Businesses hopeful as holiday shopping revs up

Nov. 24—Slammed as much as their customers have been this year by inflation and supply line disruptions, Scottsdale and East Valley small business owners hope the Christmas shopping season will bring them a little cheer.

Buoying those hopes are reports like one earlier this month by Catherine Cullen, senior director of industry and consumer insights for the National Retail Federation and NRF Chief Economist Jack Kleinhenz, who predict healthy holiday sales as consumer spending continues to reinforce economic activity.

"Almost regardless of what's going on in the economy, consumers want to celebrate holidays," Cullen said. "They want to give gifts to their loved ones, and they want to make this time of year feel special."

But while Kleinhenz predicted holiday retail sales would grow by 6-8% this year, the federation noted that its research also shows "consumers are feeling the impact of inflation in different ways.

"Higher-income consumers are planning to spend more than they did in 2021, while lower- to middle-income individuals are more cautious when setting budgets for the holiday season," the federation said, echoing similar predictions by other experts.

Regan Amato, vice president and retail specialist for the global real estate investment company Jones Lang Lasalle said, "Local performance and sales numbers among metro Phoenix restaurants, retailers and most services are strong" and that the Valley is "in a very good position going into the holiday season, which traditionally only further boosts sales."

"In-store shopping has experienced something of a renaissance this year, beating online ordering for the top shopping method," JLL's annual holiday shopping survey said. "After two years of dealing with the pandemic by staying close to home, consumers are ready to get back to shopping in stores."

Against this backdrop, area business owners are keeping their fingers crossed even though the pandemic gave way to continuing supply line disruptions, higher costs and staffing shortages.

"After everything opened back up again, we were charged around a 7% surcharge added to the delivery fee," said Ana Wells, owner of urbAna in the Scottsdale Quarter. "I think the main driver of that was the cargo ships that were getting stuck and the delay on that."

The surcharge has impacted long-standing businesses like The Paper Place in Old Town.

"I just had to go re-order our bags and that was a 20% increase," said The Paper Place co-owner Betsy Hendricks. "I mean, 18 to 20% is almost the standard in everything we're buying and because of that, we had to increase the prices."

Wells said she had to do the same, explaining, "My vendors are increasing their prices a little bit and because of that, we've had to raise our prices."

Businesses across the East Valley reported similar challenges.

Tiffany Shultz, who started Sip and Shop boutique store at the SanTan Village in Gilbert in November 2020, said inflation forced her to raise prices between 5% and 10% on various products such as wood.

Rebecca Hill, executive director of the Downtown Chandler Community Partnership, said businesses "do feel like the season has started a little bit slower, but I think it's still too early to tell if it's really the impact from inflation."

"In some instances, there have been some delays for shipping for sure and I think everybody's feeling the additional cost."

Because of this, Hill said businesses have become more proactive in ordering products to sit on shelves this holiday season.

But many retailers also found ways to mitigate drastic cost increases.

Lacey Barta, who owns The Boutique in downtown Mesa said she has managed to circumvent significant wholesale cost increases by "sourcing correctly," resulting in only a 3% to 4% increases in her prices.

She said she carefully selects suppliers in both Arizona and across the country with an eye toward value.

"I haven't had that huge of an issue," Barta said of her product costs. "And it's because we're sourcing where we need to be sourcing."

Labor shortages another issue

Though staffing shortages have been a consistent thorn in area businesses' side for at least a year, owners find particular challenges as they beefed up their staff to support an expected influx of shoppers flooding into their doors during Black Friday and Small Business Saturday as well as most days from now until Christmas.

Though she'd like to add four more employees, Shultz said finding employees has remained difficult.

Shultz said she's fielded about 50 applications recently but only three showed up for an interview.

"We have a good staff," Shultz said. "But I'm always looking to hire more people because it has been difficult to find people."

Barta also is relying on her core staff to push her through the holidays.

With two full-time employees and three part-time, Barta said she's prepared for the holiday shopping season but could use the extra help and would eventually like to expand.

"In the past few years, they've been great and consistently getting better, and were just growing," Barta said. "Even though the economy might be a little scary right now, it doesn't mean that we have to be scared about holidays or anything."

On the other hand, Julie Judd who serves as the store leader for Altar'd State in Scottsdale Quarter said she was able to hire seven new employees for the holiday season.

Back in stock

Area stores have begun to see products return to shelves.

"I think what we're seeing this year is a lot of easing of the supply chain challenges that people had last year and the retailers have some inventory on their shelves this year, which is great," said Scottsdale Quarter marketing manager Christina Calhoun.

Barta said it wasn't long after the 2021 Christmas shopping season that "we were already planning for next holiday because we know fresh what didn't work, what did work."

"With what is thrown at us, we pivot, and so we've got a lot of plans here for this holiday and we're excited," she said.

Added Calhoun, "One thing that we're noticing that's different this year is that everyone's starting their holiday much earlier.

"A lot of stores began putting up their holiday displays immediately after Halloween and I think the reason that we saw that was because everyone finally had that inventory in stock and they want to make sure they get it out on the shelves, so people had plenty of time to shop early," she said.

Shultz said inflation does not seem to have impacted customer activity.

"We've still seen the same number of customers in the same volume that we've seen in the past, despite having to raise prices due to the economy right now," Shultz said.

Overall, Shultz said she saw a rebound in her sales ahead of last year with consumers going out "ready to support local... We're seeing that again this year, So far despite inflation and the way the economy is, we're ahead of where we were last year."

Barta said the clothing store has also seen a gradual increase in sales, a sign of a return to normal.

"The pandemic just really made people want to get out and go shopping," Barta said. "And so, it really kind of helped with that and growing ourselves."

Area retailers also are ratcheting up their appeals to customers to think local when they start looking for gifts.

"I'm a big advocate of shopping small and the small businesses are what makes the heartbeat in the communities," said Lisa Garber, owner of Galicia Fine Jewelers in Scottsdale.

"We are the ones that people come to when they need donations here in the school, for charities or anything else. So, I always remind people — ever so kindly and ever so respectfully — to remember us not just when you want to ask for something."

Despite the anxiety among business owners as they gear up for the holiday shopping season, many are still hoping for the traditional jolt it receives from the Black Friday rush as well as the next day, Small Business Saturday.

Judd says she and her team at Altar'd State are excited to open their doors for its first Black Friday sale.

"It's our first year, so we're excited," Judd said. "Our plan is just to wow everyone with the fashion that we have over there and honestly, it's the most fun day of the year for me. I'll bring in candy canes and hand them out to everyone and I'll be wearing a Santa hat."

Merchants also are hoping that area municipalities' special tree lighting celebrations will entice crowds to downtown shops.

And the global tax and audit consulting brand Deloitte said retailers also can take heart in one fact.

"The bottom line is that despite the obstacles, consumers will likely find ways to make the holidays special," it said. "And savvy retailers likely will be the ones who find ways to engage with evolving spending priorities to shine this holiday season."