Small biz owners are both hopeful and anxious about the holidays

All signs point to a relatively solid holiday season for America’s small businesses. Yet, owners of these businesses appear to have a collective anxiety about the months ahead.

They have their customers to thank on both counts.

American kept up their spending over the summer, witness the government’s estimate that the economy grew by 4.9% in the third quarter. Yet even as they open their wallets, consumers seem pessimistic about their finances. A recent AP-NORC poll found that many Americans are concerned about their financial future.

In turn, after two years of a COVID-fueled sales boost, owners fear consumers have run through their pandemic savings and might cut back this holiday season or shop online again after getting out and supporting local businesses. Inflation is still a concern and interest rates are higher. And there’s no predicting the weather.

“When we talk to retailers there’s a lot of uncertainty,” said Max Rhodes, CEO of Faire, an online wholesale marketplace many small retailers use to buy inventory. “The combination of higher inflation and rising interest rates are making consumers nervous which in turn makes retailers nervous. It continues to be a weird economy. The data looks good, but nobody feels good about it.”

Rhodes said his customers started to search for “Christmas” items starting in mid-August, compared with mid-September last year. Buying early can relieve the stress of supply-chain bottlenecks and gives owners a chance to restock if something sells out early in the season.

For many retailers, the holidays can account for more than half their annual sales. Holiday retail sales are expected to increase between 3% and 4% in 2023, according to trade group the National Retail Federation. But the total value of those sales will grow more slowly because inflation has moderated. In 2022, sales jumped 5.3%, according to the NRF.

Early indications are that sales have kept pace with prior holiday seasons, with consumers making purchases that help them temporarily put aside their financial concerns.

Shop owners are seeing “comfort” items sell well: high-end candles, plush stuffed animals for adults, particularly the brand Jellycat, all things sparkly (like disco balls), and anything Barbie- and Taylor Swift-related.

“We’re calling it a ‘bright future’ (trend) right now because there’s so much heaviness in the world,” said Rick Haase, owner of eight Patina gift shops in St. Paul and Minneapolis in Minnesota. ”Bright and happy is really the trend that we’re seeing as a whole, this kind of happy escapism and things that make you feel good about life.”

Higher-priced candles are in demand at Measure Twice, a card and gift store in Brooklyn, New York. Owner Kimberley Yurkiewicz said the store had strong sales in 2021 and 2022 and sales are up again so far this year. She said people are paying $45 to $65 for candles, up from a range of $25 to $45 last year.

But she said it’s hard to gauge numbers when it feels like things are constantly being disrupted, be it COVID, up and down tourism, or recession fears.

“We still don’t feel like we’re operating under ‘true’ or ‘regular’ or ‘normal’ numbers,” she said. “Any kind of accurate analysis has been a real challenge the last few years in that you can overthink it all. …It’s hard to know what crisis-free sales reporting should look like.”

Andy Wilkerson, co-owner of Blackhawk Hardware in Charlotte, North Carolina, got a sales boost in 2021 and 2022 as holiday shoppers focused on outdoor holiday decorations for their home in lieu of celebrating with guests. But entertaining is back this year, and the store is seeing an influx of shoppers buying place settings, ornaments and indoor decorations.

So far, sales are on par with last year, which is “pretty remarkable, especially considering the last couple of years were unnaturally inflated because so many people were staying home or changing holiday traditions,” he said. “The fact that we have stayed steady this year is a good sign."

Some owners still bear the scars of supply-chain driven shortages during the pandemic. Heather Haynie, co-owner of Rock Paper Scissors stationary store in Charlottesville, Va., had inventory shipped in sooner and put out holiday items earlier this year – at the beginning of October rather than mid-month. She says customers have learned to “buy something when they see it.”

Haynie also said that after having her best two holiday seasons in 2021 and 2022, she’s worried that customers might be lured by deals from bigger online players such as Amazon.

“Now that we are a bit more removed from the COVID years when our amazing customers felt strongly about getting out and supporting local, I fear that as life gets busy again, they fall prey to the convenience of online shopping,” she said. The NRF expects online and other non-store sales to rise 7% to 9% this year. The figure rose 9.5% during the holiday period in 2022, according tot he NRF.

Sierra Wallis, owner of Sq/Ft gift shop in Decatur, Ga., who had her best sales years in 2021 and 2022, said her sales are up again so far this year, but spending per customer is down. Instead of one customer spending $200, 10 customers are spending $20 each.

“It’s kind of like we’re chasing our own tail,” Wallis said. “It’s like we’re busier, but we’re having to work harder for it.”

The holidays are essential to her business because they account for two-thirds of her annual sales. Wallis said she won’t be doing much reordering during the holiday season because that can be unpredictable. She’s already ordered all of her holiday inventory and hopes to sell through that by mid-December. Then she’ll restock with gift items that can sell not only during the holidays but in January and beyond.

“We’re just crossing our fingers, we feel good about it,” she said. “But, you know, I look at the numbers (every year) and it just always feels impossible, like, how are we going to sell that much in the next two months? But then it happens.”

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