By Faye Brookman
Retailing woke up with a hangover after the New Year.
The headache hit home when the National Retail Federation revealed that indeed holiday sales were off the mark and below the association’s forecast. NRF said holiday sales expanded by 5.3% to $936.3 billion (that excludes automobile dealers, gasoline stations, and restaurants). That was below the 6% to 8% incline NRF predicted.
Post-Thanksgiving numbers were promising but foot traffic diminished as the holiday approached. It is important to note, the beauty industry is estimated to have performed better than overall retail sales because of its role as an affordable luxury.
“We knew it could be touch-and-go for final holiday sales given early shopping in October that likely pulled some sales forward plus price pressures and cold, stormy weather,” Jack Kleinhenz, the NRF’s chief economist, said when announcing the results. “The pace of spending was choppy, and consumers may have pulled back more than we had hoped, but these numbers show that they navigated a challenging, inflation-driven environment reasonably well. The bottom line is that consumers are still engaged and shopping despite everything happening around them.”
So, what happened? The weather Kleinhenz mentioned was a big factor. Much of the country experienced violent storms. But there was another avalanche of sorts—consumers started realizing they were getting caught under credit card debt and the escalating costs of groceries. In the end, they pulled back on spending. Higher transactions at the grocery checkout and overall living expenses chopped discretionary spending by about $20 billion during the two-month holiday season, according to Craig Johnson, president of retail consultancy Customer Growth Partners and a go-to expert in retail trends.
What does this mean for 2023? During a press session, Kleinhenz suggested the beginning of the year could have some speedbumps, but the second half should be smoother. Consumption is still strong and consumer confidence is on the mend, he said. Acknowledging everyone wanting to know about a pending recession he said there will be one just based on economic cycles. “I can tell you; we’ll have a recession. The question is when will it be? Business cycles repeat themselves. Recession is a normal part of the economic fabric. It will be a challenging 2023. But the evidence suggests that we are slowing, but my view is we are not in a recession.”
Companies at NRF said mastering technology to make operations more efficient and innovative products will move to the front burner in 2023. Research from KPMG’s most recent executive study highlights that push. Seventy-one percent of retail executives are prioritizing supply chain efficiency during the next 12 months, making it the most common priority. The second biggest priority, at 51%, was improving customer experience, followed by improving top-line growth, at 48%. Executives see SKU rationalization as the top (56%) priority to improve the supply chain, followed by modifying the distribution network (42%) and diversifying the supplier base (36%).
Funneling the economic forecast to the beauty industry, the good news is demand for beauty did not wane during last year. What could impact the bottom line for the start of the new year is that profits could be pinched by the heavy discounting that it took to drive sales. On the to-do list for beauty brands should be the implementation of more technology to manage everything from promotional pricing to shipping. But the most important element just might be coming up with innovation and products that consumers want to have whether it be for wellness routines or just to make them feel good with a new shade of lipstick. The category needs to retain its place at a “feel good” purchase.
It is also important to note that the NRF meeting was bustling with 35,000 attendees making it feel like a pre-pandemic event. And all were confident of the health of retailing despite the hiccup of last-minute holiday spending. Retailing is resilient was the battle cry.
ABOUT FAYE BROOKMAN
Faye Brookman has reported on the beauty and personal care industry for more than 35 years. 
She contributes to beauty industry publications including Women’s Wear Daily and CEW Beauty News. Her articles have also appeared in USA Today, The Wall Street Journal and The Washington Post. She also is a frequent moderator for discussions of the beauty business and retail industry.
A graduate of Syracuse University’s S.I. Newhouse School of Public Communications, Brookman resides in Skillman, N.J.
Categorized in: Trends/Insights