Top Holiday Challenges for Small Retailers

retail shopping

Retailers are facing a host of challenges this holiday season, which is probably news to no one who works in retail, or even to consumers frustrated with roadblocks to purchasing. 

To evaluate the extent of the difficulties, Intuit QuickBooks recently surveyed 9,700 consumers and 3,000 small businesses in the U.S., Canada, and the UK. Of the 1,500 small businesses surveyed in the U.S., 70 percent predicted they would experience inventory or product shortfalls, and 90 percent said they would experience shipping and fulfillment woes. Hiring was also expected to be a challenge during the holidays.

Why Is Retail So Difficult This Year?

There are a variety of reasons for ongoing problems in retail, and small businesses are feeling the brunt of the problems. These include:

Ongoing problems with the supply chain. According to a study conducted by SAP SE in October, global political unrest is one of the main factors causing ongoing supply chain issues. Business leaders say their current supply chain issues primarily stem from global political unrest (58 percent), a lack of raw materials (44 percent), and rising fuel and energy costs (40 percent). Only 31 percent cited inflation as a major contributor. Unfortunately, the study predicts that these factors will continue through 2023, so small retailers may wish to spend the early part of the year adapting to these realities to minimize disruption for the 2023 holiday season. 

Shipping problems. By the middle of summer 2021, the average cost of a shipping container had spiked dramatically, quadrupling from what it was in mid-2020. Prices peaked as high as $20,000 or more per container. While prices are down from this historic peak, they are still high. In addition, reduced capacity has led to delays in many goods being shipped, particularly from abroad. It has been estimated that ocean freight is taking approximately five to six weeks longer than it did in 2020.

Labor shortages. Retail managers will be highly familiar with this element. Labor data has shown that during 2022, there are more unfilled job openings than unemployed workers with experience in their respective industries. In the retail industry, low pay has driven many workers elsewhere. Today, the average hourly pay in retail (adjusted for inflation) is $2 less than it was in the early 1970s. Simply put, people are finding jobs that pay more. 

Inflation is pinching customers’ wallets. Soaring utility and grocery costs have put a damper on what Americans are willing to spend this holiday season. The Intuit QuickBooks survey found that two-thirds of consumers reported that inflation would force them to buy fewer gifts this year. At the same time, in the US and Canada, there could be a shift in demand toward experiences, such as entertainment and dining out.

Going forward, small retailers may wish to tailor their business plan to work around these ongoing problems, such as increased automation, modifying their ordering, and finding suppliers that are more insulated against supply-chain problems. It may help to engage the services of a business consultant to future-proof retail business processes. 

DOAAR is a small business bookkeeping, tax, and consulting services firm, with an additional focus on its client’s personal finances. Specializing in bookkeeping, controller, and CFO services, DOAAR’s offering spans daily accounting, month-end close, complex financial modeling, and oversight. From execution to analysis and strategy, DOAAR provides clients with a powerful and fully integrated back-office accounting solution. We have locations throughout California and the rest of the U.S. Visit our website for more information or to contact us.