A Macy’s store at Herald Square was observed on December 11, 2023, in New York City, reflecting the retail atmosphere during a period marked by variable economic conditions. Despite a slowdown in inflation, retailers are approaching the holiday season with caution due to several unpredictable factors. Consumer spending during this period may be influenced by volatile weather conditions, potential distractions from political events, and a heightened focus on bargain hunting. Additionally, the reduced number of days between Thanksgiving and Christmas compared to the previous year could pressure shoppers.
Nonetheless, optimism is present among retailers, as reports indicate a more upbeat consumer sentiment and an intention to increase spending compared to the previous holiday season. This is supported by an annual survey conducted by Deloitte and a separate forecast from the National Retail Federation (NRF). According to the NRF, holiday spending in November and December is anticipated to grow by 2.5% to 3.5% from 2023 levels, reaching between $979.5 billion and $989 billion. This represents a smaller increase than the 3.9% growth from the 2022 to 2023 holiday season when spending amounted to $955.6 billion. The NRF’s figures do not include spending at automobile dealers, gasoline stations, or restaurants.
Deloitte’s survey projects that consumers will, on average, spend $1,778 on holidays this year, an 8% increase from the last holiday season. This anticipated rise in spending is attributed to a more favorable economic outlook among respondents, expectations of higher prices, and an increased willingness to spend among higher-income households earning between $100,000 and $199,000 annually. Factors such as low unemployment, a return to typical inflation levels, and a recent interest rate cut by the Federal Reserve have improved consumer sentiment, according to Stephen Rogers, managing director of Deloitte’s Consumer Industry Center.
In anticipation of the holiday season, early sales have been rolled out, giving consumers a preview of potential deals, which may encourage budget-conscious shopping in light of rising living costs. According to Deloitte, nearly 80% of surveyed shoppers intend to participate in sales events in October and November, a significant rise from the 61% participation rate the previous year. Deloitte’s survey has also highlighted a potential shift in consumer spending from gifts to experiences and decorations. An expected 16% increase in spending on experiences and a 3% decrease in spending on gifts compared with the previous holiday season were noted.
Retailers may face a challenge catering to this change in consumer preference, which has been reflected in a prediction that spending within retail categories will remain relatively unchanged, averaging $1,043 in 2024 compared to $1,020 in 2023. This is in spite of an overall shift toward more value-seeking behavior among consumers, including reduced self-gifting and a higher tendency to choose affordable retailers and private labels.
Home Depot, a retailer that offers a wide range of holiday decorations, anticipates a high demand for decor and is prepared for value-seeking consumers, offering more low-priced artificial Christmas trees ranging from $49.
Amidst these considerations, the upcoming presidential election presents another layer of uncertainty. Retailers like Walmart and SharkNinja remain hopeful that potential distractions won’t significantly impact consumer shopping habits. SharkNinja CEO Mark Barrocas emphasized the unpredictability of the election’s impact on the season, while Walmart’s research suggests a similar optimistic consumer sentiment as the election season unfolds.
In addition to political factors, weather patterns are expected to play a significant role in shaping holiday shopping behavior. Cooler winter temperatures typically encourage holiday shopping, with expectations that cold conditions will prevail during November and December, potentially benefiting retailers. However, the recent hurricane impacts in certain regions might cause a temporary redirection of consumer spending towards home repairs and recovery as affected families adjust their budgets.
The shorter holiday season, with five fewer days between Thanksgiving and Christmas compared to last year, may present additional challenges for retailers who must adapt their strategies to meet consumer expectations regarding convenience and timely deliveries. Kohl’s has expanded its inventory to accommodate these shifts, offering a variety of gift items and decorations in anticipation of heightened consumer demand.
Overall, retailers are navigating a challenging landscape this holiday season, considering factors such as the economic outlook, consumer sentiment, political distractions, weather patterns, and a shorter shopping period.
