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Consumers Cautious But Still Spending This Holiday Season

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Nov 23, 2023

The 2023 holiday shopping season is underway, with retailers offering deep discounts to entice cost-conscious consumers. Despite high inflation and rising interest rates, surveys show most Americans still plan to spend this year, though at reduced levels compared to the past couple years.

Consumers Holding Back More This Year

After two straight years of robust holiday sales growth during the pandemic, forecasts predict more modest gains this winter. According to Deloitte’s annual holiday retail forecast, holiday sales are expected to rise between 4-6%, still a healthy increase though below 2021’s 15% jump.

The National Retail Federation (NRF) projects sales rising between 6-8% in November/December, amounting to between $942 – $960 billion. Though solid growth, it lags last year’s 13% surge. #Lower Spending Levels

“Coming off historic spending in recent years, consumers are being more selective and shifting their priorities because of inflationary pressures,” explained NRF President Matthew Shay.

Surveys indicate shoppers plan to spend roughly 8-9% less on holiday items this season. Over three-quarters say rising costs of essentials like food and gas will impact their budgets. #Tight Budgets

“Consumers have plenty of dry powder this year, but they just aren’t as willing to spend it as freely as last year,” remarked Wells Fargo economist Tim Quinlan.

Deep Discounts Being Offered

With consumers showing caution, retailers have expanded promotional activity substantially. Discounts were apparent even before Thanksgiving, a reversal from recent years when sales started later.

The average discount rate sits around 32%, much higher than the 15% rate last year, according to DataWeave. #Higher Discounts Some analysts say discounts may need to reach 40-50% to sufficiently motivate strained shoppers.

“Retailers are going to have to offer even bigger deals than usual,” noted Kristen Classi-Zummo, an apparel industry analyst with the NPD Group. “Shoppers are being strategic in what they are going to spend their money on.”

Best Buy, Lowe’s, Kohl’s, and other major chains have said sales slowed in recent months as customers held back. Most are ready to sacrifice profits to reduce excess inventory heading into 2023. #Work Down Inventories

“Retailers have shifted their focus to moving as much product as possible,” said Neil Saunders, managing director at GlobalData Retail. “This will likely lead to a promotional holiday period.”

Consumers Still Plan to Spend

For all the talk of grouchy shoppers, surveys indicate people still intend to spend this holiday season at decent levels. #Spending Continues

The NRF poll shows consumers plan to shell out an average $832 on holiday items, only slightly below the $886 average last year. Gifting remains commonplace, with 90% buying presents for family members.

Likewise, a study by Total Retail found over three-quarters of shoppers will spend the same or more compared to last holiday season. #Firm Spending

“Many analysts predicted this holiday season would be slow, but consumers are still shopping,” said Kathy Gramling, president of consumer insights firm Ipsos’ U.S. division.

Experts say higher incomes and savings rates enable continued outlays, though allocated more selectively. Surveys also show intentions to use “Buy Now, Pay Later” financing options to spread costs. #Affordability Concerns

“The consumer wallet is shifting back to more normal spending patterns after a few extraordinary years,” said FOX Business correspondent Madison Alworth. “Shoppers will hunt for bargains, but still spend on family priorities.”

Category 2022 Holiday Sales 2023 Holiday Sales Forecast
Total Retail Sales +13% +4% to +8%
Online Sales +11% +2.5% to +4%
General Merchandise +15% +4% to +6%
Apparel +47% +0% to +2%

Table data from Deloitte and National Retail Federation

Final Stretch Has Retailers Hopeful

While nerves persist around consumer jitteriness, retailers hope steadier spending materializes as usual in the final 10 days before Christmas. Industry researchers spotlight that nearly 30% of holiday sales occur December 16-24. #Season’s Not Over

Most consumers have yet to even start buying gifts. Surveys show only 21% have purchased presents so far, meaning the bulk remains. #Procrastinators Abound

Plenty expect a solid finish. “I think the holiday season will end up banner,” remarked footwear executive Matt Powell.

Likewise, Mastercard SpendingPulse anticipates robust gains in the home, personal care, and apparel categories as December goes on. Still, most see holiday sales finishing below the heated pace of 2021 and 2022. #Moderation The New Watchword

“Consumers have the willingness and desire to spend this holiday season, which drives optimism for growth,” explained Mastercard advisor Steve Sadove. “Yet shoppers will remain budget-conscious, seeking lower prices and promotions.”

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AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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