A Macy’s store in Herald Square, New York, was photographed on December 11, 2023, by Michael M. Santiago for Getty Images.
Retailers are facing a holiday season filled with uncertainty, despite a cooling inflation rate. Numerous unpredictable elements could influence consumer spending patterns as shoppers prepare for the festive season. These factors include volatile weather, distractions from the presidential election, and a tendency for deal-hunting, all compounded by a shorter holiday period between Thanksgiving and Christmas compared to last year.
However, there is room for optimism among retailers. According to a survey by Deloitte and a projection by the National Retail Federation (NRF), consumers are more positive and intend to increase their spending in comparison to the previous season. The NRF forecasts a 2.5% to 3.5% rise in holiday spending for November and December, expecting total expenditures to reach between $979.5 billion and $989 billion. This increment is more modest compared to the 3.9% increase from the 2022 to 2023 holiday season when spending reached $955.6 billion. These figures exclude sales from automobile dealers, gasoline stations, and restaurants.
Deloitte’s survey reveals that shoppers plan to spend an average of $1,778 this holiday season, marking an 8% increase from the previous year. This uptick in spending is attributed to a more favorable economic outlook, anticipated price hikes, and a greater willingness to spend among higher-income households. Stephen Rogers, managing director of Deloitte’s Consumer Industry Center, noted that low unemployment, normalized inflation, and a recent Federal Reserve interest rate cut have contributed to consumers’ improved sentiments.
Ahead of the typical trick-or-treating season, shoppers began encountering holiday deals, hinting at a season anticipated to be marked by increased deal-seeking efforts, especially following years of rising living costs. Deloitte’s survey found that almost 80% of shoppers plan to engage in deal events in October and November, a notable increase from the previous year. This expectation aligns with predictions from NRF CEO Matt Shay, who anticipates a more promotional environment this holiday season.
Consumers are expected to prioritize spending on experiences over traditional gift-giving, with a projected 16% increase in spending on experiences compared to a 3% decrease on gifts. Non-gift purchases, such as decor and party apparel, are also set to rise by 9% year over year. Shoppers across different income levels are prioritizing value, exhibited by reduced self-gifting and a preference for affordable retailers and private labels.
Retailers could find an opportunity amidst these shifts by aligning their merchandise with experiential offerings, a suggestion highlighted by Rogers. Home Depot, for instance, anticipates high demand for holiday decor items, like Santa-themed throw pillows and animated yard reindeer, while also catering to consumers looking for value with lower-priced artificial Christmas trees.
As the presidential election looms, retailers like Walmart and SharkNinja are curious about whether political distractions will affect holiday shopping. The election, scheduled for November 5, could delay its impact if results between candidates Kamala Harris and Donald Trump are not immediate. Mark Barrocas, CEO of SharkNinja, referred to the election as a significant unknown variable for the shopping season, potentially influencing consumer perceptions of the economy. Meanwhile, Walmart’s research already indicates rising consumer positivity as the election approaches.
The election cycle has already been cited by companies like Amazon and Delta Air Lines as a factor affecting sales, with Amazon cautioning that the election distraction could moderate demand and Delta’s CEO Ed Bastian predicting reduced discretionary spending around the election.
Additionally, severe weather conditions could impact retail dynamics. Cooler winter weather is traditionally seen by retailers as favorable for stimulating holiday shopping. Early fall, however, was marked by atypically warm temperatures and severe hurricanes, hindering demand for winter apparel and artificial trees. Planalytics’ executive vice president, Evan Gold, suggests that cooler temperatures expected in November and December could eventually boost shopping activity.
For some families, especially those affected by hurricanes, priorities may shift towards recovery and rebuilding rather than gift-buying, potentially redirecting spending towards essentials, according to the NRF’s chief economist, Jack Kleinhenz. Home Depot, already preparing for this, has adjusted stock in affected stores, offering necessary rebuilding supplies instead of a full range of holiday items.
The holiday rush this year also faces a temporal challenge, with five fewer days between Thanksgiving and Christmas compared to last year. This shortened period could either restrict spending or prompt shoppers to utilize expedited shipping and other fast delivery options, according to the NRF’s Shay. Retailers are tasked with maximizing this time to meet consumer expectations for quick and convenient shopping.
Kohl’s Chief Marketing Officer Christie Raymond mentioned that the retailer anticipates a tougher fight for consumer attention, especially among middle- and lower-income shoppers feeling the strains of inflation and reduced time. Kohl’s plans to attract customers by increasing its selection of gifts, party dresses, and decorations to establish itself as a comprehensive holiday shopping destination, as explained by Chief Merchandising and Digital Officer Nick Jones.
