chain grunts and coronavirus variants don’t derail the festivities.

Retailers found themselves in the unusual situation of their supply struggling to meet demand. This is the first time that even seasoned traders have seen something like this.

With many people vaccinated and still relatively few restrictions on movement despite the Delta Wave, Americans and Europeans are expected to socialize a lot more this year.

And they are willing to spend the money. Personal balance sheets remain strong, thanks to savings accumulated during lockdowns and continued tailwinds from stimulus payments.

Stores are already gearing up for a busy season. The return of large gatherings means that festive food should be a hot commodity.

Retailers are poised to offer more products, including fine meat and vegan centerpieces, gourmet desserts and pre-mixed cocktails. Other chains offer large and expensive tree cuts to prepare homes for Instagram.

Meeting friends and family is also good for giving gifts. Even the smallest “Secret Santa” gifts could come back when people return to the office.

Mastercard SpendingPulse expects strong demand from US consumers for high-end products and jewelry. This is good news for the big luxury brands, but especially LVMH Moet Hennessy Louis Vuitton, which recently acquired Tiffany.

Overall, Mastercard SpendingPulse expects US retail sales to grow 7.4% in November and December from 2020, and 11.1% from 2019 (She founds its estimates on its own data on customer spending, as well as on other types of payments.)

It does not provide a dollar amount for this projection, which includes restaurants, but excludes travel, cars and gasoline. But at the expected level of expansion, the 2021 holidays would set a sales record.

Unlike past festive seasons, when retailers had to entice people to spend with bargains and other offers, this year demand won’t be an issue. It’s filling the shelves that will be the big challenge.

With manufacturing and port disruptions in Asia, as well as labor shortages closer to home, retailers can struggle to ensure they have enough products that buyers want to buy. . Another source of uncertainty is viral variants such as Delta and Mu.

To avoid shortages, companies are ordering earlier than usual and building up their stocks. Target said it had planned more in advance and ordered larger quantities of goods in advance. As fall approaches, it has $ 2.5 billion more in revenue than a year ago. Rival Walmart’s U.S. inventories were also up 20% at the end of its second quarter.

The past 18 months have shown that it is good to keep some flexibility in your supply chain – for example, ordering a number of dresses now, with the option to purchase more later.

But amid supply disruptions, retailers fear losing sales if they don’t have enough stock at the right time.

Take Victoria’s Secret & Co.: Its ideal trading position is to buy about half of its shares up front, leaving the rest to be bought during the season. This year, it went down with 75 to 80% of its secure stock.

Supporting the biggest trends, such as top-selling toys, also makes sense, even if it means cutting back on other items. This could see stores offering less choice for shoppers.

When it comes to food, supermarkets so far plan to offer a wide range of festive dishes, although fewer variations of treats like pigs in blankets are possible if supply constraints worsen.

These coping mechanisms come at a cost. Housing stocks tie up money, and transporting goods by air, which some retailers seek, costs more than ocean freight.

For fashion companies, ordering more early in the season injects more risk: if clothing retailers bet big on an item and it doesn’t sell, that leaves a lot of inventory to depreciate.

The flip side is that consumers are likely to buy early to get what they want. This means retailers won’t have to cut as much as they once did. Say goodbye to pre-Christmas sales and maybe even some Black Friday deals. Higher margins resulting from fewer markdowns should help offset higher costs.

Stores and consumer groups should make the most of it. Shoppers may be ready to absorb higher prices as Christmas approaches – as everything from artificial trees to children’s clothing becomes more expensive – especially if they make up for the lost 2020 vacation.

But if the traditionally lean days of January are accompanied by continued inflation, including higher energy prices spilling over into household bills, then people may be forced to pull the purse strings.

This will test if the revenge spending lingers longer than the gift wrap.

Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.

© 2021, Bloomberg Reviews


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