Following a strong holiday season, small businesses face uncertainty in 2023.

The 2022 holiday season turned out to be better than expected for small business owners, despite inflation rising to 7.1% this year. Despite higher prices for many items and fears of a looming recession, consumer enthusiasm for the holiday season has not waned.

Mastercard SpendingPulse^TM U.S. retail sales for the period from Nov. 1 to Dec. 24, excluding automotive, rose 7.6% year-over-year, which is from Nov. 1 to Dec. 24. MasterCard measures in-store and online retail sales across all payment types and is not adjusted for inflation.

The report found some key trends:

• E-commerce continues to grow.Online sales rose 10.6 percent compared to the same period last year, preliminary impressions show. This holiday season, e-commerce accounted for 21.6% of total retail sales, compared to 20.9% in 2021 and 20.6% in 2020. They accept electronic ordering and payment systems like Slice and have invested in secure e-commerce.

“When customers use the app a lot, Slice gives them discounts and coupons for free items,” says Greg Kovelczyk, owner of Fabio’s Bistro in Fanwood, NJ, who gets most of his business through the app. “It’s user-friendly and drives customers to us. It’s a simple 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 the convenience but also because of the discounts available online. Even people visiting brick-and-mortar stores can be seen checking price comparisons on their phones. Retailers are making the most of the time they spend shopping by encouraging customers to shop online and pick up at their local store. So, if customers want to buy something and pick it up quickly, they can do that, but if they want to browse, they can do so with confidence that they’ve found what they’re looking for in the retailer.

• Weekend shopping reignsBlack Friday retained its title as the top spending day of the 2022 holiday season, up +12% year-over-year (excluding automotive). According to Mastercard SpendingPulse, this is closely followed by Saturdays in December^TMReporting on national retail sales across all forms of payment such as cash and cheque.

“Inflation has changed the way U.S. consumers go about their holiday shopping — from hunting for the best deals to making deals that stretch gift-giving budgets,” said Michele Meyer, chief economist for North America at the MasterCard Economics Institute. “Consumers and retailers have weathered the season well, showing resilience in the face of increasing economic pressure.”

• Restoration of the restaurantIn-person dining continues to show strong growth in restaurants at 15.1% year-on-year, driven by continued demand for the experience. From gatherings with colleagues to dinners with friends and family, the festive season brings consumers together for the holidays. Some of this may be related to increased demand for dining and travel opportunities that have been canceled during pandemic lockdowns. In general, people are eager to get back to normal, and by 2022 many are returning to old habits.

National Retail Federation (NRF) Chief Economist Jack Kleinheinz said on November 4 that “despite rising inflation, rising interest rates and low confidence levels, consumers will remain in the driver’s seat while maintaining their spending.” As the holiday season begins. Consumers generally buy new clothes for travel, along with food and souvenirs, which could be positive for retail sales, although some spending will shift to dining out, gas and airline tickets.

Even in these times of inflation, small business owners are reinvesting in their companies. The most recent NIB Small Business Outlook Survey (November 2022) found that 55% of owners reported capital expenditure in the past six months, up one point from October. About ten (39%) purchased new equipment, 19% purchased vehicles, 12% upgraded or expanded facilities, 11% purchased new furniture and fixtures, and 5% acquired new buildings or expansion land.

The question will be whether business owners will continue to reinvest when the Federal Reserve announces that interest rates will rise again in 2023. Small business loan approval rates at banks are declining. Funding is still available from non-bank lenders, but the interest the lenders charge is higher than that charged by banks.