63% of Small Retailers Anticipate Holiday Profit, While Corporations Expect Losses

Small retailers targeting Gen Z and Gen Alpha through social media should expect higher profits, according to Capterra’s SMB Holiday Retail Report

Small and midsize businesses (SMBs) are optimistic about the holiday shopping season—a stark contrast to their big-box counterparts that have cut hiring and brace for excess inventory along with expected profit losses. Capterra’s SMB Holiday Retail Report reveals that more than half of SMB retailers predict higher profits this year due to an increase in marketing spend on targeting younger audiences through social media, advance supply-chain planning, and embracing hybrid store models.

“Whether consumer spending supports SMBs’ projections is an open question, though most retailers remain confident that they’ll enter 2023 with healthy holiday profit growth compared to big-box retailers.”

Gen Z and Gen Alpha are driving strong holiday sales for small retailers. Surveyed retail leaders expect that while some older shoppers may forego holiday splurges, spending for kids, teens, and young adults will continue. To that end, 80% of SMB retailers with primarily Gen Z or Gen Alpha audiences expect higher seasonal profits this year, compared to 63% of those targeting millennials, and 54% targeting Gen X and boomer audiences.

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Most small retailers (85%) are increasing their holiday marketing spend on one or more channels, including social media, eCommerce marketplaces, and search engine optimization. Over 60% of small retailers that will advertise for the holidays intend to increase their spending on social media marketing, including 73% of those targeting Gen Z and Gen Alpha and 67% targeting millennials.

Capterra’s report also reveals that retailers that ordered holiday inventory early this year are reaping the benefits and sometimes outmaneuvering big-box stores. Large retailers have canceled billions of dollars worth of stock orders due to poor forecasting. In contrast, three-quarters (75%) of SMB retailers say they’ll have just the right amount of inventory for the holiday season. Almost half (45%) of surveyed retailers got an early jump on ordering their supplies this year.

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“From proactive inventory management to social media marketing, SMBs are pulling out all the stops to get clicks and foot traffic this holiday season,” says Molly Burke, senior retail analyst at Capterra. “Whether consumer spending supports SMBs’ projections is an open question, though most retailers remain confident that they’ll enter 2023 with healthy holiday profit growth compared to big-box retailers.”

Retailers looking to grow their business and retain customers for seasons to come must start with the fundamentals, such as safeguarding their inventory and offering affordable, fast shipping. Getting creative with deals and social media marketing to relevant audiences can make or break profitability for any growing retailer. Visit Capterra.com to read the full report, and learn more about how growing retailers can prepare for this holiday season.