After a solid holiday season, small businesses face uncertainty in 2023

The 2022 holiday season has been better than expected for small business owners, despite inflation rising to 7.1% this year. Consumer enthusiasm for the holiday season has not waned, despite rising prices for many items and the looming possibility of a recession.

Mastercard Spending Pulse^TMs U.S. retail sales, excluding autos, were reported to have grown 7.6% year-over-year this holiday season from November 1 to December 24.

The report revealed several important trends.

• E-commerce growth continues: Preliminary insights show that online sales grew by 10.6% year-on-year. E-commerce accounted for his 21.6% of total retail sales this holiday season, up from 20.9% in 2021 and 20.6% in 2020. Tech-savvy small businesses and start-ups created during the pandemic took advantage of the acceleration of digitization. They invest in secure e-commerce, adopting electronic ordering and payment systems such as Slice.

said Greg Kowalczyk, owner of Fabio’s Bistro in Funwood, New Jersey. “It’s convenient for users and directs customers to us. It’s an easy app. You order before you leave work and the food is ready when you get home.”

Online shopping continues to grow not only because of convenience, but also because of the discounts available online. Even people who visit physical stores can be seen comparing prices on their mobile phones. Retailers are also reducing the time spent shopping by encouraging customers to buy online and pick up at local stores. So if a customer wants to buy something and pick it up right away, they can do it, but if they want to browse, they can browse with the confidence that they’ve already found what they want in retail. increase.

• Weekend shopping is the best: Black Friday remains the top spending day of the 2022 holiday season, up +12% year-over-year (excluding automobiles). This was followed by him Saturday in December, according to Mastercard SpendingPulse.^TMsreports national retail sales for all payment types, including cash and checks.

“Inflation has changed the way American consumers approach holiday shopping,” said Michelle Mayer, chief economist for North America at Mastercard Economics Institute. “Consumers and retailers have weathered the season well, showing resilience amid mounting economic pressures.”

• restaurant rebound: In-person dining continues to show strong momentum, with restaurants growing 15.1% year-over-year, based on continued demand for experiences. From get-togethers with colleagues to dinners with friends and family, consumers have gone on vacation during the holiday season. Part of this may be related to stagnating demand for dining and travel opportunities that were discarded during the pandemic lockdown. In general, people are desperate for a return to normalcy, and in 2022 many are reverting to their previous behavior.

Jack Kleinhenz, chief economist at the National Retail Federation (NRF), said on Nov. I have the power,” he said. Since the holiday season has started. “Consumers typically buy new clothes for travel occasions and buy food and items to bring as gifts. It could be positive for retail sales.”

Even in times of inflation like this, small business owners are reinvesting in their companies. In his latest NFIB Small Business Optimism survey (November 2022), 55% of owners reported capital expenditure in the last six months, an increase of 1 percentage point from October. Nearly 4 in 10 (39%) purchased new equipment, 19% purchased vehicles, 12% improved or expanded facilities, 11% purchased new fixtures and furniture, 5% It states that it has acquired new buildings or land for expansion.

The question is whether business owners will continue to reinvest as the Federal Reserve suggests rates are expected to rise again in 2023. Bank approval rates for SME loans are declining. Financing from non-bank lenders is still available, but the interest rates charged by these lenders are usually higher than those charged by banks.