Price inflation to push worldwide online holiday sales to $1.2 trillion

Key Points

• Holiday sales are expected to increase 7% this year to $1.2 trillion worldwide

• Price inflation and global supply chain disruption will force the cost of products to increase 20% 

• “Buy now pay later” financing will double this year to 8% of all the transactions worldwide

Online shoppers worldwide will be buying fewer gifts this holiday season, however, they will spend more, consumer interaction software developer Salesforce said on Wednesday.

The projection said the e-commerce sale could rise 7% during the holiday season in November and December, and Salesforce forecasted it to reach a record $1.2 trillion globally.

This year, the growth will significantly slow down from last year, which surged 50% from 2019, largely driven by pandemic restrictions.

Costlier products

The San Francisco-based company said that even as the actual amount of dollars spent is seen rising, shoppers will mostly purchase fewer items, mainly due to price inflation and global supply chain disruption.

The rise in consumer price will make gifts 20% more expensive compared to last year, which will force the number of orders to fall 2% worldwide, the report said.

Due to the rise in prices, customers will seek out to use buy-now, pay-later financing services. Salesforce said the number of purchases using postpaid financing would double this year, reaching 8% of all transactions globally. 

Retailers and manufacturers around the world are closely monitoring the price of goods as it inches higher due to rising freight costs. Moreover, the labor shortage is forcing manufacturers to pay higher wages, coupled with costlier raw materials is forcing the manufacturing capacity to decline.

Even as demand has largely remained robust, some companies are missing out on sales as they struggle to keep their inventories stocked.

“With persistent global supply chain disruptions, retailers must draw consumers to their online and physical stores early in the season to fulfill demand and capture holiday spending,” said Rob Garf, VP, and GM of Retail, Salesforce.

The report said that U.S. retailers are expected to face a cost increases of $223 billion during the season, mainly due to lower unemployment and a lack of stimulus checks to help consumers deal with the higher costs. 

“Product availability is going to be the Grinch that stole Christmas,” Garf told Bloomberg in a conference call. “If you see a gift you want, buy it now. Don’t wait, or you’ll risk it being unavailable later in the holiday season.” 

As people are returning to the office and there are minimal restrictions related to social gatherings, customers are expected to buy apparel and luxury items. Contrary to that, home-related goods are also expected to be among the most popular purchases this holiday season as the majority of the employees are still working from home.

Picture Credit: LifeWire