November 9, 2023

The holiday season is one of the most anticipated sales periods for businesses every year—and holiday spending surged to record levels over the last three years amid pandemic-era stimulus money. Despite inflationary pressures and high interest rates, spending is expected to grow between 3% and 4% to roughly $966.6 billion. Although this is a slower growth rate than the past three years, it is consistent with the average annual holiday increase of 3.6% from 2010 to 2019, according to the National Retail Federation (NRF).

“Consumers remain in the driver’s seat, and are resilient despite headwinds of inflation, higher gas prices, stringent credit conditions and elevated interest rates,” NRF Chief Economist Jack Kleinhenz said. “We expect spending to continue through the end of the year on a range of items and experiences, but at a slower pace. Solid job and wage growth will be contributing factors this holiday season, and consumers will be looking for deals and discounts to stretch their dollars.”

A survey from ICSC found that eight in 10 shoppers expect to spend about the same as or more than they did last year during the holiday season. “This figure shows a slight uptick compared to the 73% of consumers who said the same in 2022, reflecting continued and consistent spending while navigating economic pressures like inflation and higher interest rates,” the report reads.

Inflation has been driving higher dollar sales for most retailers and wholesalers. Sales expectations for 2023 are not quite as high as they were for 2022, but most retailers expect both dollar sales and unit volumes to increase in center store categories, according to the Supermarket News 2023 Center Store Trends Survey. “But increased consumer spending doesn't necessarily translate into more items being bought,” said NACM Economist Amy Crews Cutts, Ph.D., CBE. “Due to inflation-adjusted level sales, consumers may be buying on average the same number of items but at a higher price.”

As credit managers in the retail industry gear up for the holiday season, some take the time to reflect on spending trends from the last several years. “During the pandemic, our industry saw a big reduction in sales because everyone was staying home,” said Ian Hittman, chief financial officer at Gerson & Gerson, Inc. (New York, NY). “It wasn’t until last year that we saw a spike in sales. We've also seen it come down a little bit from last year, but not to the levels that it was during the pandemic.”

Practicing due diligence will prevent any payment delinquencies during the busy holiday season. “Credit professionals have to be ready for a possible downturn,” said Denise Moller, CCE, ICCE, credit manager at Agri-Fab, Inc. (Sullivan, IL). “I'll always be looking for any changes in customers’ ordering patterns as they are always in flux. With talk of recession, I think people are going to be more cautious with their spending.”

Craig Lindsay, credit manager at Skechers USA, Inc. (Manhattan Beach, CA) is aware that just because customers have a strong interest in their product and a good payment history, doesn't mean they’re always creditworthy. “I recognize them when their business is going well but if they've placed an order that's two or three times where I've had their account before, then I have to backtrack on extending credit or extending credit terms.”

Retailers are paying closer attention to the factors that influence consumer debt load, including rising interest rates and the resumption of student loan payments. “The cost of borrowing has climbed as credit card delinquencies—the number of people not making payments toward their balance—have ticked up, though the metric remains below the highs of the Great Recession," reads a CNBC article.

Imagine having unrestricted access to a treasure trove of expertise, insights and cutting-edge industry knowledge right at your fingertips. Unlock a world of knowledge and professional growth for all employees, all-year round with NACM’s Unlimited Webinar Program.  

By joining, you gain entry to an exclusive realm of webinars spanning a multitude of subjects, from the latest tech trends to leadership strategies. With unlimited access, you can attend as many webinars as you want, whenever you want, learning from top-notch experts and thought leaders without constraints. Whether you're looking to master a new skill, boost your career or explore diverse topics, this program offers it all.  

#1 Challenge Yourself 

Master all aspects of credit management and challenge yourself to learn something new. “Anybody on my team, or branch for that matter, has access to credit information no matter if it’s on construction liens, accounting or financial analysis,” said D'Ann Johnson, CCE, credit manager at A-Core Concrete Cutting, Inc. (Salt Lake City, UT), who signed up all five branches of her company for the program just last week with one single subscription. “They can also hear about real-life experiences from credit experts, ask questions and dive deeper on specific topics. The best part is there’s always something new to learn about.” 

#2 Increase Engagement 

Webinars can be used as a means to increase staff engagement. Heidi Lindgren-Boyce, CCE, NACM board director and senior credit manager at Star Rentals, Inc. (Kent, WA) signed up for the program when it was new in 2021. “We were still in the throes of COVID and our work volumes were less than normal,” she said. “We signed up in order to keep our credit staff engaged and grow their knowledge base. The variety of topics offered included those not available pre-COVID, and that was very exciting to them. They loved the freedom to sign up for programs on their own without having to ask permission each time.” 

#3 Career Advancement Opportunities 

The program offers opportunity for career advancement, whether it is earning CEUs for designations or learning new skills that make you eligible for a promotion. “We like to promote from within our company, so I encourage my staff to take a variety of programs that will help them grow into our future leaders and managers,” Lindgren-Boyce said. She also has staff members take specific webinars to help them study for their Credit Business Fellow (CBF) exam. “I’m happy to announce that both employees earned their CBF’s and received raises for their accomplishments.” 

#4 Team Building 

The Unlimited Webinar Program is a powerful team-building tool. For Johnson, the program helps generate conversation for monthly meetings and encourages staff to ask each other questions. “I use it as a secondary team-building exercise,” she said. “I have somebody in my Texas office and somebody in my Oregon office who attended the same seminar and immediately after discussed what they learned with other colleagues who may not have had the time to sit in on this conversation. This way they can share their perspective on a topic which stimulates interest to listen to the webinars which can be similar to that.” 

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Trade creditors from around the world and those who extend credit internationally can expand their knowledge. Brooke Wilson, ICCE, Region Credit Manager at Volvo Penta of the Americas (Chesapeake, VA) used the Unlimited Webinar Program as she pursued her International Certified Credit Executive (ICCE) designation. “It helped me advance in my career in that I received a promotion within my company and it also allowed me to be more involved in certain areas,” she said. “I work for a global company that covers a large area that at one point covered almost the entire Western Hemisphere and being able to attend as many webinars as I wanted, whenever I wanted, gave me great insight into the cultural differences in the four global regions I was less familiar with.”  

Filing a mechanic’s lien can be a challenging process. It’s a way to try to secure your rights and receivables, and allows flexibility to extend credit you might not typically extend. Several benefits come out of filing a mechanic’s lien. Firstly, it helps with legal protection and ensures payment from the customer. Mechanic’s liens also benefit subcontractors, customers, suppliers and all parties involved in the project—and can be a great way to maintain your customer relationships.

Before filing a mechanic’s lien, consult with your internal business units to ensure all is in order: 

1. Distribution: Were there any delays in delivering the product or product damage during delivery? Before filing a mechanic’s lien, you must make sure everything functions properly. 
2. Customer service: Check with customer service to see if there were any legitimate concerns the customer waged during the process of completing the order.
3. Manufacturing: If your company manufactures a product, check to see if there were any inefficiencies or problems with the product itself. As a wholesaler, you should also check to see if your manufacturer’s customer has encountered any problems. 
4. Installation: If your company provided the installation, check with project managers to assure there were no installation problems or delays. If your customer provided the installation, consult with your customer and possibly a project manager to assure your materials were installed correctly. 
5. Rental equipment: If your company provided construction equipment, ensure the correct equipment was provided and in a timely manner. 

So, now that all boxes are checked, you go with your gut and recommend filing the lien, but management overrides the recommendation. What do you do?

When faced with the risk of nonpayment, it’s important to document the facts. If the credit department is recommending that a lien be filed, make the recommendation in writing, concisely describing and defending the recommendation. If the recommendation is not approved, ask why. It’s important to understand management’s concerns, hesitations and appetite for risk. Summarize management’s reasons for denying your request to file a lien in writing to create a paper trail as memories fade over time. 

As a lawyer, Michael Murray, Esq., associate attorney at Lanak & Hanna, P.C. (Orange, CA) said he deals with management’s override to mechanic’s liens almost daily. “The concern from the management side with recording a lien is alienating or upsetting a customer, especially if it is a good customer who maybe has not been paid on the project themselves,” Murray said. “Recording the mechanic’s lien will likely help you get paid, but it could also potentially upset your customer. The owner will get upset with the general contractor, the general contractor will get upset with your customer for not paying you and allowing a lien on the property. There is a delicate balance act between recording the lien and keeping the customer happy.” 

Some customers are treated differently from a collections perspective for various reasons. For example, if it’s one of your largest customers, you may not want to step on toes when filing the mechanic’s lien because the customer may think you are too aggressive with collection calls. “If the customer knows everyone, we can’t afford to make them mad,” said Chris Ring of NACM’s Secured Transaction Services. “They could tell everyone else about what we did to them, especially if it’s one of our oldest customers. We’ve been around them forever and don’t want to lose them.” 

However, it is important to make sure all parties fully understand the process of a mechanic’s lien and its impact. Management is most likely against the idea because of upsetting the customer and business relationship, but it is a team effort. Usually when conflict arises, it is a misunderstanding on how the lien will impact project players, explained Christopher Ng, Managing Partner at Gibbs Giden Locher Turner Senet & Wittbrodt LLP (Los Angeles, CA). “Typically, management is trying to figure out the pressure points and put themselves in the shoes of a customer they do not want to offend,” Ng said. “The mechanic’s lien is not a direct attack on the customer. So, when you exercise the remedy of the mechanic’s lien on the owner’s equity in the project, it allows you to put complementary or additional leverage on the owner. You’re working as a team with the subcontractor to help push to get payment.” 

Interested in learning more? Register for our upcoming webinar on I’m Ready to File a Mechanic’s Lien, but Management Is Against It. Let NACM’s Secured Transaction Services (STS) be your choice to secure your construction receivables. Our staff, with construction credit experience, will help you maintain your rights.

It feels a bit like déjà vu, as we are just over a week away from another potential government shutdown on Nov. 17 with no real solution in sight. Despite this, the political tea leaves in DC are pointing towards a relatively painless resolution, at least for a few months. To understand why, here’s a recap of the historic search for a new Speaker of the House last October.

Russian Speaker Roulette

Last month, a small minority of Republicans triggered the nuclear option, ousting former Speaker Kevin McCarthy for ignoring conservative demands and negotiating with Democrats to avert a government shutdown. What followed was a three-week process to find another candidate who could secure the support of both hardline conservatives as well as moderate Republicans.

First up was Steve Scalise. McCarthy’s #2 and overwhelmingly popular within the party, this was the natural choice. Unfortunately, he was not different enough for the small group of hardline conservatives, and so while he easily won the nomination against Freedom Caucus-founder Jim Jordan, he ultimately opted to bow out gracefully rather than be defeated in a vote on the House floor.

The next obvious candidate was Jim Jordan, one of the original founders of the Freedom Caucus and current Chair of the House Judiciary Committee. Considered a borderline conservative hero, he however had a large group of “never-Jordans” among moderate Republicans who had been vilified by the Freedom Caucus in the past and did not feel Jordan was qualified to lead the party. Jordan spent several days and more than a handful of roll call votes to give it the good ol’ college try, but eventually stepped aside as it became clear he was losing more votes than he was gaining with each successive attempt.

The search continued and eventually Tom Emmer, the third highest member of House Republican leadership put his name forward. Like Scalise, he easily won the closed-door nomination among Republicans, but eventually withdrew from consideration prior to a floor vote because he could not convince hardliners to support him.

Then came Mike Johnson, the #4 in House Republican leadership that many considered to be the ‘token’ conservative member of McCarthy’s leadership team. Whether it was fatigue within the party or simply divine providence, after winning the closed-door ballot within the party he sailed to victory on the House floor with all 220 Republicans voting in favor of electing him the next Speaker of the House. As a four-term Member of Congress, he is the most junior Speaker of the House in more than 100 years.

A colleague of mine put it best: whoever had Mike Johnson as Speaker of the House this year on their bingo card is either a genius or needs to play the lottery.

So What Has Changed?

Speaker Johnson’s first act in his new role was to cancel the October/November recess and keep the House working on passing all 12 appropriation bills, or government spending bills. Rather than shielding moderate Members from taking difficult votes, he has taken a much more hands off approach, opting to let the chips fall as they may. And so far, it’s working.

Since he was elected Speaker on Oct. 25, the House has passed three appropriations bills, bringing the total up to seven out of 12. While it is unlikely that they will be able to finish all 12 before the Nov. 17 deadline, it is significantly more progress over a short period of time than McCarthy was able to achieve. It may seem like a low bar to pass three bills in two weeks, but each bill has hundreds of amendments and potentially dozens of votes that Members need to speak to and vote on.

Johnson has also already telegraphed to his party: he is not in the business of shutting down the government. So, while negotiations between Republicans and Democrats continue over the overall funding levels, he has acknowledged that another continuing resolution may be necessary and that he thinks it should go through mid-January to avoid an end-of-year crunch.

What to Expect Next Week

There is already unrest within the Republican party over the idea of another ‘clean’ extension, but most of Washington is predicting that because Johnson is still in his ‘honeymoon phase’ as the new Speaker and the fact that he went into it telling his party that they would need to do another continuing resolution, that it will eventually get done. As such, while there will be some posturing, we don’t expect a government shutdown next week.

But where do we go from here? It’s very clear that the American public is opposed to a government shutdown, and that right now, a shutdown would likely be blamed on Republicans. If conservatives want to change the narrative, they’re going to need to start now, and until they do, it’s hard to see Johnson being able to fulfill his promises to his party when January rolls around next.

Webinar Next Week

If you’ve enjoyed this series, or want to dive more deeply into both the current political situation in DC and what it means for bankruptcy, trade, or other economic issues, NACM’s lobbyist Ash Arnett will lead a complimentary webinar at 11am ET on Wednesday, Nov. 15, for NACM members. Register now for Making Sense of Washington, D.C. - Politics and Policy for NACM Members.