Retailers ready to kick off unofficial start of the holiday season just as shoppers pull back

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Retailers are gearing up for the unofficial beginning of the holiday shopping season this Friday, offering various discounts and incentives. However, concerns are mounting among executives about a potential spending decline that could affect sales following Thanksgiving and throughout the holiday period.

Despite a robust job market and steady wage increases, consumer spending had remained resilient, surprising economists and contradicting negative public opinions. This spending, though cautious, persisted even with rising grocery prices and increased borrowing costs.

Now, consumers face additional challenges such as decreasing savings, growing credit card debt, and persistent inflation. October saw a reduction in consumer purchases, halting a six-month streak of increased spending. While inflation has somewhat eased, the cost of items like meat and rent remains significantly higher than three years ago.

Retail giants from Walmart to Best Buy have reported a dip in consumer strength. Walmart observed a cutback in spending in October and projected a subdued sales forecast. Best Buy noted consumers opting for less expensive TVs, and Target reported customers delaying purchases, such as waiting for colder weather before buying items like sweatshirts or jeans.

Target’s CEO, Brian Cornell, acknowledged the remarkable resilience of consumers but also emphasized their growing concerns with uncertainty, caution, and budgeting.

Even luxury retailers like Saks Fifth Avenue’s online business, headed by CEO Marc Metrick, are witnessing a cautious approach among consumers. Metrick anticipates a moderate holiday season, neither exceptionally poor nor exceptionally robust.

The National Retail Federation predicts an increase in consumer spending this year compared to last, but at a slower rate due to economic uncertainties. It forecasts a 3% to 4% rise in U.S. holiday sales for November and December, a decrease from last year’s 5.4% growth but aligned with the pre-pandemic annual average of 3.6%. The pandemic years saw a surge in spending, driven by federal relief funds and limited spending avenues during lockdowns, with a notable 12.7% jump in the 2021 holiday season.

Retailers, anticipating a different landscape, have reduced their inventory for this season and started promoting holiday sales earlier in October to help customers distribute their spending. The trend of early shopping, intensified during the pandemic due to supply chain disruptions, continues.

Retailers like Best Buy and Kohl’s are adjusting their strategies, focusing on entry-level priced items and simplified deals. Kohl’s, for instance, is promoting items under specific price points, like $25.

Barbara Lindquist, an 85-year-old pre-school teacher from Hawthorne Woods, Illinois, plans to maintain last year’s spending level of $1,000 for holiday gifts for her extensive family. However, she intends to focus more on value and deals, particularly due to high prices on essentials. She is also leaning towards gift cards to manage her budget effectively.

Adobe Analytics predicts better online discounts this year, especially in categories like toys, electronics, and clothing. The expected average discounts are 35% for toys, 30% for electronics, and 25% for clothing, all showing an increase from last year.

The five-day Black Friday weekend, including Cyber Monday, is a crucial indicator of consumer spending willingness. Black Friday is anticipated to be the busiest shopping day again, with the top 10 shopping days in the U.S. likely to account for around 40% of all holiday retail traffic.

Despite the boost from extended Black Friday deals throughout November, Marshal Cohen, chief retail adviser at Circana, believes that consumers will be more deliberate in their shopping, focusing on their lists and avoiding impulsive buys. He also expects a more spread-out shopping pattern throughout the season, as consumers prioritize convenience.

For more insights, follow Anne D’Innocenzio on Twitter: http://twitter.com/ADInnocenzio.

Frequently Asked Questions (FAQs) about Holiday Shopping Trends

More about Holiday Shopping Trends

• Retail Market Trends
• Consumer Spending Habits
• Holiday Season Shopping Insights
• Economic Impact on Retail Sales
• Black Friday and Cyber Monday Analysis
• Inflation and Consumer Behavior
• Retail Strategy Adjustments
• National Retail Federation Reports
• Luxury Retail Market Observations
• Online Shopping Discounts and Trends