Consumers plan to do more in-store shopping this holiday season, but retailers may struggle to keep shelves stocked, according to CBRE Group Inc.’s. The annual guide highlights trends in retailing and consumer shopping and how those will impact commercial real estate.
Dallas-based CBRE (NYSE: CBRE) predicts that brick-and-mortar shopping will be more popular this season — increasing by 8% — than in previous years due to the supply chain challenges with online orders. Online sales are growing slower than in previous years, CBRE said. Due to higher costs of products and hard-to-find items, gift cards are expected to be popular during the holidays this year.
Available warehouse space in the U.S. is at a historic low, reaching 3.6%, per CBRE. Therefore, some retailers might not have as much inventory as is necessary, which could lead to stock shortages. However, some of the biggest retailers — such as Target and Walmart — have reported strong inventory levels going into the holiday season,.
“We expect shoppers to return to brick-and-mortar retail in a big way this holiday season,” said Bill Wright, CBRE’s retail leader for the Americas. “E-commerce sales will grow too, but retailers are focused on building in-store inventory in preparation for higher foot traffic than we’ve seen in the last few years.”
CBRE anticipates an increase of 8.4% from last year’s retail sales, calculated from November to December and excluding auto, gas and restaurants. Brick-and-mortar retail sales are expected to increase by 8%, a 10-year high, after in-store shopping was down last year due to Covid concerns. Online shopping is expected to rise between 10% and 15%, according to a collection of industry estimates, CBRE found. For comparison,predicted online shopping would increase a whopping 40% year over year during the first holiday season of the pandemic.
“Strong holiday sales will boost recovery of the retail real estate sector, which has already rebounded faster in Houston than in other parts of the country this year,” said Sydney Dixon, senior associate with CBRE Retail in Houston. “With the supply chain disruptions, it will be very interesting to see whether retailers are able to restock their shelves in time for the pre-Christmas rush. For the last-minute shoppers like myself, gift cards may be the best option this year.”
With the low availability in warehouses and other supply chain challenges, some retailers are using costly air freight to get products in on time, according to CBRE. Rising costs of transportation and supply chain issues will ultimately be passed along to the consumer.
“If the resurgence in retail spending in 2021 thus far is any indicator, the stage is set for particularly strong, perhaps even record-breaking, holiday sales. However, to fully capitalize on this seemingly boundless potential, retailers and their distribution networks must solve the current supply chain challenges,” said Brian Ashby, first vice president with CBRE Retail in Houston. “Savvy shoppers will look to locally sourced (i.e. North American) goods and products in an effort to negate backlogged ports filled with foreign goods and shop in-store to [ensure] they get their hands on desired products.”
While the holiday season is normally the biggest hiring period of the year for the retail industry, labor shortages are another issue currently facing companies. In August, there were an estimated 1.2 million job openings in retail, a 62% year-over-year increase, according to the U.S. Bureau of Labor Statistics, CBRE reports. The annual retail employment turnover rate is 81.6%, up from 66.6% in 2010 and the lowest level in 10 years.
“There will be challenges for retailers, but those that are the most creative in their product offerings and disciplined in their supply chain strategies will be well-positioned for a major boost this holiday season,” said Brandon Isner, head of Americas retail research for CBRE. “For consumers, many traditional shopping practices were put on hold last year or significantly changed. We anticipate that the retail center will regain prominence with shoppers looking for the experiences they missed, but consumer[s] should also expect prices to be a bit steeper.”