Nov 1, 2022
Shoppers are starting their holiday shopping early as prices continue to surge, but experts still anticipate slower sales growth this season.
While Black Friday traditionally signaled the start of the holiday shopping season in the past, IBM says in its annual holiday shopping report that 58% of consumers plan to start holiday shopping before November.
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Although the study shows that consumers are budgeting 8% more for holiday shopping than they did in 2021, nearly half of respondents say they’ll spend less if inflation continues to drive prices higher.
“I think some consumers will spend less, other consumers will take on more credit card debt to try and have a happy holiday,” wrote Donna Hoffman in an email to Moneywise. Hoffman is a professor of marketing at the George Washington School of Business in Washington, D.C.
She adds that increasing concerns over a recession and some companies starting to lay off staff are “likely to put a damper on the holiday spirit.”
Stores are already in holiday mode
While Thanksgiving isn’t for another few weeks, stores are already rolling out the Christmas merch and holding sales events — a phenomenon known as Christmas creep — in the hopes of selling off excess inventory.
Americans have been spending less on goods and more on travel and entertainment this year. With weaker consumer demand, retailers are reportedly sitting on a record $732 billion of inventory as of July — a 21% jump from a year ago.
Target kicked off its Black Friday sales on Oct. 10 — three weeks earlier than last year’s shopping event — and Walmart also offered four days of discounts that same week. Amazon held a second Prime Day event on Oct. 11 and 12 as well.
However, despite all the markdowns, experts are still anticipating a muted holiday shopping season. The steepest discounts are expected in electronics, but there’s been low demand for this market of late, especially for items like smartphones, tablets and TVs.
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Shoppers plan to start early and buy less
Grappling with higher prices, almost three-quarters of Americans say they’re expecting to spend either more or the same on the holidays compared to last year.
Deloitte’s 2022 holiday retail survey reports that consumers plan to buy fewer items and cut back on non-essentials this year in order to compensate for inflation. They also expect to visit fewer in-store and online retailers.
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The firm forecasts a meager 4 to 6% increase in 2022 holiday sales — compared to last year, which saw a 15% jump from 2020.
Deloitte economic forecaster Daniel Bachman says inflation will “help to raise dollar sales, although retailers will see less growth in sales volume."
Hoffman predicts more shoppers will opt for online shopping instead of going into stores, since it’s easier to compare deals.
She also believes shoppers may be hunting for early bargains and avoiding the risk of the gifts they want going out of stock. Last year’s holiday season was plagued by supply chain issues, staffing shortages and high demand.
“They want to get a jump on things so they won’t be caught empty handed,” says Hoffman. “Plus, inflation is a big concern — if prices are only going up, it makes sense to buy things you can buy ahead as soon as possible rather than wait.”
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More: Do big box stores save you the most? We price-check our shopping list
Many shoppers plan to tap savings, credit cards
Over 40% of consumers say their income isn’t enough to cover the costs of gifts and other holiday items this year, reports the National Retail Federation. But that doesn’t mean they’re opting out of gift-giving.
There are multiple ways shoppers plan to bolster their spending power.
While 40% of respondents in the study said they plan on tapping into their savings, 32% may take on on credit card debt, 25% may rely on services like buy now, pay later to split up payments and 22% could sell assets in order to afford gifts this year.
Hoffman is concerned about the impact this could have on consumers’ finances.
According to the Federal Reserve Bank of New York’s latest quarterly report, credit card balances saw their biggest year-over-year increase in over 20 years. And more Americans are resorting to the paycheck to paycheck lifestyle in the wake of higher interest rates and consumer prices.
“People are spending money, but they can’t really afford it. We’re almost at record consumer debt,” Hoffman warns.
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Serah Louis is a reporter with Moneywise.com. She enjoys tackling topical personal finance issues for young people and women and covering the latest in financial news.
