Macy’s Department Store in Herald Square, New York, on December 11, 2023.
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Inflation may have cooled, but retailers are still looking ahead to the holidays amid uncertainty.
Several factors that are difficult to predict will influence consumer spending as they decorate their halls and search for the perfect gift. Changeable weather, election disruptions and a deal-seeking mentality can impact the season. There are fewer days between Thanksgiving and Christmas than last year Will make shoppers grab their time.
Yet retailers have reason to be optimistic: Shoppers are feeling more optimistic and planning to spend more than they did during the last holiday season, according to an annual survey by consulting firm Deloitte and a separate forecast from the National Retail Federation.
Holiday spending in November and December is expected to increase 2.5% to 3.5% over 2023, with a range of $979.5 billion to $989 billion, according to the National Retail Federation. The increase is more modest than the 3.9% annual increase in the 2022-2023 holiday season, when spending totaled $955.6 billion. The NRF’s data excludes car dealerships, gas stations and restaurants.
Shoppers expect to spend an average of $1,778 during the holidays this year, an 8% increase from the previous holiday season, according to a survey by consulting firm Deloitte. The survey, conducted in late August and early September and covering about 4,000 consumers, attributed the increase in spending to a more favorable economic outlook, with respondents believing prices would be higher and households with higher incomes being more willing to spend. .
Stephen Rogers, managing director of Deloitte’s Consumer Industry Center, said low unemployment, a return to more typical inflation levels and the Federal Reserve’s recent interest rate cuts are lifting consumer spirits.
“Despite the political arguments, people’s mentality is still better,” he said. “When they look at their bank account and think about their financial situation, they feel better.”
People shop ahead of Black Friday at a Walmart Supercenter in Burbank, California, on November 14, 2023 (left).
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Deal chasing mentality
Weeks ahead of trick-or-treating, shoppers are getting their first taste of holiday deals.
These early deals set the stage for a shopping season in which shoppers are expected to seek more ways to stretch their budgets after years of rising costs of living.
Nearly 80% of shoppers said they will participate in promotions in October and November, up from 61% last year, according to a Deloitte survey.
“Our deal-seeking prowess has really been honed over the last two years and we’re going to continue to hone it,” Rogers said.
NRF CEO Matt Shay agreed with the prediction. Retail trade groups expect a more positive promotional environment for this year’s holiday season, with more brands and categories on sale than a year ago, he said in a phone interview this week.
Another potential challenge for retailers? Catering to customers who are more focused on decorations and experiences than gifts. Deloitte’s survey shows that compared with last year’s holiday season, consumers plan to spend 16% more on experiences annually, but spend 3% less on gifts. Non-gift purchases, including consumption Decoration and party wear are also expected to grow by 9% year-on-year.
The company’s survey found that spending in the retail category will remain relatively flat, with average spending at $1,043 in 2024 compared to $1,020 in 2023. Shop at affordable retailers and more.
Rogers said the shift could hurt retailers who sell merchandise unless they come up with compelling ways to connect merchandise to experiences, such as recommending hiking gear.
for home depotThe company sells a variety of holiday decorations, including Santa-themed throw pillows and giant animated reindeer for the yard, and high demand for decorations could be an opportunity. However, the home improvement retailer said it’s also ready for consumers looking for value.
This holiday season Home Depot is buying more low-priced artificial Christmas trees, such as pre-assembled ones for $49, said Lance Allen, senior decorating holiday merchandiser at Home Depot.
Signs supporting Democratic presidential candidate Vice President Kamala Harris and Republican presidential candidate former President Donald Trump stand on a rural highway near Traverse City, Michigan, on September 26, 2024. slogan.
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election uncertainty
As Americans await the results of the presidential election, will they also be doing their holiday shopping?
This is something retailers and consumer brands are thinking about, including Walmart and Shark Ninjahoping that shoppers will browse and buy rather than obsess over the news. The election is set for Nov. 5 and could take days if the race between Vice President Kamala Harris and former President Donald Trump is as close as polls suggest Only then will the winners be announced.
SharkNinja CEO Mark Barrocas described the election as the “biggest unknown” that will impact the holiday season.
“It could be a blip or it could be no big deal and if the news cycle is overwhelming, it could disrupt things for a few weeks,” he said. “Christmas is coming up and there will be a holiday. It’s just a matter of how much disruption there is.”
He said the election and its associated news cycle could also affect how consumers view the economy.
Walmart’s internal research shows ‘increased motivation’ among its shoppers Enjoy fall and get ready for Halloween, says Jen Acerra, Walmart’s vice president of customer insights and strategy.
“One of the things that is still out there and happening is what’s going to happen with the election, and what happens with the election is going to really determine whether this is a positive thing or not,” she said.
Some companies have blamed the election for hurting their sales. Amazon Attributing the weak forecast for August to election disruptions that will dampen demand for online shopping has some scoffing at the comment as an excuse.
Delta Air LinesChief Executive Ed Bastian told CNBC this month that the company expects lower demand around the election to impact revenue.
“I think consumers are going to be a little bit hesitant to make investment decisions, discretionary or otherwise,” he said. “I think you’ll hear other industries talking about this as well.”
Clearwater flooded after Hurricane Milton hit Florida. Search and rescue operations in the area are ongoing.
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Hurricane damage and winter temperatures
For retailers, cooler winter weather is always on the Christmas wish list.
Evan Gold, executive vice president of Planalytics, said the weather can put shoppers in the holiday spirit and get them in the mood for thicker sweaters, coats and gifts. , providing weather-related inventory planning advice to retailers.
“No external factor can affect consumers’ purchases as directly, frequently and immediately as the weather,” he said.
This early fall got off to a rough start. The unofficial kickoff to the holiday shopping season, marked by October sales, coincided with unseasonably high temperatures in San Francisco and other parts of the country, as well as severe hurricanes that hit North Carolina and Florida. This makes shoppers less willing to buy sweaters, coats and artificial trees.
However, Gold said this year’s weather should ultimately help retailers, as temperatures in November and December are expected to be cooler than a year ago. He said changes in weather, such as snow or cold snaps, can help signal shoppers to prepare for the season.
NRF Chief Economist Jack Kleinhenz said in an interview with reporters that many households are simply trying to rebuild from hurricane damage rather than buying holiday gifts, which may divert money into furniture, clothing or Home repairs.
“It’s just an adjustment to their budgets, but it’s too early to know the full impact on retail,” he said.
Home Depot expects the same. Allen said the company pulled holiday products from 124 big-box stores to make room for items needed in hard-hit areas, such as shingles and drywall. Instead, he said, the company plans to sell a more limited variety of items, such as wreaths and best-selling trees, in those stores.
“They are working hard to rebuild and restore their homes,” he said. “Obviously they’re not going to buy a nine-foot reindeer and put it out there.”
Holidays are shorter
Due to the calendar, the holiday rush can go into overdrive.
There will be five fewer shopping days between Thanksgiving and Christmas this year compared with last year, which could curb spending or could prompt time-pressed shoppers to seek expedited delivery, curbside pickup or other faster options. way to get gifts.
NRF’s Shay said retailers will be under pressure to make the most of every day and provide convenience as shoppers race to buy the items they need and expect them to arrive within hours, or at least days.
“Shorter periods do have consequences and impacts, one of which is certainly that the shipping season will be shortened,” he said.
Kohl’s chief merchandising officer Christtie Raymond said during a recent store tour that the retailer expects to have to work harder to attract customers, especially low- and middle-income shoppers who are stressed by the cumulative effects of inflation and pressed for time.
“We think they feel a little more squeezed than they did last year,” Raymond said. Shoppers also said they “feel pressed for time,” she added.
To attract these consumers, Kohl’s wants to offer more of what they need, said Nick Jones, chief merchandising and digital officer.
The retailer has increased its gift offerings, adding more party dresses and starting selling a wider range of decorations, including Christmas trees, lawn ornaments and wrapping paper.
“We want to be a resort,” he said. “We don’t have food, but we have everything else.”
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