'Tis the season: 2023 holiday shipments underway amid consumer spending concerns

The pace of seasonal supply chains is picking up with the nearing holiday season, just as consumers likely begin to tighten their purse strings.

Shipments of Christmas decorations appear to be normalizing amid a broader easing of supply chain bottlenecks for consumer discretionary goods, according to an Oct. 12 analysis by Chris Rogers, head of supply chain research at S&P Global Market Intelligence.

"More space has become available in warehouses — always a particular challenge for products with a high seasonal peak — following a period of inventory destocking by general retailers across their product ranges as a response to higher interest rates and falling profitability," Rogers said.

Improved seasonal supply chains contend with tepid forecasts on consumer spending.

Robust consumer spending

Fueled by pandemic savings and credit, consumer spending increased again in August despite elevated interest rates. Consumers — many of whom will also be hit by the resumption of student loan payments in October — may be reaching the end of their financial rope before year-end as banks increasingly tighten lending standards.

The personal saving rate, which measures personal income minus taxes and expenses, has also been on the decline since May and fell to 3.9% in August, the lowest of any month so far in 2023 and well below pre-pandemic levels.

Still, Walmart Inc. CFO John Rainey said holidays remained a priority for consumers, even as they search for savings in other categories. "Consumers are not compromising on the holiday seasons. They're showing a willingness to spend," Rainey said during the company's Aug. 17 earnings call.

American consumers were still eager to spend in September, with consumer prices rising due in part to strong spending on entertainment.

Christmas decorations on track

So far, imports of Christmas lights and decorations in 2023 appear to be falling in line with previous years, Market Intelligence's Rogers said. Imports of Christmas decorations historically peak in September and October.

Some company executives have hinted at a shift in their Christmas decoration supply chains during recent earnings calls.

"We're […] not the only one, but one of the few that are bringing in seasonal items early," Costco Wholesale Corp. CFO Richard Galanti said during a Sept. 26 conference call. "Everything from decor to trees to toys, that's starting off well so far."

Available data through July reveals a continued reshoring trend among major exporters. Cambodia has steadily increased its Christmas decoration exports to the US, though the country remains far from overtaking China's role in decking the halls of American households.

Tariffs were imposed on certain US imports from China in 2018 amid concerns over China's policies on intellectual property, technology and innovation. That includes lights and decorations.

Halloween shifts

Halloween supply chains followed an accelerated schedule in 2023, as major retailers brought Halloween-themed offerings to consumers as early as July, said Rogers. In stocking products ahead of the usual timeline, retailers may have been trying to sell while the going is good and consumers were still willing to spend on nonessential products.

Evolving consumer preferences also led to pronounced changes within the category. Imports of Halloween outfits and accessories over the three peak shipping months were down 13% compared to the previous year, while decorations and other merchandise only decreased 3%.

Home decor and furniture retailer Kirkland's Inc. is seeing particularly strong demand for Halloween products.

"We believe [that] will be a good indicator for holiday products later this year," Kirkland's President and COO Amy Sullivan said during the company's Sept. 6 earnings call.