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88% of Brands & Retailers Are Counting on 2023 Holiday Sales Accounting for up to 40% of Annual Sales

Sales Targets Will Likely Be Missed, as 46% Either Don’t Have Enough Cash to Finance Holiday Orders or Are Unsure If They Do, Reveals Creditsafe Study

The holiday shopping season is one of the most anticipated and important sales periods of the year. Consumers count on price markdowns, special deals and promotional offers. Meanwhile, brands and retailers have high hopes for the 2023 holiday season contributing significantly to their annual sales targets. But a new Creditsafe study reveals that these hopes could be dashed, as many brands and retailers have been grappling with mounting debt, excess inventory and cash flow problems this year.

The ‘Economics of Holiday Sales’ study reveals that 88% of brands and retailers are counting on holiday sales driving up to 40% of their annual sales. But it costs money to make money. And as our study reveals, nearly half (46%) either don’t have enough cash in their accounts to finance their holiday orders or are unsure if they do.

Matthew Debbage, CEO of the Americas and Asia for Creditsafe, said: “It’s a positive sign that brands are setting ambitious goals for the holiday season. But achieving these goals doesn’t just depend on offering steep discounts and selling higher volumes. Other factors will play a major role, especially since it’s been a rough few years with a pandemic, recession, rising inflation, rising interest rates and decline in consumer spending. That’s why financial planning, data analysis, cash flow forecasting, inventory planning and supplier due diligence are all so critical. Without this type of planning, brands and retailers will be at a higher risk of increased operating costs and debt, while excess inventory will eat into their profits, cash flow will suffer and annual revenue targets will be missed.

But it’s not just about making sure brands and retailers have enough cash and have analyzed sales volumes, inventory orders and operating expenses from the last holiday season. It’s also about keeping a watchful eye on how your suppliers manage their finances. Their financial mismanagement and cash flow issues can lead to factory shutdowns, product shortages, lost customers and declines in sales – all of which will increase storage costs, lower profit margins, exacerbate debt and potentially result in bankruptcy.”

Read More: SalesTechStar Interview with Stuart Ford, COO and president at DropIt Shopping

Key findings from the research study include:

  • Order volumes, stock and competition have retailers on edge this holiday season: While 24% of brands are worried about seeing lower order volumes and average order values this holiday season, another 22% are concerned they won’t be able to get enough stock from suppliers to meet customer demand. Plus, 22% are worried that they’ll lose out on sales to competitors who offer better prices and deals. These problems could be magnified ten-fold given the fact that 28% of consumers plan to spend less this holiday season than they did in 2022.
  • The high cost of inventory glut: storage, markdowns, declining profits: Our study found that 78% of the respondents still have 50% of their stock leftover from the 2022 holiday season. As the study’s respondents reported, 23% said excess inventory from the 2022 holiday season has resulted in increased maintenance and storage costs and 22% have seen their profit margins decline as a result. This will be a problem if this leftover inventory doesn’t sell this holiday season.
  • Suppliers’ financial mismanagement threatens to derail holiday sales: Most (83%) brands and retailers have had to diversify their supply chains in the last 12 months because their suppliers had financial issues or went bankrupt. This could have been avoided if supplier due diligence was taken seriously. But our study found that over half (56%) don’t run credit checks on suppliers to make sure they have strong enough finances to complete holiday orders. This means brands and retailers could fall into the same problem this holiday season and not have enough inventory to meet customer demand – hurting both their holiday sales targets and annual sales targets.
  • Third party risk management and ethical sourcing beliefs conflict with each other: Our study found that brands and retailers are conflicted between their ethical beliefs and their risk management practices. On the one hand, 52% of the respondents would immediately cancel contracts with and payments to suppliers who use forced labor and/or child labor. But over half (53%) admitted they don’t run compliance checks on suppliers to prevent this from happening.

Read More: 82% Of Rebates Miss the Mark. Here’s How To Build a Good One

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