HOLIDAY

COMMENTARY

New Inflation Worries Cloud Holiday Forecasts

• by Sarah Mahoney , Staff Writer @mahoney_sarah, October 4, 2022

Rising consumer concerns about inflation are already causing retailers to second-guess their holiday marketing strategies. But new research from the NPD Group shows those worries are growing rapidly, with 29% of consumers saying finances and the economy will cause them to spend less.

As a result, more say they will shop in stores rather than online to save money on seasonal spending.

Most shoppers plan on spending the same or more than last year. But more say they are planning to cut back.

“Last year’s optimism has taken a beating as financial concerns have them feeling a bit more grinchy this year,” Marshal Cohen, NPD’s chief retail industry advisor, said in its release. “Despite economic challenges, consumers still have just as many friends and family members to shop for during the holidays, they will just be spending differently.” 

NPD expects 2022 spending to be about level with last year, with potential growth of between 0.5% to 2.5% when looking at an expanded season of October through January.

About 20% say they will spend less, and 12% plan to cut back on gifts to pay more for holiday entertaining-related expenses.

Online shopping, often perceived as more expensive, may suffer, with 80% saying they plan to do some buying online, compared to 85% last year. And by channel, discounters are likely to gain.

As COVID concerns give way to inflation sticker shock, more are shopping earlier, with 39% saying they’ve already started or plan to do so in October.

Cowen & Co. also has an increasingly dim view of holiday spending, according to Women’s Wear Daily. With high inventory levels and slowing demand, it describes the retail sector as “fragile.”

While Cowan projects a gain of 6.5% when factoring in inflation at 6%, which means a real gain of just 0.5%, reports WWD.

Concerns are also building that retailers will be pushed into steeper discounting activity. Amazon is adding to that pressure, recently announcing its second Prime Day, the first time it has offered two of the mega-sale events in a single year.