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Pandemic fallout could slow US online holiday spending growth

FE Team | Published: October 21, 2021 10:19:34 | Updated: October 23, 2021 22:08:08

Shoppers carry bags of purchased merchandise at the King of Prussia Mall, United States' largest retail shopping space, in King of Prussia, Pennsylvania, US on December 8, 2018 — Reuters/Files

US online holiday spending is expected to grow at its slowest pace in at least eight years, as product shortages, higher prices and lingering pandemic-related uncertainties threaten to put a strain on the shopping season.

Adobe Analytics forecast an average 10 per cent growth or $207 billion in online sales in November and December, compared with a record 33 per cent jump in 2020 when people chose to shop from home, instead of travelling to stores during the pandemic, reports Reuters.

After grappling with virus restrictions on stores for the better part of last year, retailers are now dealing with a slew of pandemic consequences including a clogging of global supply chains that could lead to a shortage of everything from Nike shoes to Apple iPhones during the holiday quarter.

The lack of clarity around what items could run out of stock, and when, is making it hard to determine whether product shortages could push consumers to shop more online or in-store, Adobe Digital Insights lead analyst Vivek Pandya said on Wednesday.

The expected shortages and the risk of a resurgence in Covid-19 cases are also part of the reason for Adobe's broader spending forecast range, between a 5 per cent and 15 per cent gain, Pandya added.

The 2021 growth, expected to be partly driven by product price hikes, would be the smallest rise since Adobe started tracking holiday spending data in 2014.

With companies raising product prices due to skyrocketing commodity and transportation expenses, consumers are expected to pay 9 per cent more between Thanksgiving and Cyber Monday this year, Adobe said.

It said out-of-stock messages on retailers' websites were up 172 per cent at the end of July from pre-pandemic levels, with apparel stocks depleting the fastest, followed by sporting goods, baby products and electronics.

To cope with the potential inventory shortfalls, retailers are offering fewer discounts and looking to spread out the selling season by encouraging shoppers to start their holiday shopping early this year.

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