Holiday shopping kicks off with inflation dampening spirits
The U.S. job market remains strong, consumer spending is resilient and inflation has been slowing. But elevated prices for food, rent, gasoline and other household costs have taken a toll on shoppers.
As a result, many are reluctant to spend unless there is a big sale and are being more selective with what they will buy — in many cases, trading down to cheaper stuff and less expensive stores.
Shoppers are also dipping more into their savings, turning increasingly to “buy now, pay later” services like Afterpay that allow users to pay for items in installments, as well as running up their credit cards at a time when the Federal Reserve is hiking rates to cool the U.S. economy.
Such financial hardships could help drive shoppers to look for bargains.
This year’s trends are a contrast from a year ago when consumers were buying early out of fear of not getting what they needed amid clogs in the supply network. Stores didn’t have to discount much because they were struggling to bring in items.
But some pandemic habits are sticking around. Many retailers that closed stores on Thanksgiving Day and instead pushed discounts on their websites to thin out crowds at stores are still holding onto those strategies, despite a return to normalcy.
Major retailers including Walmart and Target are again closing their stores on Thanksgiving. And many moved away from doorbusters, the deeply marked down items offered for a limited time that drew crowds. Instead, the discounted items are available throughout the month, on Black Friday or the holiday weekend.
Against today’s economic backdrop, the National Retail Federation — the largest retail trade group — expects holiday sales growth will slow to a range of 6% to 8%, from the blistering 13.5% growth of a year ago. However, these figures, which include online spending, aren’t adjusted for inflation so real spending could even be down from a year ago.
Adobe Analytics expects online sales to be up 2.5% from Nov. 1 through Dec. 31, a slowdown from last year’s 8.6% pace when shoppers were uncertain about returning to physical stores.
Analysts consider the five-day Black Friday weekend, which includes Cyber Monday, a key barometer of shoppers’ willingness to spend, particularly this year. The two-month period between Thanksgiving and Christmas represents about 20% of the retail industry’s annual sales.
While Black Friday still has a strong place in the U.S. among shoppers, it has lost stature over the last decade as stores opened on Thanksgiving and shopping shifted to Amazon and other online retailers. Stores have further diluted the day’s status by promoting Black Friday sales throughout the month. This year, stores began sales earlier than last year to get shoppers to spread out their buying.
Still, some experts believe Black Friday will again be the busiest shopping day this year, according to Sensormatic, which tracks customer traffic. Consumers are also back to shopping at physical stores amid easing worries about COVID-19. In fact, more stores opened than closed in the U.S. last year for the first time since 2016 — and that gap is only widening this year, according to Coresight Research, a retail advisory and research firm.