Expectations for the 2022 Holiday Season and 2023 Outlook

This is the month of the holiday season, so why not spread positive vibes? In addition to grand gestures, let's also take a look at the facts, figures and trends regarding business expectations for the 2022 Holiday Season and 2023 Outlook.

With the current pandemic, labor shortages, and record inflation, DHL conducted a survey with managers and executives at U.S. businesses. The majority of businesses expect big changes one way or the other this holiday season: roughly half expect either a substantial increase in business or a substantial decrease. 

Throughout this article, I will connect the dots between the following:

• DHL Q4 Holiday Survey
• Rand Corporation Report / Understanding a new era of strategic competition
• McKinsey discussion paper: Global flows: The ties that bind in an interconnected world

In the third holiday season of the pandemic, small and medium-sized businesses (SMEs) are still feeling the effects. Whether it's disruptions in global supply chains, labor shortages, or inflation, this time of year has presented challenges for the businesses. A dramatic increase in online shopping and e-commerce activity has also created some unexpected opportunities for SMEs in the past three years.

Surprisingly (!), supply chain is considered the biggest challenge in business.

Inflation is a close second to supply chain challenges. In response to a question 46% of respondents said supply chain challenges would be a challenge this holiday season. The biggest concern for them was delays, followed closely by inflation, which nearly doubled from last year.In 2021, 35% of respondents said it was their biggest concern.

There will be significant changes in holiday sales Year Over Year.

In comparison to the 2021 holiday season, half of the respondents expect their business' holiday sales to increase or decrease significantly in 2022. 27 percent expect an increase from last year to this year, while 23 percent expect a decrease from last year to this year. 40% of respondents expect no significant change despite inflation.

The pressures of inflation are being passed on to consumers.

60% of companies said they planned to raise their prices to offset rising inflation. In addition, 78% of respondents increased their product prices due to inflation.

2023 is considered a global year.

In response to the question of what would most benefit them, nearly half (45%) of respondents anticipate expanding globally in 2023. SMEs remain optimistic about expanding into new trade markets and eager to reach new international consumers despite global trade challenges. 30% of business owners believe the Inflation Reduction Act will be most beneficial in 2023.

Being honest, I'm skeptical about this "globalization outlook" considering my earlier article "What the Next Era of Globalization Will Look Like." (Link below)

Overall, the survey says small and medium-sized businesses are optimistic about the holiday season and global trade market going into 2023, despite challenges. 

The Rand Corporation released a report last week (November 30th) that discusses the economic, geopolitical, and military aspects of U.S. competition with China and Russia, and identifies strategic policy recommendations and investment opportunities.

When we combine some of the findings of this report with the DHL holiday survey, we get a much clearer picture of what to expect in 2023.

Competition is not a result of chance; it is a result of clashing interests and objectives between major powers. Identifying the interests and objectives of the competitors is the first step in evaluating the strategic competition. By examining relative goals and objectives, we gain an initial understanding of the essence of the emerging conflict: It is a contest over the character of the international system rather than over the outcomes of particular geopolitical disputes or forms of military power.

An interconnected world is defined by global flows.

We live in an interdependent world, connected by global flows of goods, services, capital, people, and data. Global value chains have been built on these flows, resulting in increased prosperity worldwide. The pandemic, Russia's invasion of Ukraine, and years of rising tensions between China and the United States have however led some to speculate that globalization is already at an end. The latest analysis reveals a more nuanced reality. Global interconnections remain strong, and flows have remained resilient despite recent turmoil. Additionally, no region is self-sufficient. Managing the risks and downsides of dependency is the challenge, since products are concentrated in their places of origin, so it is crucial to leverage the benefits of interconnection while managing the risks and downsides of dependency.

No region is close to being self-sufficient. Every region imports more than 25 percent of at least one important type of resource or manufactured good that it needs.

CONCLUSION: As always, supply chain algebra involves a lot of variables. Trends might deviate from indications, such as speculation about globalization. It is therefore very important to think about an agile strategy.

- There is an air of optimism

Despite challenges, most SMEs (small and medium-sized businesses) remain optimistic about the holiday season and the global trade market going into 2023, according to the survey findings.

- Understanding a new era of strategic competition is the key for making decisions in 2023 and beyond

It is a contest over the character of the international system rather than over the outcomes of particular geopolitical disputes or forms of military power.

- We continue to live in an interdependent world

Often, the same flows that create dependency are also a source of competitive advantage.

Explore opportunities for building system-level resilience. Global corporations can be more resilient if they form public–private or private–sector partnerships that leverage their key roles in global flows to achieve systemic resilience. Companies that are smaller can work with trade associations or other organizations to promote their interests

Hopefully, these findings will resonate with your expectations for the holiday season of 2022 and the outlook for 2023. It would be great to hear different opinions and your thoughts on this.

#supplychain #digitalization #longtermplanning #supplychainresilience #riskmanagement  #globalization #localization