The majority of American consumers (86%) plan to reduce their holiday shopping budgets this year, with nearly half (47%) expecting to cut spending by more than 50% compared to last year, according to consumer research from Relex Solutions.
The forecast runs against some other studies that predict the upcoming holiday shopping season will be stronger than last year, with higher sales and earlier shopping than 2023.
But Finland-based Relex says its conclusion is based on the shorter holiday shopping period of 27 days in 2024 (five days shorter than 2023), combined with economic volatility and supply chain disruptions. The research includes survey responses from 1,000 U.S. consumers in October 2024.
According to Relex, those results reveal a complex landscape where price sensitivity and decreased brand loyalty are reshaping traditional retail dynamics. That means retailers and manufacturers must carefully balance promotional strategies with profitability while maintaining product availability, since consumers are actively seeking better value and may switch between brands more readily.
"Retailers are facing a highly challenging season, with consumers prioritizing value more than ever. To succeed, retailers must not only offer attractive promotions but also ensure those deals don’t erode their margins. At the same time, manufacturers need to optimize their operations and collaborate with retailers to deliver value without sacrificing profitability," Madhav Durbha, Relex’ group vice president of CPG and Manufacturing, said in a release. The company says it provides a supply chain and retail planning platform that optimizes demand, merchandising, supply chain, operations, and production planning.
"This holiday season represents a critical juncture for the retail industry," Durbha added. "With reduced brand loyalty and a shorter shopping window, there’s no room for error. Retailers and manufacturers need to work together closely, leveraging AI-powered tools to anticipate demand, manage inventory, and run effective promotions," Durbha said.
In additional findings, the survey found:
Brand loyalty is eroding: About 45% of consumers say they're less likely to remain loyal to brands without meaningful discounts, while 41% will switch brands if faced with both poor deals and out-of-stock products.
Digital channels dominate deal-seeking behavior: Store and brand apps (60%) and email promotions (60%) are the primary channels for finding deals, while only 32% of consumers primarily search for deals in physical stores.
Supply chain concerns remain significant: Nearly 85% of shoppers express concern about potential disruptions, with electronics (60%) and clothing/accessories (57%) being the categories of highest concern.
Age significantly impacts shopping behavior: Consumers from age 45-60 show the highest economic sensitivity, with 60% cutting budgets by more than 50%, while shoppers aged 18-29 prioritize product availability over price.
As we approach the final stretch of 2024, the rail industry is at a critical juncture, facing a convergence of long-standing challenges and emerging opportunities.
In recent years, the rail industry's story has been one of persistent headwinds: financial pressures, labor shortages, and heightened safety concerns following the East Palestine, Ohio, derailment, to name just a few. The shadows cast by these difficulties continue to loom large. These challenges, however, are symptoms of deeper, structural issues that have plagued the industry for over a decade.
Since the late 2000s, aggregate rail volumes have remained stubbornly stagnant. The initial gains from Precision Scheduled Railroading (PSR), once hailed as a revolutionary approach to operational efficiency, have largely been exhausted. The industry now grapples with this model's limitations, searching for new avenues to drive growth and profitability.
This pivotal moment demands a nuanced understanding of the sector's current state and potential trajectories.
The weight of history
In many ways, the root of today’s rail industry dilemma lies with coal. Coal was first used to generate electricity in the United States in 1882, and coal production, power plants, and railroads all grew together. In the 1970s, the development of the vast coal deposits of the Powder River Basin in Montana and Wyoming and their proximity to major rail lines fueled a massive nationwide railroad infrastructure investment cycle that lasted a decade. It was truly a bonanza.
In the early 2000s, however, advancements in hydraulic fracking and horizontal drilling led to a surge in natural gas production. As its prices fell, natural gas grew to be a titan competitor of coal for electricity generation. The impact of inexpensive and abundant natural gas has led to huge declines in coal production and coal’s share of electricity generation. According to the Energy Information Administration (EIA), coal’s share of U.S. electricity generation averaged 52% in the 1990s and fell to 16% in 2023. The natural gas share rose from 16% to 43% during that same time.
The impact on coal production, transportation, and consumption has been massive. In 2023, U.S. coal production was 577.5 million tons, representing a 51% decrease from 2008 volumes of 1.13 billion tons. During that same time, originated carloads of coal by U.S. Class I railroads peaked at 7.71 million in 2008 and plummeted to 3.43 million in 2023.
The short-term outlook is just as gloomy. According to the Association of American Railroads (AAR), coal carloads were down 17.1% from last year, the lowest January to June volume since the AAR began keeping records in 1988. Natural gas prices remain extremely low, and the cost of generating electricity from wind and solar farms has plunged. Coal’s share of U.S. electricity generation is expected to continue to decline in 2025. As a result, a significant amount of historical rail traffic will not return.
All factors considered, in the first half of 2024, U.S. railroads originated 4.17 million carloads, excluding coal and intermodal. That volume hasn’t changed much over the last 10 years, meaning that U.S. Class I’s have been unable to replace the diminished coal traffic with other carload traffic.
Filling the carload breach
Currently there are three AAR commodity segments that ship in enough volume to potentially offset the contracted coal volumes—grain, chemicals, and petroleum products. Of the three, do any provide a platform for volume growth?
Grain does offer some of the unit train economics of coal and represents about 12% of the first half of 2024 volume for U.S. railroads. However, for railroads, the grain market is divided into two very distinct sectors—domestic and international. Domestic grain demand has been relatively flat for the last 10 years, offering little opportunity for significant volume growth. The international market is quite different. While the United States is the world's largest grain exporter, volumes can swing wildly from year to year. The unpredictability of grain exports makes the entire segment risky as a growth strategy for Class I railroads.
The chemicals industry consists of thousands of producers throughout the United States, representing a material growth opportunity for Class I’s. The American Chemistry Council (ACC) reported that in 2022, 1.02 billion tons of chemicals were shipped in the United States at a cost of $79.0 billion. As a commodity segment, chemicals are the largest carload revenue source for U.S. Class I railroads. According to the ACC, rail represents 18% of total chemical tonnage while trucks led with 58%.
Like the chemicals segment, petroleum products represent a wide range of categories, including crude oil and refined products, including liquefied petroleum gases (LPGs), fuel oil, lubricating oils, aviation fuels, and other fuels. Together, they represent approximately 5% of U.S. rail-originating carload shipments.
A noteworthy structural opportunity that Class I’s can continue to nurture for growth in both the chemicals and petroleum products is south of the border. Today, Mexico’s ability to both produce and refine enough energy to meet its domestic needs is quite constrained, and that is reflected in the growth in imports from the United States. This export market represents a unique opportunity for Class I railroads.
Three things have driven this structural event. First, the Permian Basin in Texas and New Mexico creates a low-cost feedstock source for the world’s most sophisticated refining complex located in the U.S. Gulf Coast. Second, Mexico is a nearby market for both the feedstock and refining capacity. Finally, Mexico is facing a structural challenge in that its refining capacity has been operating below 50% for the last several years, and PEMEX, the Mexican state-owned petroleum company, is carrying massive debt. Railroads could serve as a vital link transporting feedstock.
The intermodal conundrum
Intermodal transport has long been considered the industry's golden ticket to growth, but in 2024, it presents a more complex picture. The segment saw a downturn in 2023, hitting its lowest volumes in three years. In June of this year, Class I railroads did report about an 8.7% volume growth in intermodal for the month over 2023. But even those numbers don't get them back to pre-pandemic levels.
However, we remain cautiously optimistic about intermodal’s long-term outlook. One way that Class I railroads could capture market share would be to target a significant volume of single-line traffic that travels between 700 and 1,500 miles and traverses only one railroad. That is a fairly sizable market for trucks right now, and if successfully converted to rail, it will add a significant amount of additional intermodal volume to the railroad’s portfolios.
To successfully compete, railroads will need to offer a compelling value proposition that can respond effectively to trucking’s current capacity surplus and low post-pandemic rates. This requires a delicate balance of pricing strategy, service reliability, and operational efficiency.
Path forward
Railroads have long faced criticism for their perceived inflexibility and reluctance to adapt to shipper needs. However, today's competitive landscape and changing customer expectations are driving rapid transformation in the industry. Class I railroads are actively working to enhance the customer experience, but they face significant challenges. To compete effectively with trucking, they must overcome deeply entrenched negative perceptions about rail shipping. This requires demonstrating unwavering commitment to their shippers and the markets they serve, as well as presenting comprehensive, forward-thinking strategies that showcase their long-term dedication to the industry.
For their part, shippers should reexamine the supply chain solutions they implemented to solve pandemic and post-pandemic challenges. They should take advantage of the current transportation market volatility to scrutinize the rates they currently pay and understand the trade-offs they can make in the marketplace to decrease overall transportation costs. Now's the time to start evaluating modal shifts. Railroads may be hungrier for traffic they didn't want to haul during the pandemic and post-pandemic years, and shippers can take advantage of a contracting truck market to inform their rail negotiations. In some cases, shippers may find that railroads have more appetite to commit to long-term contracts with fixed indices.
As we look to the future, railroads may never recover the bygone coal volumes, and their earnings profiles may be forever changed. Still, the industry's trajectory will be determined by its ability to address these interconnected challenges and opportunities brought about by the turbulence of being an integral part of the global economy. Success will require a multifaceted approach, and what worked for Class I’s in the past likely won’t help them be successful soon. All that said, it is a given that railroads will remain an integral part of North America’s industrial economy for a very long time.
Buoyed by a return to consistent decreases in fuel prices, business conditions in the trucking sector improved slightly in August but remain negative overall, according to a measure from transportation analysis group FTR.
FTR’s Trucking Conditions Index improved in August to -1.39 from the reading of -5.59 in July. The Bloomington, Indiana-based firm forecasts that its TCI readings will remain mostly negative-to-neutral through the beginning of 2025.
“Trucking is en route to more favorable conditions next year, but the road remains bumpy as both freight volume and capacity utilization are still soft, keeping rates weak. Our forecasts continue to show the truck freight market starting to favor carriers modestly before the second quarter of next year,” Avery Vise, FTR’s vice president of trucking, said in a release.
The TCI tracks the changes representing five major conditions in the U.S. truck market: freight volumes, freight rates, fleet capacity, fuel prices, and financing costs. Combined into a single index, a positive score represents good, optimistic conditions, and a negative score shows the opposite.
The market for environmentally friendly logistics services is expected to grow by nearly 8% between now and 2033, reaching a value of $2.8 billion, according to research from Custom Market Insights (CMI), released earlier this year.
The “green logistics services market” encompasses environmentally sustainable logistics practices aimed at reducing carbon emissions, minimizing waste, and improving energy efficiency throughout the supply chain, according to CMI. The market involves the use of eco-friendly transportation methods—such as electric and hybrid vehicles—as well as renewable energy-powered warehouses, and advanced technologies such as the Internet of Things (IoT) and artificial intelligence (AI) for optimizing logistics operations.
“Key components include transportation, warehousing, freight management, and supply chain solutions designed to meet regulatory standards and consumer demand for sustainability,” according to the report. “The market is driven by corporate social responsibility, technological advancements, and the increasing emphasis on achieving carbon neutrality in logistics operations.”
Major industry players include DHL Supply Chain, UPS, FedEx Corp., CEVA Logistics, XPO Logistics, Inc., and others focused on developing more sustainable logistics operations, according to the report.
The research measures the current market value of green logistics services at $1.4 billion, which is projected to rise at a compound annual growth rate (CAGR) of 7.8% through 2033.
The report highlights six underlying factors driving growth:
Regulatory Compliance: Governments worldwide are enforcing stricter environmental regulations, compelling companies to adopt green logistics practices to reduce carbon emissions and meet legal requirements.
Technological Advancements: Innovations in technology, such as IoT, AI, and blockchain, enhance the efficiency and sustainability of logistics operations. These technologies enable better tracking, optimization, and reduced energy consumption.
Consumer Demand for Sustainability: Increasing consumer awareness and preference for eco-friendly products drive companies to implement green logistics to align with market expectations and enhance their brand image.
Corporate Social Responsibility (CSR): Companies are prioritizing sustainability in their CSR strategies, leading to investments in green logistics solutions to reduce environmental impact and fulfill stakeholder expectations.
Expansion into Emerging Markets: There is significant potential for growth in emerging markets where the adoption of green logistics practices is still developing. Companies can capitalize on this by introducing sustainable solutions and technologies.
Development of Renewable Energy Solutions: Investing in renewable energy sources, such as solar-powered warehouses and electric vehicle fleets, presents an opportunity for companies to reduce operational costs and enhance sustainability, driving further market growth.
“ExxonMobil is uniquely placed to understand the biggest opportunities in improving energy supply chains, from more accurate sales and operations planning, increased agility in field operations, effective management of enormous transportation networks and adapting quickly to complex regulatory environments,” John Sicard, Kinaxis CEO, said in a release.
Specifically, Kinaxis and ExxonMobil said they will focus on a supply and demand planning solution for the complicated fuel commodities market which has no industry-wide standard and which relies heavily on spreadsheets and other manual methods. The solution will enable integrated refinery-to-customer planning with timely data for the most accurate supply/demand planning, balancing and signaling.
The benefits of that approach could include automated data visibility, improved inventory management and terminal replenishment, and enhanced supply scenario planning that are expected to enable arbitrage opportunities and decrease supply costs.
And in the chemicals and lubricants space, the companies are developing an advanced planning solution that provides manufacturing and logistics constraints management coupled with scenario modeling and evaluation.
“Last year, we brought together all ExxonMobil supply chain activities and expertise into one centralized organization, creating one of the largest supply chain operations in the world, and through this identified critical solution gaps to enable our businesses to capture additional value,” said Staale Gjervik, supply chain president, ExxonMobil Global Services Company. “Collaborating with Kinaxis, a leading supply chain technology provider, is instrumental in providing solutions for a large and complex business like ours.”
However, that trend is counterbalanced by economic uncertainty driven by geopolitics, which is prompting many companies to diversity their supply chains, Dun & Bradstreet said in its “Q4 2024 Global Business Optimism Insights” report, which was based on research conducted during the third quarter.
“While overall global business optimism has increased and inflation has abated, it’s important to recognize that geopolitics contribute to economic uncertainty,” Neeraj Sahai, president of Dun & Bradstreet International, said in a release. “Industry-specific regulatory risks and more stringent data requirements have emerged as the top concerns among a third of respondents. To mitigate these risks, businesses are considering diversifying their supply chains and markets to manage regulatory risk.”
According to the report, nearly four in five businesses are expressing increased optimism in domestic and export orders, capital expenditures, and financial risk due to a combination of easing financial pressures, shifts in monetary policies, robust regulatory frameworks, and higher participation in sustainability initiatives.
U.S. businesses recorded a nearly 9% rise in optimism, aided by falling inflation and expectations of further rate cuts. Similarly, business optimism in the U.K. and Spain showed notable recoveries as their respective central banks initiated monetary easing, rising by 13% and 9%, respectively. Emerging economies, such as Argentina and India, saw jumps in optimism levels due to declining inflation and increased domestic demand respectively.
"Businesses are increasingly confident as borrowing costs decline, boosting optimism for higher sales, stronger exports, and reduced financial risks," Arun Singh, Global Chief Economist at Dun & Bradstreet, said. "This confidence is driving capital investments, with easing supply chain pressures supporting growth in the year's final quarter."